Being Flexible is Key for Successful Trading

02/21/2014 9:11 am EST

Focus: TOOLS

Don Miller

Author, Chronicles of a Million Dollar Trader

The pace of the market, and the willingness to adapt to changes in it, are crucial for successful trading, says trading expert, Don Miller.

SPEAKER 1:  My guest today is Don Miller.  We’re talking about Emini trading and how it’s changed over the years in terms of strategy and the dynamics of that market.  Don, you probably know more about the Emini trading than anybody else.  How has it changed over the years?  How did it start and where are we at now?

DON:  I think that with any trading mechanism, you can have ebbs and flows.  You can have changes in pace.  You can have changes in volatility.  The rules of the game never really do change; just the intensity.  You’ve got trading psychology that will always be involved and whether it’s the Eminis or oil or tiddlywinks or whatever, that game will always be there.  The pace of the markets certainly has changed.  Obviously recently we’ve been in the bull market.  You have lots of long opportunities, short opportunities a little bit tougher; although they’re still there you just have to be more cautious with them in terms of sizing and in terms of number of opportunity.  You have an overall trend in the market which is very, very important that we recognize that we trade along with that.  At the same time, the game really never changes.  What might have worked in 2001 and 2008 may not be working now, but as I’ve tried to preach to traders over the years that’s why it’s important that we become flexible; that we try to identify what the market is doing at any given point in time – morning, noon, night, this week, this year.  Put that in perspective and align ourselves with that.  To that extent, things really haven’t changed so long as we can adapt to it and identify it.

SPEAKER 1:  In some sense this rising market if traders have started in the last two years, it’s been relatively easy if they’ve been long traders.  Has it been a dangerous time to start trading because they haven’t had to really learn what it takes?

DON:  I think any time you start with success it’s a dangerous time.  I hate to say it, but you almost have to go through those pains because if you don’t feel the pain then you’re going to think it’s always like this.  I think the one risk in starting in any market in doing well and failing to realize that you are going to have to adapt.  Those of us who trade volatility very well have to adapt to markets that do not move as much.  There are fewer opportunities around so that you can’t, if you start off poorly let’s say in the morning you have less sample size, you have less trading population to get your gain back together by the end of that day.  That is always going to require that we remain adaptable to markets over time.

SPEAKER 1:  What are you looking for in terms of everybody thinks we’re at the top, we’re at all-time highs.  Are you even saying that to yourself at this point?  Are you saying until it happens, I’m long?

DON:  What’s today going to do?  I’m sitting down at a restaurant, I have my menu before me.  The menu seems to flavor a certain sort of thing, I have to choose off that menu.  Okay?  We’re in a market that longer term certainly it’s important to see where that’s at, but to me I’m going to try day trader.  Again, I don’t use the day trading terms, it’s intra-day; I’m cash at the beginning, cash at night.  I provide liquidity to the market place.  I speculate a little bit.  I add inventory that I manage, but it’s all done intra-day.  What’s most important to me and always has been and always will be is what’s going to happen at that given point in time.  How does this day align with yesterday and the prior day and the prior week within the context of your well trend?  That’s what’s important to me.

SPEAKER 1:  Do you homework at night to get ready for that day or because you’re intra-day when the market opens, that’s when you start looking?

DON:  There is certainly a degree of homework that’s done at the end of the day.  First of all, evaluating my own performance as well as putting my mindset in the proper frame for the next day.  If we have a trend day for example the prior day, you’re working on the next day, you’re probably going to see some consolidation chop.  You know that because you’ve traded that.  You’ve been in that river feeling the current the day before so that you’re going to be in that same river the next day and you can flow easily from one day to the next.  There is some homework done at the end of the day, but as long as you’re always swimming in that river you should always feel that current and you just bring yourself to work with your game face on the next day; that’s what is important.

SPEAKER 1:  Don, I want to find out more about you and your trading and you write about your trading.

DON:  A book recently came out, The Chronicles of a Million Dollar Trader.  My website Don Miller blog and donmillereducation.com can provide additional information.

SPEAKER 1:  Don, thanks for your time.

DON:  You’re very welcome.

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