The Big Should

I look out my window and think to myself, it's summer, there should be sun- but there isn't. I look out at the tree across the street and think to myself, the leaves should not be turning color or falling- but they are. I look at the five day forecast indicating rain and think to myself, I should be somewhere else. Everywhere I look today I'm not seeing what I should be, but...

...in the market this does not seem to matter.  Traders begin the slippery slope of telling the market what it should or should not be doing and probabilities take a back seat to prediction. Price should be going to 14. This trade should be successful. Tomorrow the SP should hit 1250 and bounce. In reality however, everything in the market is in its proper place and in its proper order and not only is everything doing what it should be doing, it's doing what it ought to be doing. So if everything is doing what it ought be doing, why should it be doing anything else?

Everyone trades their personal market. Every participant comes to the table with a different story and while over time and in aggregate market participants begin to get bucketed and bracketed, each individual story is nuanced;  however, the larger historical narrative has given each of us enough similar traits to play a role on this stage whether it be greed or fear- perhaps envy, so while we trade a different market there are tendencies to trade the same way. I have found myself challenged by these roles, particularly as of late where I've felt out of sync with this market, but I was truly out of sync with was myself. There's a fine line between a market not being tradeable in accordance with my style, and me not being able to trade well and rationalizing and reinforcing why this is so. The current environment has not been the kindest to the style of momentum break out trading I employ and in an effort to avoid altering this during a challenging period and suffering style drift I held firm.

However, not only was I finding a lack of trading opportunities during the past few months, my frustration was beginning to rise and I was not even finding the opportunities to continue to find learning experiences and lessons to study and to be more constructive with my time. I was locking my mindset to the market and not listening more clearly to what the market- myself- was telling me. I was becoming antagonistic and angry every time I looked out the window and saw a gray sky with rain, a constant reminder that I might miss the entire summer and I knew I was not where I “should” be.

So, considering I've been applying myself to understanding the markets I decided it was best to take some time away from the markets. Having played tournament chess, I am acutely aware of my cycles of stagnation and peaking. Applying myself thoroughly to the subject of chess for extended periods of time I would gain knowledge and experience and increase my strength, but I would also plateau and appear to be treading water for extended periods as well. I came to realize that during these times it was best to simply step away for a while, digest, and let everything sink in. Even though I developed a plan of approach for earnings season I realized it was in my best interest to step away and let everything sink in.

Another lesson that I've taken from chess is understanding my place. There's a class and rating system that makes it clear where I stand. I know how many points I receive from a win, loss, or draw and how many points I've earned or lost, my standing, and any prize received at the end of each tournament. In the markets however this is not the case. The main metric of performance is my equity curve, but that does not always tell me whether or not I've improved as a trader, just as increasing my market knowledge may not have an effect upon my equity curve. I can learn everything there is about markets and conceivable trade worse for it. Although I know I have increased my knowledge considerably, and I have maintained a profitable equity curve, I was struggling with the belief that I was not doing well which was in dissonance with what was occurring- another reason to step away.

In a couple of days I have an opportunity to camp near a hot springs in the high Sierras and sit under a canopy of constellations and should I see a shooting star I'll make sure not to think of candle sticks and if I see a bear make sure not to think of market cycles, for that is one thing I should be doing right now.

Since I am not there yet, I wanted to quickly glance over the landscape this past week and what stands out is the $USHL5. Two weeks ago the SP closed at 1353, .61% higher than Friday's close, yet the New High/New Low cumulative is 1200 lower, which to me looks like I was not the only one taking the week off. 

$USHL5 07/22