Why Fight Proven Market Trends?

I know what your thinking, to ask why to fight the market is too easy of a question to ask, I also know I am not the first to suggest the notion that trading with the market is the way to go. I have asked myself these same questions thousands of times, I personally understand my own reasons for falling into the trap of trading too fast, with too much risk and in the wrong direction of the market.

According to Invesco, the average bull market lasts for 55 months on average, now contrast that with just 11.7 months for a bear market. My affinity for wanting to fight a bull market has a lot to do with how and when I learned to trade.

I began learning to trade in 2002, my introduction and training included the mechanics of shorting and going long with futures contracts. My knowledge of the 2001 dot com bubble was still fresh in my memory, the idea that money can be made in a falling market that is panicking has a special appeal to me, the ability to risk a small sum of money and turn it into respectable size trading account is that proverbial genie in the bottle. Trading for me appeals to the underdog entrepreneur in me who thrives on taking on the challenge of overcoming the odds.

I began what I would call active trading in 2006-2008, this was at the beginning of the “Great Recession“, I am live trading and my wins were spectacular, I had thoughts of quitting my job to trade full time. I was a huge technical analysis nerd, I would quickly look at charts patterns that (confirmed my bearish bias) indicated a selloff, I did not hesitate to pull the trigger and short the YM, NQ or the ES, I was making nearly 1k on my winning trades. For those who have not traded through a bear market, it’s the stuff my dreams are made of.

Being right about a short position is as addictive as any video game or drug that gives you a quick high on just a limited amount of patience and effort. Many of my short trades would begin to work within 10-15 minutes, that was the hard part, the rest of the work was to determine how much profit I was going to hold on to. In 2009, I was still super bearish, I felt more fearful of missing a big selloff than actually trading badly. My confidence was as high as it was ever going to get, I felt if the market is YM was ever down over 100 points, that is a day I should be able to easily identify the time and place to short.

As spectacular as my winners, my losses were small but many which are devastating to any account given enough time.  Through the losses, I stuck with funding and trading my account with the idea that I am learning from my mistakes (nope). I have taken breaks, gave myself time for some soul searching and introspection on what I need to for “better trading”. I have learned that trading based on my own cognitive biases is a recipe for mental torcher and anguish, I am not capable of removing all my emotions from trading, believe me, I wish I could. We all have our own biases to what we think should or should not make the market rise, the ability to not be influenced by news, politics or the talking heads is more than a challenge, I question if it is even possible not to be influenced.

If you are a fan of nice round numbers, the average bull market lasts 5 years, the average bear market eeks out bearly 1 year. I can not make a good argument as to why I would spend hours and days in front of screens willing my brain to perform with laser focus to decide if I should be short or long.
Allow me to better explain myself,  I would rather be delta long the majority of the 5 years than trying to find opportunities to short the market.

Going forward, I prefer to think of myself as an active investor, I am planning on building my own basket of stocks and ETF’s with the time frames of 5,10,15, and 20 years. Covered calls (options trading) will play an important role in my strategy to manage the downside risk and volatility.  My investment style needs to be in sync with not just my lifestyle, but that of my family’s. Slow and steady is not sexy, it does not sell books or the promise of quick money. My desire to live my best life trumps the need to actively day trade. Will I ever day trade again…maybe? As I explained, I am biased to shorting a market, with that said, when the next bear market is made official by FOMC, when the time comes, I hope to be mentally prepared and capitalized to trade an account completely separate from my investment account for the purpose of only trading through a down market, to act as a hedge against the investment account.

Thanks for taking the time to read, your comments and thoughts are appreciated.

Trin