Friday, February 6, 2009

Futures VS Stocks.



As I wrote in a prior post, stocks seem to mess up my thought process when it comes to trading this pattern (which is the only trading I do). After going back over January's statement, I was alittle shocked by what I saw. Essentially, as good as some many of the trades were I lost money trading stocks. My profitable month was down to my much more infrequent, but substantially more profitable, futures trading. Sometimes less is more...

Here are the facts: I lost roughly 16.6% of profits made on futures trades (ie would have been 20% more profitable) by trading stocks. The time spent trading stocks was the vast majority of the hours the market was open to do so. If we say 4 out of the 6.5 available that's 88 hours for the month. On the other hand, futures was done on the fly...my guess is around 10-20 hours for the month, but it's hard to quantify as I was doing other things at the same time.

So what does this mean for me? Looking at this from my perspective, I'm disappointed. I've always invisioned myself making slow but consistent profits day in day out (with losses throughout obviously) but, looking at it from a business perspective, I have two choices:-

1) Find out what I'm thinking/doing to damage a winning edge to the extent that it's losing money when used with stocks (I'm sure that it "works" in stocks as well as futures)

2) Simply focus on what's working and find other ways to fill my day during market hours....there are less appearances of the pattern during these hours in the forex futures...

The many reasons for my...uh...blunt edge are, as far as I can tell:-

*Lack of trust in stocks...I see them as being easier to manipulate or fall prey to adverse movements as they are under the "markets" bias.

*Being able to scale in and scale out- in futures it's boom or bust. You can't split a contract so maybe that enforces more discipline with entries and exits. I've often times watered down good trades (in stocks) by scaling out far too quickly to "protect downside"...lol

*Using lower risk....because I can. As above, this could be having an affect on discipline.

*Number of stocks/frequency of pattern- simply put, too much choice. I'm able to keep an even keel when there's an extended period of time between trades. It allows me to dampen the affects of despair and euphoria/fear and greed.

*Giving "room" for trades (misplaced stops)- similar idea to being to the ability to scale....I can widen my stop by taking on less size instead of committing to the trade as I'm forced to do with the futures. This waters down any good the trade might do by giving me less reward for my risk.

Need to work through the above if I'm to use stocks as a profitable market for me...until then, I'm going to let setups like RDS A go...

1 comment:

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