Saturday, November 28, 2009

Waiting for the move

As I watched the Chicago Blackhawks 8 game win streak come to an end Friday I thought of what makes a successful shooter and goalie in an NHL shootout. In my experience watching, playing, and coaching hockey, the way to win a shootout (whether goalie or shooter) is to let the other player make the first move.

A great goalie will wait until the shooter makes his move and then react quickly. Likewise, a great goal scorer will wait until he sees the goalie make a move, lean in one direction, poke check the puck, etc... I am reminded of all the great 1980s Wayne Gretzky highlights when the goalie somehow ends up on his side way out of the net and Gretzky has an easy goal into a seemingly empty net.

What does this have to do with trading?

  • When is there opportunity for a short term trader? Answer: when there is market movement.

  • When does a short term trader get chopped up? Answer: when the market does not move.

Sometimes a trader has to be like the NHL shooter on a breakaway and let the market make a move first. When I looked at the calendar for November I had Wednesday November 25th and Friday November 27th circled as days to most likely do less. Wednesday I barely traded and scratched the day. Friday I made money and had a couple larger positions on.

What was the difference between the full day before Thanksgiving and the half day after Thanksgiving? Thanks to Dubai's debt/ real estate crisis, we saw movement on Friday. That does not mean there was free money to be had. But it does mean that a short term trader is more likely to make money because the markets are moving. I.e. like in poker, the odds favored putting more chips on the table. Had I traded the same size and # of decisions on Wednesday as I did on Friday, I would have lost more on Wednesday that I was able to capture on Friday.

Check out Edmonton Oiler's 2007 4th round draft pick Linus Omark playing for Sweden in this shootout. He waits for the goalie to make a move and then makes him look silly. As a trader I will wait for the market to show its hand and then make the market look silly.

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