When I made the decision to get as good as I could get in trading (and I believe this has to be a conscious decision no matter what the endeavor), by far the most important thing I ever did was to read Trading To Win by Dr. Ari Kiev. Dr. Kiev passed away in 2009, but during yesterday's trading it felt as if he was sitting next to me.
I was furious about the actions of the Federal Reserve, and was very fearful for the future of this country as well as fearful to step in front of the runaway market. However, I had laid out a trading plan and my reasoning to do just that: to step in front of it. Not blindly of course, but when it felt like the time had come, just like any other day.
As if to back me up, I kept hearing a quote from Dr. Kiev that said:
Feel yourself enter into the fearful moment and embrace the fear,
and you will discover that it disappears as you do it.
I was very wrong in expecting a reversal. It didn't happen. All my Fibonacci targets got exceeded. The market was very strong, but I did not question it. It gave me information, and I acted on it. I did the same things I do most every day, only quicker because the market was moving so quickly. In losing my self in my work -- by blocking out feelings that didn't matter -- I felt what it felt like to enter the fearful moment, embrace and acknowledge the fear, and yet go about my business, long and short.
Suddenly there was no fear, just like Dr. Kiev said.
This business is not about being right all the time. It's equally about what happens when you're wrong and how do you deal with it. It's also about planning and knowing exactly when and where you're wrong.
I use options extensively because they allow me to control risk. I haven't the slightest clue about the derivation of the Black-Scholes formula. I only know that options force me to be a better trader because they're impacted by so many different variables and that I must act quickly to take what the market gives me.
Today I will do the same thing. I will also want to see how the weekly candle ends up on the S&P. We are in uncharted waters. Anything can happen. Now that the May 2008 highs have been exceeded, the all-time highs are open for gaming. Many doubts remain and nothing is solved. My strategy, however, will be to continue to sell rips and buy dips until I see differently.
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