Right now, my System Trading portfolio is about 10% long the NQU09 (via 'BTD Index': http://stbsmb.blogspot.com/2009/06/btd-index-generates-entry-signal_16.html) and about 60% short the ESU09 (via 'SHOE SPY': http://stbsmb.blogspot.com/2009/06/shoe-spy-generates-short-entry-signal_18.html). I find myself rooting for the long and then rooting for the short and then rooting for the long and then.... Since the ES and NQ are highly correlated, I should expect them to pretty much move in tandem with each other. If I keep on rooting for both, then I will surely make myself crazy, yet I find that I am doing it anyway.
So if I am going to root, then which direction should I root for? On balance I am net short so I should root for the downside.
By why root at all? This is not professional baseball that has me rooting for the home team (Go Red Sox!). However, the very notion of rooting suggests I am too close to the trade emotionally, too involved in its outcome.
If my models are robust, then the winning trades and their profits will come over the next 12 months whether I root for them or not. While the rooting can be fun, perhaps it is a sign of being too tied up in the trades outcome, of too much ego involvement.
Perhaps this dynamic is also related to my tendency to exit winning trades too soon, specifically if they have not reached the price target or the time stop. Going back to the baseball analogy, if my team is winning, and I can call the game early, then I get to book the win and thus improve my record! But somehow I don't think the opposing team, the umpires and MLB would allow such a thing. Since I trade on my own, I am also my own coach, manager and umpire. Whenever I am inclined to exit a trade early, I should consult my coach, manager and umpire to see if it is an acceptable thing to do. Somehow I don't think they will!
This has been an informative post for me to write. I hadn't previously made the connection between rooting and exiting a wining trade early. Perhaps there really isn't a connection and I just went off on a tangent. But perhaps there is. Since it is a pretty human thing to do, I don't know if I can stop rooting for a particular direction (long/short) or a particular sports outcome (go Sox!), but at least I have brought this dynamic to my attention. This in itself is a win.
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Confession: As a boy growing up in New York during the 1970's, I was a New York Yankee's fan. I have been living in Massachusetts since 1986, and became a Red Sox fan in 2003. My wife is a huge Sox fan, and we have watched or listened to nearly every Sox game since 2004. It has been great fun being on both sides of one of the greatest rivalry in professional team sports. I have tremendous respect for the Yankees and their organization, but when it comes to rooting I am all about the Sox. Periodically, I like to remind my wife that I was a Yankee fan. She responds with the usual grimace when I express such blasphemy.
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Disclosure: Short the ESU09, Long the NQU09.
So if I am going to root, then which direction should I root for? On balance I am net short so I should root for the downside.
By why root at all? This is not professional baseball that has me rooting for the home team (Go Red Sox!). However, the very notion of rooting suggests I am too close to the trade emotionally, too involved in its outcome.
If my models are robust, then the winning trades and their profits will come over the next 12 months whether I root for them or not. While the rooting can be fun, perhaps it is a sign of being too tied up in the trades outcome, of too much ego involvement.
Perhaps this dynamic is also related to my tendency to exit winning trades too soon, specifically if they have not reached the price target or the time stop. Going back to the baseball analogy, if my team is winning, and I can call the game early, then I get to book the win and thus improve my record! But somehow I don't think the opposing team, the umpires and MLB would allow such a thing. Since I trade on my own, I am also my own coach, manager and umpire. Whenever I am inclined to exit a trade early, I should consult my coach, manager and umpire to see if it is an acceptable thing to do. Somehow I don't think they will!
This has been an informative post for me to write. I hadn't previously made the connection between rooting and exiting a wining trade early. Perhaps there really isn't a connection and I just went off on a tangent. But perhaps there is. Since it is a pretty human thing to do, I don't know if I can stop rooting for a particular direction (long/short) or a particular sports outcome (go Sox!), but at least I have brought this dynamic to my attention. This in itself is a win.
**********************************************************************************
Confession: As a boy growing up in New York during the 1970's, I was a New York Yankee's fan. I have been living in Massachusetts since 1986, and became a Red Sox fan in 2003. My wife is a huge Sox fan, and we have watched or listened to nearly every Sox game since 2004. It has been great fun being on both sides of one of the greatest rivalry in professional team sports. I have tremendous respect for the Yankees and their organization, but when it comes to rooting I am all about the Sox. Periodically, I like to remind my wife that I was a Yankee fan. She responds with the usual grimace when I express such blasphemy.
**********************************************************************************
Disclosure: Short the ESU09, Long the NQU09.
***remember this is an illustration of what i am trading and my thinking...it is not a recommendation for you or anyone else to buy or sell this or any other security***
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