Time and Perspective

Time frame. The toughest choice a professional trader has to make when managing other people's money. In "Fooled by Randomness", the author Nicholas Taleb reminds the reader that as you narrow down the time frame in which you are trading or investing, you also decrease the winning probability of the trade or investment. In other words, making money over a year is easier than profitting in one day. I have been trading/investing my personal account as well as other people's money for the past eight years. I have always found intraday trading the most demanding style. In fact, my long term track record has always benefitted from lower turnover rather than following a squitzophrenic approach to trading that I like to refer to as "hardcore". For professional reasons I practice both.

Over my trading career I have concluded that clients usually have two drivers when choosing an investment adviser or portfolio manager. Performance and turnover. Performance is substance. Not only do you need it, but you also have to present it through a consistent pattern. Turnover is style. The more you have, the better you look and sound. As a professional trader, you probably need both. That's why a professional daytrader, or an investor with relatively high turnover, will attract and appease a bigger crowd compared to a dull trader. Assuming that both are successful. And that both are paid in performance fees, not transaction fees.

In my case, the biggest challenge in intraday trading is keeping perspective. By perspective I mean not fighting your overall view of the market. Let's say that you are managing an intraday portfolio but your overall view is that equity markets will end the month higher. What happens then if your intraday trading system sets up a string of short trades? Do you trade or do you fade? I tend to trade. My experience tells me that it's probably best to work on the system, and align both outputs provided in different time frames, rather than to try to outsmart any given system.

This is the kind of conflict that leads to some of the most difficult trading decisions one encounters when daytrading. Unfortunately, it happens a lot. Especially after a few hours staring at the screen.