Are You Asking The Right Trading Questions?

I think we have thoroughly covered the topic of my “dorky” youth, but in case I haven’t publicly flayed myself sufficiently on that subject, read on.

When I was in high school I always got “nervous” around the time of school dances. In order to attend one of those satanic social events I had to actually go up to a girl, mumble something about going with me, and then hope that not only didn’t she say “no,” but also refrained from throwing rotten eggs at me in the middle of the quad while screaming at the top of her lungs…

“Can you believe this dork asked me to the dance?”

And why was it so nerve-wracking for me?  Because I had built the event up to ridiculous proportions in my mind by asking a question with no context.

The question I was always asking myself was, “Does she like me?”

But what does that question mean?  Does she like me enough to go steady?  To marry me?  To have sex with me?  It’s silly because those weren’t even options I was looking at (although the “sex” one would have been just fine).

All I wanted to do was get a date for the dance, so the question I needed to ask myself was, “Does she like me enough to go to the dance with me?”  And of course the answer to that question was generally “yes.”

Last week I was watching the market action in $AAPL and I found  a spot where it looked like it needed to hold resistance so I tweeted my thoughts out….

It did in fact bounce in that area and instantly I became the $AAPL guru du jour.

Phone calls, letters, and even a proclamation from President Obama came in congratulating me on my fantastic ability to look at a support area on a chart and ubiquitously tweet about it.

Now that I was the “axe” in $AAPL for the day I then got this tweet (shown in text to protect the innocent).

“Hey Brian, what’s your target on $AAPL?”

I didn’t have an answer to that question because not unlike in my wacky high school dance analogy, the question that was being asked was the wrong one.  One without context.

What’s my target for $AAPL in the next five minutes?  Thirty minutes?  Day? Week? Month? Quarter? I wasn’t even trading $AAPL, I just pointed out where it needed to hold, so I didn’t even have a target in mind.

But this type of generalized question and others like it get asked all the time by traders.

The market is by definition dynamic, ever changing, and moving in multiple time frames and dimensions simultaneously.  It’s kinda like that Twilight Zone episode where the kid rolls under the bed and they can’t find her or that stupid 3D chess game on Star Trek.

You just can’t ask linear, non-contextual questions about the markets or stocks, because to quote Mr. Spock, “that would be fucking stupid, Jim.”

Spock giving Kirk the “illogical A-hole” look.

Ambiguous information in trading kills.  It kills your trades.  Kills you success and will kill your P&L because you can’t act on information that is too general.  The more objective, the more in context, and the more specific your trading information is, the easier it is to act on, and the more it will benefit your trading.

So in order to get that actionable information, work to craft the questions you ask, both of others and of yourself, that illicit targeted and specific responses.

A better version of the question asked of me would be;

What are the next resistance levels on $AAPL?

or even..

What do you think a reasonable swing trade target would be on $AAPL?

Once you get in the habit of asking more focused questions about trading, you will find that they become second nature and an integral part of your analysis process going forward.

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  1. Pingback: Tuesday links: the new mosaic - Abnormal Returns | Abnormal Returns

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