The Power Of Side Projects

• Posted by DynamicHedge
• on September 13th, 2011

Writing about the financial markets can be a bit boring and repetitive.  Trading isn’t a game in the fourth quarter with the shot clock running out every single moment.  In fact, it’s mostly a super dull and repetitive loop of screening for stocks, examining relationships, running spreadsheets, with the occasional bout of reading.  This is especially when you’re trading outside accounts or have a narrow mandate to follow.  It’s not like I’m taking shots at momo names like $NFLX.  This is the boring old man business of spread trading.  No gun slinging whatsoever.

Most of the big creative breakthroughs in my spread trading happened years ago while searching for an edge.  While I may have many “theories” about how the market works, very few ever find their way into the spread trading strategy.  It’s 95% rules based and I rarely deviate from my flight plan due to mistakes and missteps tattooed into my psyche.  Every once in a while I have a bit of drama come along like the $GDX – $GLD trade, but mostly its just initiate a position, get stopped out, or lift the winner.

Side projects keep you fresh.  I’m still super passionate about the market so I need somewhere to test my theories and just screw around so I don’t get stuck in a rut.  I’m lucky to have a great trading partner who is just as curious and passionate about the market as I am.

I started working on a side project about a year and a half ago and have been beta testing it for the last few months.  This side project is purposefully out of the realm of spread trading.  I also made sure that I was tackling something incredibly difficult.  In my case, trading the $ES_F contract.  The advances I’ve made on my side project are truly amazing and could be a game changer for me — and my whole career.  It never would have never happened if I didn’t dedicate a good amount of my time messing around, dropping my preconceived notions about how markets work, and generally not caring about the results.  I now understand why people make such a big deal about Google allowing their engineers 20% of their time to side projects.  This is where all the progress comes from.  There is nothing to be learned from a strategy humming along.  You need to break out of your comfort zone and attack new problem sets with a clear mind.

Here are a couple stories about great things that happen when you work on a side project you care about:

Success on the Side (The Journal of the American Enterprise Institute)

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