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    Wednesday, April 23, 2008

    Afternoon update


    Stocks and commodities are all over the place today, with the $US dollar being the driving force. I was able to add 2 full units to the SDS position (2x short S&P500), for a total of 3 units. For the last 2 hours it's been a one way train my direction, so I peeled off a bit of the position. Although I feel the trade will work, stocks won't go straight down in a line. I will add back the little SDS I sold, perhaps around 2:30 pm (or next signal). So far, so good with this trade, so I'll let it work, and instead move on to what DID NOT work today.

    Earlier this morning, I was finally stopped out of the WEAT etf. But that's not all, I'm very close to losing my Wheat futures position, too. For now, I have some breathing room, but another day like this will take that position out. Of course I'd have liked the trade to work, but traders DO lose, and we lose frequently. The loss, because it's taken early and according to plan, is not debilitating. The stop allows us to focus on the next opportunity to add to what is working (SDS).

    Regarding the commodity bull, I feel it's still intact. Just because a trader loses money doesn't mean he is wrong. The trade was the right trade, but with an unfavorable outcome, nothing more or less. I do not go right back the well after a stop out, but instead focus on ideas that are working, and try to maximze them. For example, if the economy is so weak that commodity demand is going to dry up, wouldn't earnings power dry up for corporate America? So the short side of stocks might be a big winner, and the focus falls there for the time being. I'm flexible and will jump on any long signals in commodities, as long as the big trend is still intact.

    Just a side note regarding an e-mail I received. The trader asked why I didn't hop on ABC at 9:45, and DEF at 10:04, etc? My simple answer is that my system is my system, and that's all. His trades might work great all the time, but I can't "see" them. I grasp the setup, but I don't see the exit plan clearly, so I try not to be involved early (when it's really volatile). I much prefer to have larger size positions, that I step into smoothly, where I have a "window" for exit ideas. Nothing is exact in trading, but we can minimize uncertainty. The "need for more" must be understood on a deeper level, including the need for more excitement and action. As I frequently remind myself, I trade for my living, and nothing more. Good luck.

     

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