Today's Ideas:

    IMPORTANT : Below is what we're looking at currently, but pay attention to our UPDATES on the side of each page for actual entry/exit times and prices. Refresh pages often! You will witness our winners AND losers; something that is rare in our business.    TO VERIFY ACTUAL PRICES AND TIMES, PLEASE CLICK ON  A TICKER ENTRY TO THE RIGHT.  ALL TRADES, WHEN THEY OCCURED, ARE VIEWABLE.  Whenever possible, we have included the ETF symbol for those who are not experienced trading futures, etc.

    Friday, May 16, 2008

    Losing small

    Despite not getting much traction the last several trades, I think readers can learn something very valuable. These "streaks" will occur in every trader's career, no matter how successful they eventually become. Without too much effort, I keep my upbeat mood by reviewing trades setups, entries, exits to confirm I acted according to my system. Trading well is not reflected in the P+L from moment to moment, but does show results over a series of trades. As I read my usual finance blogs last night, I was amazed to see how many were "in the dumps" as a result of the recent action. It's this simple, small losses cannot get you down as you must expect them to occur frequently. It goes back to my recent post regarding "how much" you make when right vs. "how much" you lose when wrong.

    Enough on the mental aspects of trading, for now. Let's review some technical and fundamental observations. I have known for a long time that the financial companies typically lead the market, both up and down. Since the decline form the highs to lows on March 17 has been so severe in this group, I'd expect stocks to have not seen the lows yet. I would think the same of homebuilders; no way that group's fundamentals are even near turning up! However, the last 2 months have seen these stocks move higher. Until they start to wobble again, this "drift higher on low volume" could continue.

    I basically trade this the same way as if my short side trades were working, except I am more focused on position sizing. That is, I take signals as they present, but at the next juncture where I would normally add to the initial stake, I am instead paring back (if it's under water). This really shows the importance of sizing. The trader barely notices the loss on 1/2 unit, traded at the signal and exited, rather than tripling up and really creating a problem. Readers might want to compare the volatility of my overall P+L on the website, to their own portfolio. This is located below the current positions. I want the volatility to subside on drawdowns, but it can increase substantially if it's a profitable situation, due to the increased size on winning trades. Proper position sizing IS risk control.

    I've also attached a chart of the $USD. All the talk about the bottom being in might be true. However, when I look at that chart from across the room, I certainly don't want to be long that vehicle. Just because something is done gone down (if it's done), does not imply it's going up from now on. Same, but in reverse, with regard to oil. As far as I can gather, this recent market is more rotational than anything else. Readers know the setups I've been hunting, but until the action kicks in to support my trades, I'll be small or out entirely. Just because I have a strong belief doesn't mean it has to come true today (as much as I'd like that). The process requires losing as little as possible until I get traction, then exploiting the opportunity when it blossoms. Stay focused, ignore headlines, and review your position sizing. These are the things you can control. Personally, I won't have a significant position until the bonds, indexes, financial stocks, etc are all in confirming moves in each other. Lately, it's been one instrument signaling while the others are not close to a signal. Sometimes this is symptomatic of lower opportunity environments, but the good news is it never lasts.

    This article is a day or two old, but I meant to share it yesterday:

    And this short and sweet post from the Big Picture blog:


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