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    Thursday, August 14, 2008

    Just for clarity

    Some readers are confused by my recent comments when compared with my actions, so I'll explain. To make and keep gains taken from the markets, one must be flexible. I frequently make the distinction between analysts and traders. An analyst is concerned with being correct, while I'm concerned about making money.

    My recent "adjustment" in my outlook for the $USD is a function of the breakout on the charts. This event causes me to temper my bearish bets, although I still take bets against the dollar, as that is the long term trend as defined by the moving averages. My discipline will only allow bets in the same direction as the trend, so it would take many more months of a strong dollar before the averages would turn up, and allow me to take "long dollar bets" or short commodities. That does not mean I stay short the dollar, rather that it's the best probability trade. In environments like this, I am forced to tighten stops, risk less of total portfolios (.5% vs 1%), and dampen my profit expectations. This is just what has worked for me over the years, and it's allowed me to avoid bombs like buying/holding financial stocks long.

    I really don't care to label markets bull of bear. Each day, week, and month has tradable moves on both sides. I do believe something has changed to drive the $USD through resistance in such a strong manner, but I'm not concerned what the particular reason is, as much as I recognize when I need to adjust. The main point is to focus on following a valid system, through great times and drawdowns, regardless of what your "analysis" tells you. Rest assured, nobody will know the reasons definitively until long after the opportunity has passed.

    Good luck and stay focused on what matters!

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