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    Friday, September 19, 2008

    It's not what you trade, it's HOW you trade that makes the difference



    Readers know I haven't been comfortable being long stocks for over a year. That said, I've managed to make money being long equities the last few days. It's important to note that success has nothing to do with what I traded, but how I traded. Just about any idea would've worked, but results came from proper risk control. Appropriate sizing allows one to stay in a trade when it's not working (as long as not stopped out), keep a clear head, and exit when you get the signal (not before. A week ago I was the only "fool" buying Gold, and now that it's worked, I booked the profits. Just because I was long doesn't mean I support or disagree with the long term arguments, it's just a trade. Both longs and shorts in Gold could have made money, depending on when they enter/exit. Likewise with stocks yesterday and this morning. I was fortunate enough to be long, and am selling into the rally. I don't care to "exactly" measure the impact from all the manipulation, all I know is the best time to sell in a bear market is during one of the vertical rallies that occur frequently.

    Keep and open mind, and know your time frame. Clearly define your risk, taking into account the recent volatility. It's not enough to trade on terms like "strong/weak, big/small size, etc". The terms must be definite, or you should not enter the water.

    Check out the "Gubmint". I try not to get dejected with news like this, but I find comfort knowing that whatever rules they make, we will find a way to win. It's only mid-trade that can clobber you, because at all other times, where we bet is up to us. If the race is "fixed", then bet the horse that's guaranteed to win. The point is that no matter how the rules change, don't get bent. Opportunities will still exist, even if it's only the opportunity to move to Argentina! Every decision in life is a "trade", and reminding myself of this truth allows for clear thinking.

    Links I like:

    -Perhaps this will be my window to get long?

    -Brett Steenbarger always adding value.

    P.S. What's up with financial markets when Constellation Energy pukes like that? I'm keeping my "long stock" trades for very short hold times.



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