I have seen many novice traders lose all their capital, irregardless whether their capital is US$5,000, US$10,000, US$50,000 and even US$100,000. Most lose them within a year of trading. One of the main reason why they lose capital so fast is because they over-trade or others call it lack of money management. Basically, they trade too many contracts in any one trade.
To all novice traders, my advice to them:
PLAY ONE CONTRACT PER TRADE at any one time.
The rationale is very simple. If you are a novice trader, the tendency for you to play a good trade and make money is less than you playing a bad trade and/or lose money. If you play just one contract and lose $50 per contract, then you lose only US$50. If they you play 10 contracts, the loss is multiplied by 10, i.e. US$500. Some would argue, "Yes, but if I make, I would make 10 times i.e. US$500". Yes, that is true, but like I said, tendency is that you make more bad trades and good trades in the novice stage.
So in the novice stage, my recommendation is always, play one contract at a time. When you have gain confidence (which needs to be built up) and play more good trades than bad, then increase the contract size incrementally. e.g. 1 additional contract at a time.
You play small, win small and lose small.
Following this simple rule requires discipline and patience. Both of these assets are important for traders.
- PersianCat (Millionaire-in-progress)
Wednesday, February 27, 2008
News Bytes - U.S. in Recession
Rogers: U.S. in Recession, Will Get Worse (MoneyNews.com – 26 Feb 08)
The United States economy is already in recession and is set for a further slowdown with the dollar expected to remain under pressure, investment guru Jim Rogers said on Monday.
Rogers, who co-founded the Quantum Fund with billionaire George Soros in the 1970s, said the housing and automobile sectors were in a situation "worse than recession" with soaring energy and food prices hitting consumer spending.
"They (the U.S. central bank) are printing money and are trying to prevent the recession — they are putting on Band Aids," he said ahead of an investor conference in Dublin.
Rogers said the central bank was making the "same mistakes" Japan did in the early 1990s before its credit-inflated bubble economy burst.
"The Japanese did it and the Japanese still have not recovered 18 years later," he said.
"As long as the (U.S.) central bank and the federal government keep making the mistakes, you will have a longer period of slowdown and it will be perhaps one of the worst recessions we have had in a long time in America," he said. Rogers said the dollar was set to "go down a great deal" adding he hoped to get out of all his dollar holdings at some stage this year.
Rogers reiterated he preferred investments in the agriculture sector in the light of tightening supplies worldwide.
"Inventories for food are the lowest in 40 or 50 years. I don't see where the supplies are coming from," he said.
"Agriculture is still the best place to be, maybe (also) silver, maybe palladium," he said.
The United States economy is already in recession and is set for a further slowdown with the dollar expected to remain under pressure, investment guru Jim Rogers said on Monday.
Rogers, who co-founded the Quantum Fund with billionaire George Soros in the 1970s, said the housing and automobile sectors were in a situation "worse than recession" with soaring energy and food prices hitting consumer spending.
"They (the U.S. central bank) are printing money and are trying to prevent the recession — they are putting on Band Aids," he said ahead of an investor conference in Dublin.
Rogers said the central bank was making the "same mistakes" Japan did in the early 1990s before its credit-inflated bubble economy burst.
"The Japanese did it and the Japanese still have not recovered 18 years later," he said.
"As long as the (U.S.) central bank and the federal government keep making the mistakes, you will have a longer period of slowdown and it will be perhaps one of the worst recessions we have had in a long time in America," he said. Rogers said the dollar was set to "go down a great deal" adding he hoped to get out of all his dollar holdings at some stage this year.
Rogers reiterated he preferred investments in the agriculture sector in the light of tightening supplies worldwide.
"Inventories for food are the lowest in 40 or 50 years. I don't see where the supplies are coming from," he said.
"Agriculture is still the best place to be, maybe (also) silver, maybe palladium," he said.
Monday, February 25, 2008
News Bytes - Recession Could Be Long and Severe
Recession Could Be Long and Severe - Key Reagan Adviser (extracted from MoneyNews.com 23/2/08)
Martin Feldstein, chairman of President Reagan’s Council of Economic Advisers, says that evidence is mounting that a recession began in December or January.
And unlike many economists who say any recession will be mild and brief, the Harvard economist wrote that there is a good chance it will be long and severe.
That’s largely because Federal Reserve interest-rate cuts are having little effect, he argued this week in The Wall Street Journal. "If a recession does occur, it could last longer and be more painful than the past several downturns because of differences in its origin and character,” Feldstein wrote.
The recessions of 1990-91 and 2001 lasted only eight months, and even the deeper recession of 1981 was over in 16 months.
"But these past recessions were caused by deliberate Federal Reserve policy aimed at reversing a rise in inflation,” Feldstein wrote.
"A key cause of the present slowdown and potential recession was not a tightening of monetary policy, but the bursting of the house-price bubble after six years of exceptionally rapid increases,” he wrote.
"The principle cause for concern today is the paralysis of the credit markets,” Feldstein wrote.
"Credit is always key to the expansion of the economy. The collapse of confidence in credit markets is now preventing that necessary extension of credit.”
It’s not just banks that are cutting back on extending credit, Feldstein notes. It’s also bond markets, hedge funds, insurance companies and mutual funds.
"Securitization, leveraged buyouts and credit insurance have also atrophied,” Feldstein wrote.
As a result Fed rate cuts just can’t jumpstart the economy like they have in the past. "Monetary policy may simply lack traction in the current credit environment,” according to Feldstein.
The situation has turned into a vicious cycle.
"The lack of confidence in asset prices also translates into a lack of confidence in the creditworthiness of other financial institutions, impeding the extension of credit to those institutions,” according to Feldstein.
"And because financial institutions do not even have confidence in the value of their own capital and in the potential availability of liquidity, they are reluctant to make new lending commitments,” he wrote.
Martin Feldstein, chairman of President Reagan’s Council of Economic Advisers, says that evidence is mounting that a recession began in December or January.
And unlike many economists who say any recession will be mild and brief, the Harvard economist wrote that there is a good chance it will be long and severe.
That’s largely because Federal Reserve interest-rate cuts are having little effect, he argued this week in The Wall Street Journal. "If a recession does occur, it could last longer and be more painful than the past several downturns because of differences in its origin and character,” Feldstein wrote.
The recessions of 1990-91 and 2001 lasted only eight months, and even the deeper recession of 1981 was over in 16 months.
"But these past recessions were caused by deliberate Federal Reserve policy aimed at reversing a rise in inflation,” Feldstein wrote.
"A key cause of the present slowdown and potential recession was not a tightening of monetary policy, but the bursting of the house-price bubble after six years of exceptionally rapid increases,” he wrote.
"The principle cause for concern today is the paralysis of the credit markets,” Feldstein wrote.
"Credit is always key to the expansion of the economy. The collapse of confidence in credit markets is now preventing that necessary extension of credit.”
It’s not just banks that are cutting back on extending credit, Feldstein notes. It’s also bond markets, hedge funds, insurance companies and mutual funds.
"Securitization, leveraged buyouts and credit insurance have also atrophied,” Feldstein wrote.
As a result Fed rate cuts just can’t jumpstart the economy like they have in the past. "Monetary policy may simply lack traction in the current credit environment,” according to Feldstein.
The situation has turned into a vicious cycle.
"The lack of confidence in asset prices also translates into a lack of confidence in the creditworthiness of other financial institutions, impeding the extension of credit to those institutions,” according to Feldstein.
"And because financial institutions do not even have confidence in the value of their own capital and in the potential availability of liquidity, they are reluctant to make new lending commitments,” he wrote.
Friday, February 22, 2008
12 Steps To Financial Disaster
The following are extracted from FT.com - stating Prof Roubini's 12 – steps to financial disaster. The full article could be found in: http://blogs.ft.com/wolfforum/2008/02/americas-economy-risks-mother-of-all-meltdowns/
Step one is the worst housing recession in US history. House prices will, he says, fall by 20 to 30 per cent from their peak, which would wipe out between $4,000bn and $6,000bn in household wealth. Ten million households will end up with negative equity and so with a huge incentive to put the house keys in the post and depart for greener fields. Many more home-builders will be bankrupted.
Step two would be further losses, beyond the $250bn-$300bn now estimated, for subprime mortgages. About 60 per cent of all mortgage origination between 2005 and 2007 had “reckless or toxic features”, argues Prof Roubini. Goldman Sachs estimates mortgage losses at $400bn. But if home prices fell by more than 20 per cent, losses would be bigger. That would further impair the banks’ ability to offer credit.
Step three would be big losses on unsecured consumer debt: credit cards, auto loans, student loans and so forth. The “credit crunch” would then spread from mortgages to a wide range of consumer credit.
Step four would be the downgrading of the monoline insurers, which do not deserve the AAA rating on which their business depends. A further $150bn writedown of asset-backed securities would then ensue.
Step five would be the meltdown of the commercial property market, while step six would be bankruptcy of a large regional or national bank.
Step seven would be big losses on reckless leveraged buy-outs. Hundreds of billions of dollars of such loans are now stuck on the balance sheets of financial institutions.
Step eight would be a wave of corporate defaults. On average, US companies are in decent shape, but a “fat tail” of companies has low profitability and heavy debt. Such defaults would spread losses in “credit default swaps”, which insure such debt. The losses could be $250bn. Some insurers might go bankrupt.
Step nine would be a meltdown in the “shadow financial system”. Dealing with the distress of hedge funds, special investment vehicles and so forth will be made more difficult by the fact that they have no direct access to lending from central banks.
Step 10 would be a further collapse in stock prices. Failures of hedge funds, margin calls and shorting could lead to cascading falls in prices.
Step 11 would be a drying-up of liquidity in a range of financial markets, including interbank and money markets. Behind this would be a jump in concerns about solvency.
Step 12 would be “a vicious circle of losses, capital reduction, credit contraction, forced liquidation and fire sales of assets at below fundamental prices”.
Step one is the worst housing recession in US history. House prices will, he says, fall by 20 to 30 per cent from their peak, which would wipe out between $4,000bn and $6,000bn in household wealth. Ten million households will end up with negative equity and so with a huge incentive to put the house keys in the post and depart for greener fields. Many more home-builders will be bankrupted.
Step two would be further losses, beyond the $250bn-$300bn now estimated, for subprime mortgages. About 60 per cent of all mortgage origination between 2005 and 2007 had “reckless or toxic features”, argues Prof Roubini. Goldman Sachs estimates mortgage losses at $400bn. But if home prices fell by more than 20 per cent, losses would be bigger. That would further impair the banks’ ability to offer credit.
Step three would be big losses on unsecured consumer debt: credit cards, auto loans, student loans and so forth. The “credit crunch” would then spread from mortgages to a wide range of consumer credit.
Step four would be the downgrading of the monoline insurers, which do not deserve the AAA rating on which their business depends. A further $150bn writedown of asset-backed securities would then ensue.
Step five would be the meltdown of the commercial property market, while step six would be bankruptcy of a large regional or national bank.
Step seven would be big losses on reckless leveraged buy-outs. Hundreds of billions of dollars of such loans are now stuck on the balance sheets of financial institutions.
Step eight would be a wave of corporate defaults. On average, US companies are in decent shape, but a “fat tail” of companies has low profitability and heavy debt. Such defaults would spread losses in “credit default swaps”, which insure such debt. The losses could be $250bn. Some insurers might go bankrupt.
Step nine would be a meltdown in the “shadow financial system”. Dealing with the distress of hedge funds, special investment vehicles and so forth will be made more difficult by the fact that they have no direct access to lending from central banks.
Step 10 would be a further collapse in stock prices. Failures of hedge funds, margin calls and shorting could lead to cascading falls in prices.
Step 11 would be a drying-up of liquidity in a range of financial markets, including interbank and money markets. Behind this would be a jump in concerns about solvency.
Step 12 would be “a vicious circle of losses, capital reduction, credit contraction, forced liquidation and fire sales of assets at below fundamental prices”.
Thursday, February 21, 2008
U.S. Market Holidays 2008
1 Jan - New Year's Day
21-Jan - Martin Luther King, Jr. Day
18-Feb - Presidents' Day
21-Mar - Good Friday
26-May - Memorial Day
4-Jul - Independence Day
1-Sep - Labor Day
27-Nov - Thanksgiving Day
25-Dec - Christmas Day
Early Closures (1:00pm):
28 Nov - Day After Thanksgiving
24 Dec - Christmas Eve
21-Jan - Martin Luther King, Jr. Day
18-Feb - Presidents' Day
21-Mar - Good Friday
26-May - Memorial Day
4-Jul - Independence Day
1-Sep - Labor Day
27-Nov - Thanksgiving Day
25-Dec - Christmas Day
Early Closures (1:00pm):
28 Nov - Day After Thanksgiving
24 Dec - Christmas Eve
Wednesday, February 20, 2008
How The Markets Really Work
Rajan, a good friend of mine alerted me of a 9-mins video that could be found in http://www.brasschecktv.com/page/187.html. It is a good, simplified and comical perspective of how the markets really work. The issues mentioned include the sub-prime issues. Watch and enjoy.
- PersianCat (Millionaire-in-progress)
- PersianCat (Millionaire-in-progress)
Friday, February 15, 2008
News Bytes - Greenspan, BRKA
Greenspan Speaks (Schaeffer Research - 15 Feb)
Former U.S. Federal Reserve Chairman Alan Greenspan was addressing energy execs at a CERA conference in Houston, saying the U.S. economy was on the verge of recession, warning that conditions would "continue to erode until housing prices stabilized," MarketWatch reported. In conclusion, Greenspan noted that the housing-market woes were still far from a bottom.
Warren Buffett Portfolio Changes (Schaeffer Research - 15 Feb)
Berkshire Hathaway (BRKA) disclosed it was accumulating shares of Kraft Foods (KFT) , gathering an 8.6% stake by the end of 2007. The billionaire also revealed a 1.5-million-share stake in drug maker GlaxoSmithKline (GSK) , amongst others, while reducing stakes in Iron Mountain (IRM) and Ameriprise Financial (AMP).
Bernanke Speaks (www.thestreet.com 14 Feb)
Federal Reserve Chairman Ben Bernanke on Thursday offered a bleak economic outlook for the near term and signaled the central bank's willingness to continue to cut its target rate.
Bernanke expects a period of sluggish growth, followed by a "somewhat stronger pace of growth starting later this year" as the tax rebates and interest rate cuts begin to impact the economy, the Fed chief told the Senate's Committee on Banking, Housing and Urban Affairs. He noted the Federal Open Market Committee's aggressive rate cuts to battle tight interbank lending market that have resulted in a 225 basis point drop to the federal funds rate since September to its present 3%.
Bernanke said further cuts in homebuilding and related activities are likely, as is more-expensive and less-available credit straining the economy. Additional subprime writedowns also appear likely in the short term. And while the chairman doesn't expect a "rip-roaring labor market," the Fed will be looking to see if it stabilized at current levels.
"It is important to recognize that downside risks to growth remain, including the possibilities that the housing market or the labor market may deteriorate to an extent beyond that currently anticipated, or that credit conditions may tighten substantially further," said Bernanke.
Bond Insurers Getting the Heat (www.wsj.com 15 Feb)
The clock is running out for bond insurers to save their triple-A credit ratings.
In congressional testimony yesterday, New York Gov. Eliot Spitzer gave a three-to-five-day time frame for the bond insurers to raise much-needed capital or find other ways to resolve their problems.
Bond insurers -- relatively obscure companies that insure the principal and interest payments in the event of default -- have emerged as the linchpins of large swaths of the financial markets, ranging from municipal bonds to short-term securities backed by student loans. With investors worried that potential downgrades will lead to massive write-downs in their holdings of securities guaranteed by the insurers, regulators have been trying to rally banks to help rescue the insurers.
FGIC Corp., the third-biggest bond insurer by amount of insured debt outstanding after MBIA Inc. and Ambac Financial Group Inc., has already lost its top-notch triple-A rating from all three major ratings firms, indicating that the banks so far have failed to devise a way to raise enough capital to save its status. Moody's Investors Service cut FGIC's triple-A financial-strength rating by six notches to A3, with a warning that it could be cut to the lowest investment grade level of Baa if FGIC's strategic and capital plans had "an unfavorable outcome."
FGIC is closely held by mortgage-insurer PMI Group Inc., which owns a 42% stake, and private-equity firms Blackstone Group Inc. and Cypress Group, each with 23%.
The forays of FGIC, Ambac and MBIA into the risky business of insuring complex mortgage-related securities have put them on the hook for potentially billions of dollars of claims as the housing market stumbles.
The Moody's downgrade -- which could prompt money-fund managers to unload their FGIC-insured holdings -- is more severe than the downgrades of FGIC to double-A in January by Fitch Ratings and Standard & Poor's.
- PersianCat (Millionaire-in-progress)
Former U.S. Federal Reserve Chairman Alan Greenspan was addressing energy execs at a CERA conference in Houston, saying the U.S. economy was on the verge of recession, warning that conditions would "continue to erode until housing prices stabilized," MarketWatch reported. In conclusion, Greenspan noted that the housing-market woes were still far from a bottom.
Warren Buffett Portfolio Changes (Schaeffer Research - 15 Feb)
Berkshire Hathaway (BRKA) disclosed it was accumulating shares of Kraft Foods (KFT) , gathering an 8.6% stake by the end of 2007. The billionaire also revealed a 1.5-million-share stake in drug maker GlaxoSmithKline (GSK) , amongst others, while reducing stakes in Iron Mountain (IRM) and Ameriprise Financial (AMP).
Bernanke Speaks (www.thestreet.com 14 Feb)
Federal Reserve Chairman Ben Bernanke on Thursday offered a bleak economic outlook for the near term and signaled the central bank's willingness to continue to cut its target rate.
Bernanke expects a period of sluggish growth, followed by a "somewhat stronger pace of growth starting later this year" as the tax rebates and interest rate cuts begin to impact the economy, the Fed chief told the Senate's Committee on Banking, Housing and Urban Affairs. He noted the Federal Open Market Committee's aggressive rate cuts to battle tight interbank lending market that have resulted in a 225 basis point drop to the federal funds rate since September to its present 3%.
Bernanke said further cuts in homebuilding and related activities are likely, as is more-expensive and less-available credit straining the economy. Additional subprime writedowns also appear likely in the short term. And while the chairman doesn't expect a "rip-roaring labor market," the Fed will be looking to see if it stabilized at current levels.
"It is important to recognize that downside risks to growth remain, including the possibilities that the housing market or the labor market may deteriorate to an extent beyond that currently anticipated, or that credit conditions may tighten substantially further," said Bernanke.
Bond Insurers Getting the Heat (www.wsj.com 15 Feb)
The clock is running out for bond insurers to save their triple-A credit ratings.
In congressional testimony yesterday, New York Gov. Eliot Spitzer gave a three-to-five-day time frame for the bond insurers to raise much-needed capital or find other ways to resolve their problems.
Bond insurers -- relatively obscure companies that insure the principal and interest payments in the event of default -- have emerged as the linchpins of large swaths of the financial markets, ranging from municipal bonds to short-term securities backed by student loans. With investors worried that potential downgrades will lead to massive write-downs in their holdings of securities guaranteed by the insurers, regulators have been trying to rally banks to help rescue the insurers.
FGIC Corp., the third-biggest bond insurer by amount of insured debt outstanding after MBIA Inc. and Ambac Financial Group Inc., has already lost its top-notch triple-A rating from all three major ratings firms, indicating that the banks so far have failed to devise a way to raise enough capital to save its status. Moody's Investors Service cut FGIC's triple-A financial-strength rating by six notches to A3, with a warning that it could be cut to the lowest investment grade level of Baa if FGIC's strategic and capital plans had "an unfavorable outcome."
FGIC is closely held by mortgage-insurer PMI Group Inc., which owns a 42% stake, and private-equity firms Blackstone Group Inc. and Cypress Group, each with 23%.
The forays of FGIC, Ambac and MBIA into the risky business of insuring complex mortgage-related securities have put them on the hook for potentially billions of dollars of claims as the housing market stumbles.
The Moody's downgrade -- which could prompt money-fund managers to unload their FGIC-insured holdings -- is more severe than the downgrades of FGIC to double-A in January by Fitch Ratings and Standard & Poor's.
- PersianCat (Millionaire-in-progress)
New Play - MET Put
Played the following yesterday:
- Bought MET Mar 55 Put @$1.65 (when the stock is around $58.03)
- PersianCat (Millionaire-in-progress)
Thursday, February 14, 2008
Position Update
Yesterday, the general market had another positive day (3 consecutive positive days. The charts showed that the market seems to start a rally and not testing the low of January 2008. Given the current market sentiments and looking at the charts, I closed all my positions yesterday with mixed results:
SPY - Bear Call Spread Feb 133/136 Call @$2.48 (Loss 65.3% 5 market days)
BSC - Bear Call Spread Feb 85/90 Call @$0.05 (Profit 57.1% 6 market days)
COF - Bear Call Spread Feb 50/55 Call @0.40 (Profit 64.3% over 7 market days)
- PersianCat (Millionaire-in-progress)
SPY - Bear Call Spread Feb 133/136 Call @$2.48 (Loss 65.3% 5 market days)
BSC - Bear Call Spread Feb 85/90 Call @$0.05 (Profit 57.1% 6 market days)
COF - Bear Call Spread Feb 50/55 Call @0.40 (Profit 64.3% over 7 market days)
- PersianCat (Millionaire-in-progress)
Position Update
Yesterday, the general market had another positive day (3 consecutive positive days. The charts showed that the market seems to start a rally and not testing the low of January 2008. Given the current market sentiments and looking at the charts, I closed all my positions yesterday with mixed results:
SPY - Bear Call Spread Feb 133/136 Call @$2.48 (Loss 65.3% 5 market days)
BSC - Bear Call Spread Feb 85/90 Call @$0.05 (Profit 57.1% 6 market days)
COF - Bear Call Spread Feb 50/55 Call @0.40 (Profit 64.3% over 7 market days)
- PersianCat (Millionaire-in-progress)
SPY - Bear Call Spread Feb 133/136 Call @$2.48 (Loss 65.3% 5 market days)
BSC - Bear Call Spread Feb 85/90 Call @$0.05 (Profit 57.1% 6 market days)
COF - Bear Call Spread Feb 50/55 Call @0.40 (Profit 64.3% over 7 market days)
- PersianCat (Millionaire-in-progress)
Monday, February 11, 2008
New Play - SPY
Played a Bear Call Spread on SPY last Friday.
SPY - Bear Call Spread Feb 133/136 @1.50 (when the stock is around 133.72)
- PersianCat (Millionaire-in-progress)
SPY - Bear Call Spread Feb 133/136 @1.50 (when the stock is around 133.72)
- PersianCat (Millionaire-in-progress)
Thursday, February 07, 2008
New Position Added - BSC
The market was volatile yesterday. It broke the previous day low but it rally back before it broke the same level again and end negative for the day. Anyway, I added another position again yesterday:
- BSC - Bear Call Spread Feb 85/90 Call @$1.85 (when the stock is around $84.90)
In the current volatile market, the credit spread play (above) would not make me too excitable seeing my position going from positive to negative to positive..... Since it also requires less monitoring, I am able to focus in preparing on some project which I am starting next week.
For those who celebrate Chinese New Year or its holidays, I would like to wish you "Gong Xi Fa Cai" and have a prosperous and profitable year.
- PersianCat (Millionaire-in-progress)
Wednesday, February 06, 2008
We have confirmation !!!
We have a reversal confirmation with a black candle yesterday. How to play? I would short if the market/stock goes below yesterday's low. The stop loss is Friday's high (or last week's high - whichever is higher) and the first target is January Low. I have to be careful though. In the current volatile market, crazy swings should be expected.
As for me, I have already started by playing the following yesterday:
As for me, I have already started by playing the following yesterday:
- COF - Bear Call Spreads Feb 50/55 Call @$2.20 (when COF is about $51.65)
- PersianCat (Millionaire-in-progress)
Tuesday, February 05, 2008
We might have confirmation candle today !
The futures were negative before market open. The ISM data released today was also below expectations and the futures react accordingly pushing the prices lower. It seems that this week is the week to go back to reality and continue the downtrend. If we close lower today, we would have the confirmation candlestick required to confirm a reversal after yesterday down day. Anyway, I have to be careful, as the market is very volatile these days and like to give mixed signals.
Since it is 2 weeks before expiry, I am considering to play one of my favourite strategies - at or in-the-money credit spreads. This strategy offered limited risk and limited profit. The sector to play is still the same - housing, financials, etc.
- PersianCat (Millionaire-in-progress)
Since it is 2 weeks before expiry, I am considering to play one of my favourite strategies - at or in-the-money credit spreads. This strategy offered limited risk and limited profit. The sector to play is still the same - housing, financials, etc.
- PersianCat (Millionaire-in-progress)
Monday, February 04, 2008
Thoughts - Are you winning the battle?
If a soldier is fighting in a battle, it is important that he keeps himself alive so he can fight for his country. Even if he is injured, he can still fight. But once he is dead, it is the end of the story. Of course it is the soldier’s greatest honor to die for his country.
In trading, if a trader wants to keep trading (like the soldier fighting for his country), he needs to ensure that he has enough capital (to keep himself alive). Even if he loses some money (injured), he can still trade as long as he has capital (his life). However, if he has no more capital (the soldier is dead), then his trading days are over (at least for the moment).
The moral of the story is:
The moral of the story is:
Capital preservation is extremely important in trading.
Often we have seen or heard, that once in a while, some traders (even good ones) like to participate in a suicide-like mission. They play big contracts (over-trading) in one trade hoping to make that BIG money that they are so sure of winning, but end up losing HUGE money that make them lose most of their capital. They end up so demoralised that they have lost their confidence in trading. They are "dying" and almost as good as dead. So are you surviving, winning the battle, badly injured or dying?
If you are "dead", you would not be interested to read this blog anyway. Oh, by the way, you can die for your country, but there is no such thing as dying for the market ;)
If you are "dead", you would not be interested to read this blog anyway. Oh, by the way, you can die for your country, but there is no such thing as dying for the market ;)
- PersianCat (Millionaire-in-progress)
Post Non-Farm Payroll
Last week, the market seemed to shrug off bad news and continued its rally. It broke the Resistance at August 2007 Low. For the moment, I would not short the market unless there is a confirmation of a change in direction. The longer term trend is still bearish.
- PersianCat (Millionaire-in-progress)
- PersianCat (Millionaire-in-progress)
