Sunday, July 30, 2006

Another trading week

Last week trades were good. My NAV (net asset value) went up 15%. The trend was clear: buy the Yen. Hehehe, how I wish all my trading weeks are like last week. What's up for this week?

Below are some trading rules, that I frequently read, to keep me in line, whatever that means.

Twenty One Simple Rules of Trading

1. Think like a fundamentalist; trade like a technician.The world of fundamentalists and the world of the technician are indeed compatible, despite what the most virulent supporters of one school or the other might say. We consider it paramount no to trade until the fundamentals and the technicals’ of any trade are running in tandem; i.e. if the fundamentals are bullish and if the market is rising we shall buy. Otherwise we shall stand aside.

2. Think like a mercenary guerrilla warrior. The mercenaries’ duty is to try and fight on a winning side, so too the traders’ duty. Our job is to discern which “side” of any trade has the most merit and then deploy our forces and capital accordingly.

3. The object of trading and/or investing is not to buy low and sell high, but to buy high and sell higher. Understanding this rule is the first step toward “wisdom” in trading/investing not only is more lost trying to find the lows and /or the highs, but so too is most of your “psychological” trading capital squandered.

4. In Bull Markets, one can only be long.There is no mistake worse than attempting to trade against a trend. In bull markets, one can only be long, bull spread, or standing upon the sidelines watching. Under no circumstances can one be short.

5. In Bear Markets, one can only be short, bear spread or again standing upon the sidelines.

6. “Markets can remain illogical far longer than any of us can remain solvent”A. Gary Schilling – The academicians tell us that the markets are rational; we say that most of the time they are not, but instead are sent meandering about in illogical, short term trends, intent upon doing vindictive damage to our capital and to our mental well being.

7. Don’t place a Bullish Bet on a market that has lagged behind, for it has probably done so for a reason that you simply don’t yet understand. I.E. If German Marks, French Francs and Swiss Francs are rising, but the Lira is falling, sell the Lira and buy the others. Don’t expect the Lira to catch up.

8. When you think it is time to “fade” the consensus, wait… Just a little while longer.Patience is a far better virtue when considering a trade than impatience. The market will open again tomorrow. We guarantee it.

9. Always BUY the first day of a gap higher or SELL the first day of a gap lower… and then add to the trade if the gap is still open after the third day.

10. Trading runs is cycles; some good, most bad, the secret is to trade larger when things are going well, and to cut back on the unit size when things are going poorly.In “up” cycles (and it takes a while to know when one is shifting from one to the other), trade smaller and smaller and smaller until the cycle changes.

11. NEVER meet a margin call; liquidate instead… For the margin call is the market’s way of telling you that you are wrong.

12. A bad trade done only once and held can probably never take you out of the game; but a bad trade added to and added to can.. and probably will.

13. Outside reversals at new contract lows or new contract highs are powerful technical signals that should at least be respected, and probably acted upon.

14. Most complicated technical systems only lead to confusion and added expense.The wisest and most profitable traders we’ve known have always tended to gravitate toward the simpler technical systems. If they have any technical “system” at all.

15. Markets have an uncanny way of retracing 50-62% of most moves; understand that and trade accordingly.

16. A solid understanding of mass psychology is far more important than good economics… most of the time.

17. Most long-term positions were originally short-term speculations that went wrong.Avoid this “trap” at all costs, for capital is being depleted, both mentally and fiscally.

18. After All trading rules are meant to be broken from time to time.

19. Establishing an initial position in a bull market, add a second and third time on strength when the market is proving its merit.Add thereafter on corrections. The opposite obviously holds true for bear market trades.

20. Bear markets are usually more violent than bull markets, for prices fall more quickly and in a more direct manner than the prices rise.

21. With profits, it is better to be patient; with losses, impatient.


Warning: Do not trade or do not go into Forex until you know what you are doing. 99% of traders blew their account.