Tuesday, October 21, 2008

How To Not Trade

Dear Readers, It is very unpleasant for me to see that some traders maybe overextended and getting anxious about their positions.

Please remember rule #1 of trading.
1) Do not lose money

This means very simple thing. Trader never commits to a trade that he/she can not carry either a completion or termination via stop. That is not as simple as it sounds. Especially for a longer term trade. By definition the stops must be far and risk is greater for the same amount of money that one may play for a short time. That is why the position size must be chosen very carefully and the mental stop ( anguish stop) must be known apriori. I do not control those things, because they are uncontrollable remotely. Trader does. There is another thing. What if trade goes against you and find that you do not want to leave trade ( fear of missing profits) yet market keep going against you. If you are a trader, you know what you must do. Something must be indicating to you a trend. We all have our favorite indicators. Some use averages and some use MACD and some use Directionals and/or fractal trend indicators. There is as many as there are traders. So, one must abandon the the losing position, but not forget it, watch for another time and place to enter. Let us say at 50% fibo the trade has went against you, natural place for this is to get out and wait for 62% FIBO and/or AP or a reversal on the favorite system to reenter the trade. There is not much anybody else can do. Or if you are very well capitalised and know your long term cycles, you can sit with the trade and allow it even to go deep as fare as 20-30%. Now, I do not like to operate that way. That is a way of SOROS and ROGERS. I am a trader and I think I can do better.

15 comments:

אנטי-סופיטליסט said...

Dear Boris, Perfect comments at his time to reinforce good trading habits. I just watched the Newshour on TV; guests were Nassem Nicholas Taleb and his mentor Dr. Mandelbrot. I doubt if 99.7% of viewers know them or understood what they were saying but it was a powerful interview! Mandelbrot chided the host for asking unanswerable questions and Dr. Taleb warned repeatedly of the Black Swans just over the horizon. Summary: be ready for anything! Good Trading, Jsolos

John said...

Jsolos,

Even I have read articles written by Nassem Taleb. The black swam theory really interested me. I like the fact that he pokes fun at the so called experts who think everything can be figured out.

old john

gorli said...

shalom, dear boris, you have spoken like a true "guru"
gorli

xerxes said...

Hello Dear Boris....

Great post Boris.

Today, I read the tea leaves and they say: "parity by yom Sylvestre" :-)

When do we start loading Euro calls?

D said...

1.16XX has pretty strong support...

maybe

:)

Greenie said...

Dear Boris,

When dollar was dropping in March, you wrote some long posts about how Bernanke and sopitalists were destroying USA. Now that dollar has been rising for many months, shouldn't you praise Bernanke and sopitalists for helping our country? This asymmetry of what you write regarding matters other than trading suggests that your opinions are not very credible. I hope you explain your position to a confused reader like me.

D said...

Well, Boris experienced the collapse of Russia and it has sounded to me like he is using that as his perspective or analog for the collapse here. The primary distinction is that the Ruble was not the reserve currency of the world and thus not remotely as highly-demanded for commerce as the USD is.

I have had quite a few discussions with Boris off A-S regarding the russian collapse.

The only potential way to stem the flow is to introduce a global currency unit and all countries sign a pact abolishing their sovereign currencies. That would fully close the system and cease the run on currencies.

boris said...

Dear D,
I have indeed spoken to you about this subject and to many and openly on the board.

In fact, I said exactly, this, nervous people.

USA is, a priviliged nation. It borrows in its own currency and has Dear Bernanke ready to print as much as he needs to pay for it. This nation can not go broke.

Period.

Jast facts.

diesel said...

Unless of course the rest of the world says enough is enough and refuses to fund the t-bond racket. :)

boris said...

Dear Damien,
That just makes FORTRESS America that does not wnat to trade with anybody and sais hell with you all...

USA is the most self sufficient country on the face of the earth

Good Trading
Dear Damien

אנטי-סופיטליסט said...

Hello Dear Boris....

You say that the USA can't default. Technically correct but they can devalue massively which is a technical default....

I offer this European perspective on timing....

http://www.economiasur.com/crisisglobal2008/GEAB28UsaCesacionPagos08.pdf

Does SeeFuture concur?

xerxes

boris said...

Dear Damien,
Please understand this is not my attitude at this or any other time.

I am just saying that if USA finds too many zombies in the world then it will elect type of people who will turn USA inwards and that could mean disaster for the world as the big GUY will not be there to calm the fighting parties everywhere in the world.

I do not pass the judgement on if it is good or bad that USA is there. I do have an opinion on that.

But for good or bad it is there now and people listen.

What happens when/if it says. I have played enough with these.
Yankee going home!

Good Trading

daveo said...

Dear Boris, sorry I sent you on a diatribe on trading. I know how it works. I've been frustrated finding an entry and keep getting stopped out as the $ and yen keep tearing things up. I can't watch the computer all day. I do not have the swiss big picture and probably should not have been trying to trade it. Lehman's CDS settlement and the dollar squeeze created by the credit crisis has distorted things in currencies. Not a good time to front run a trend. I'll wait until the trend changes. If I miss the first 200 pips, who cares. I wasn't overleveraged either. Daveo

אנטי-סופיטליסט said...

Hello Dear Boris.....

I forgot to thank you for the SF file....

Thank you very much....

xerxes

boris said...

Dear Dave,
I understand your frsastruation.
This is the kind of a market, none of us have seen and I have seen a frikin lot(:- excuse me for the language.

This is a category 10 on richter scale.

They do not come bigger than this and if we survive , we should send to God Hallelujah

Frustration can not come without some aggravation. I am not sure where is it coming from, but please, fight it and concentrate what we must do. It could ruin one's life. Do notlet this thing happen.

Consider it a game of sorts, and if it is not "cherchei la fam" .

Look for another woman as french would say.

When there is something disturbing we must get to it pronto.

Please understand you have SEEFUTURE. It relates to Dollar, therefore, indirectly it relates to SWISSY, EURO and all of it.

We also have the bets outline ever that Dollar is going up from March 2008 to March/May 2009.

It is a context withing which we must operate. I do not think there are too many people who have this input that we do.

Usually you are very calm and concentrated and read my charts better than I do and Please, like a parent, I see something a miss. And like a parent , I will be straight with you , so you find what that is fast and all others watchin , like my students will learn.

I know you long time and know that something is bothering you when you can not read my chart(:-
Love You Dear Dave


Good Trading