Wednesday

The Art of Trading : How To Trade Profitably

1 Comment April 22, 2009 – 5:09 pm |   | Permalink |  Print This Post |

We have a feeling of dejavu - our earlier post pre-market suggested that prices will go up on “good news” to take the Dax right up to the level of 4600 (it got to 4612), whereby we will short since all our indicators have confirmed a corrective decline. Again, we have fired some shorts before (and below) the official 4600 level in our personal portfolio, and about three times as hard ($17/point). At the time of writing, the Dax is still finding support at 4600 and trying to breakout above the 4612 mark. At $17/point, we are probably teethering on overleveraging. Our rationale is a break above 4700 will confirm that we are wrong (100 points x $17) - at least we know what our potential loss is and that amount is capped and clear to us. On the flipside, if our indicators are right (we have a total eclipse of all indicators confirming a sell signal), the Dax could easily retrace to 4400 (at this level it does not even definitively confirm a downtrend to most chartist). Our target is at least 4300. That is 300 points from here - ie $17 x 300 = $5100 (we will take profits long before that level is reached).

We await some bad news to surprise the markets. What could it be now that most bad news are out? Not uncommonly markets tank without any reason (take Monday). We need a decisive break lower.

The art of trading is probably 10% of being able to pick the direction (using all available indicators, charts and tools); whilst 90% of success will come from appropriate capital and risk management. Appropriate leverage, when to take profits, when to have a stop loss, hedging strategies (eg shorting the market but buying undervalued stocks) are more critical than being able to call the direction right (some would argue that the ability to call a direction in day trading is almost impossible - FYI, no indicator have been proven to work. Despite this, many still rely on it)

We will post screenshots as soon as we get back to our Mac.

5 hours later…

Thursdays Trades by www.theinflationist.com

Wednesdays Trades www.theinflationist.com