A few lessons from the markets


Active member
I have looked into the trades I have done this year..not very successful so far!
There are a couple of lesions I would like to share.
1) Always trade in the direction of the long term trend. I suffered a couple of losses going long on the Naz when, short-term, it was coming up, but, as we all know, this security has been in a long term downtrend in the last year.
2) As a consequence of point one. Use stop tighter stop losses if you trade against the major trend. I have been stopped out on a couple of occasions due to my rigid stop losses, which, since my position was on those occasions in the direction of the long trend, could have been less tight.
3) Only trade when you are 100% fit AND when you can physically spend most of the day close to a live monitor. I have been under a lot of pressure at work, traveled a lot, and I suspect this has impacted negatively on my overall performance, plus the fact that the major loss I suffered occurred when I was abroad on a business trip for few days, with very limited access to prices, and a lot of workload to cope with.
4) Making money on the markets is veeeeeeery difficult. I am happy I did not allocate to trading more than 5% of my net worth, AND, within that 5%, each trade was never for more than 5-10% of the total amount.

PS. A colleague of mine insisted that it is more difficult to make money in a bear market (even if you go short) because of the increased nervousness on the markets and the resulting increased volatility. As a result of increased volatility, there are more whipsaws. Although I accept that bear markets offer increased volatility, I do not think this is, in itself, a problem. the problem is that humans have an innate difficulty in going with the trend, when the trend is down.
An interesting exercise was the following. I printed out few charts of when I went long in long term down trend, and then INVERTED them. Well, I can tell you that when you see those charts inverted you can see the long trend much better, at least myself!
Good points Charty and thanks for sharing them.

Interestingly high volatility and tighter stop losses are slightly contradictary as if you make an early call when the market is turning then that is when the market is most volatile and you can get stopped out.

I have also noticed how the mm's test and take out stops before turning the market round. There have been some evil doji days recently but I certainly agree that strict stops are essential and the market is volatile!

Good trading,
Oh, Darth, may be I was a bit confusing.
My points were.
Do not try to catch a market at turning points, and not even venture trading against the major trend.
If you do, then yes, use tight stop losses.
However, my point was also that, when you trade in the direction of the major trend, then you can use less tight stop losses.