regarding Bear Stearns, that is why you should not be largely in one stock. People often don't appreciate the meaning of "diversification" until getting their heads handed to them. You need to be in usa AND international stocks. It is good if you can be long and short somewhat, to blunt the effect of sudden news events and currency movement It is good to trade different instruments - commodities, stocks, forex, options, etc. You never know which is going to get suddenly hammered. You need to not be at one broker, as the customers of Refco discovered. You need to not be overleveraged. The sudden drop in commodities should not be suprising. Gold and Oil have had insane jumps. Piling into either heavily is just a variation on trying to buy and flip at the top of the market. In other words, longterm trading success is more about preserving your trading capital than "I made 60% so far this year!!! Such things separate the experienced traders from the successful traders.
"You need to be in usa AND international stocks. It is good if you can be long and short somewhat, to blunt the effect of sudden news events and currency movement It is good to trade different instruments - commodities, stocks, forex, options, etc. You never know which is going to get suddenly hammered." Unfortunately the reality is all the above correlates with each other. Anything trending stronlgy in eityher direction with something else is either the same trade with different names or a hedge/drag on another position. Long Crude, Long Gold, Short USD is all one trade as is Long Nikkei, Short JGB etc etc. So far the only way I have found to diversify is to time diversify i.e enter at different times across sectors and markets with opportunities for long short when something is at an extreme high and something is at an extreme low. I am short US with a view to covering after the next leg down and then WAITING for the time to go long. I covered most financials on Friday. I am now short commodities (early?), Long EUR (a hedge on funds in USD in brokerage account), and Long Thailand, Short HK waiting for HK Japan to come down further (may not) before considering a long. I was short some China stocks and may reshort. I was short Australia but got out on the insanity following the first rate cut. It is not hard to see where I am in the same trade by a different name..................... I am all ears as to how I am wrong, but my observation over many years is that everything correlates, that is why fund managers who have been round the block look at a few key drivers such as interest rates because it drives so many things.
This market is rediculous. The way I made it through the past few months is to take profits quickly and take loses quickly because there is no trend, it is only whip saw. I havent held an overnight position in a few months now. Doing so would be gambling not trading. I played alot of earning post announcement, going with the trend, gap up = buy any dip, gap down = short any recovery. The volatility is so great that you can get a 2% move during the day you dont need to wait overnight. Look at MER the last two days. If you survive this market it will make you even stronger for a trending market.
I agree, other than being scared to hold on to a winner long enough. LOL That's what I am afraid will happen to me. LOL
One important fact is that all I am hearing from Joe 401k is "I have to just hang in there as if I sell I will lose too much" We are stuck in a zone where the public has losses that are too big to take so won't sell, but we have not yet reached the point where they will sell at an even bigger loss, with a similar effect from Hedge Funds halting withdrawals.
Thats a good point. An approach could be to reduce frequency, a lot, and just wait until you can see money in the corner of the room waiting to be picked up. However, I thought BSC was like that - was comparing it to Northern Rock in the UK, where there was a bounce back.
Yeah, but - Commodities, stocks and fx were shit over the last few days. Also, do a long run correlation analysis on international vs US stocks. They are very correlated.
If you are a EOD swing trader, the last week was very difficult to trade. If you are an intraday day trader, this past week was a dream come true, mega $$$$ to be made. If you are not succeeding intraday, well, all cash IS a position. Let the market establish a trend before jumping in again.
ya .. this market is starting to make me feel like I am crazy ... go long - get wiped out with a tight stop, go short - get wiped out with a tight stop ... I am thinking of increasing the stop ... but to me it's just risky right now to trade. Maybe some of you guys can trade this market better, but I certainly can't. I'm going to wait it out for now
This market is a daytraders dream come true. I chat with a dozen different experienced traders daily and they are all doing awesome in this market. You need to adjust to the big change in volatility and your stops and bet size should reflect that, but there is huge opportunity out there daily. Maybe it's different for swing traders or trend followers. I do a lot of mean reversion stuff that loves big chop and whippiness and I end every day in cash. January was my number one month of all time. February was top ten and after yesterday March is now at #2 all time. Viva volatility!