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Trading stocks and Futures
It’s early Sunday morning, I’m sitting here, sipping a little Rosenblum Pinot, listening to Buddy Holly. Seems like a perfect atmosphere to get a little philosophical. During the time I was laid up there was some great discussion of diversity in trading at the forum. I missed the opportunity to chime in at that time. Better late than never here’s some of my thoughts on the topic. If you can’t trade 1 market you can’t trade 10. A lot of the feelings and conventional wisdom regarding diversity stems from the old way of reliance on the analysis. The old thought was that surely out of 5 or 7 or 10 trades your analysis had to be right on some of them and you’d get a few winners to balance out the losers. Well, we are any thing but conventional, in case you didn’t notice. Since we now understand analysis is incomplete without a companion management program, we can now also discard this old way of thinking and approaching trading. Diversity was a polite way to cover your butt and hide yet another opportunity to recognize the shortcomings of pure reliance on analysis. They’ll do anything to keep you from seeing the truth and allow them to continue avoiding having to tell you what they’re giving you is significantly deficient. No one can survive long purporting to have expertise when they themselves can’t see the other side of the moon. With management partnered to analysis there is no reason to play to the failure scenario. Management solves that issue as well. With management as your mate you can trade forever and a day a single market and do it fearlessly. Diversity is a crutch compensating for the lameness of solely analysis based trading. We no longer fear our losses; we manage them effectively and efficiently. I could happily trade exclusively the Bonds or the Russell or Cotton or whatever without regard for what transpires in other markets and know beyond any doubt, I’d do so successfully. I trade multiple markets for only one reason … to keep my money at work. One market does not allow me to keep sufficient proportions of my account at work so that I’m getting an acceptable return on the total capital allocated to the enterprise. Having changed or incorporated such an essential component as is trade management, requires us to explore just how far reaching the resultant effects are and not hang on to the attachments that came with the old ways. We changed … you changed … the entire dynamic of what you do when you embraced management as an integral component of your trading. We done traded up, this ain’t no ’53 Merc … the fuzzy dice hanging from the mirror are just a tad TOO old school. I don’t believe diversity is of any interest to us … trade the markets in which you feel comfortable and confident, even if it’s only one. Management is a much better bedfellow than compensatory cover stories. Buddy just finished singing “Rave On” … seems like a fitting and appropriate place for me to end as well. I love you all.
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This intel was contributed by TomL
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May, 2012
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