Follow The Trend

Before we get to the age question, we need to ask ourselves, "Do traders ever retire?" I am not sure they ever do, but when I began trading I had the target of retiring when I was 40. I am currently 34 and have a little way to go yet before I can consider retirement. I may miss my target, but I'll enjoy it!! At what age do you plan to retire?

While both stocks and derivatives offer a degree of risk, as with any investment, you can use derivatives as an "insurance policy" for your portfolio. For example, if you have a portfolio of Dow stocks, you could take out index options to protect you position if the market fell. You could also write options for premium against your portoflio, etc. Have any traders used the two together to create / protect a position?

There is one factor which seperates all traders, guts. Some traders are willing to take risks, when some traders prefer to be a little more cautious. As mentioned by a couple of people on this thread, your trading style is strongly linked to your personality. All traders are gamblers to some extent, but do you gamble with a good hand, or take a punt on the final card? You are what you are!!

While the general feeling seems to be that all traders have, or do, trade because of boredom - How can we reduce or stop this? Do you have technique to stop yourself trading? Can you just walk away? Can you switch off? I must admit that I find it difficult to switch off, even when I am not at my computer. Boredom is my worst enemy.

Diversification and betas are very closely linked, if you buy a number of stocks. You can integrate different betas to give a different angle on the market. One stock beta in itself has the potential to be more volatile, although there are stocks with a beta which will follow the market closely, some perform directly opposite to the market. If you are a trader, you should really be looking at betas.

I think that you need to have more than one "string to your bow", in that you need to be able to trade more than one market. If you concentrate on one market, you may well get a good feel for the market, but it may be a little easier to get pulled into traders which maybe are not there - similar to the boredom comments elsewhere on the Forum. If you can trade one market, there is probably a similar market(s) which acts in the same way. Your skills are transferable with research.

Soultrader The first hour of trading very often determines the trend for the day, although major announcements can change this. It is strange, but you often get a feel for market trends yourself, and whether the market may be due a small pull back, etc. The higher a market goes, the more cautious I get, because at some point the profit takers will come in. I like to keep a very close eye on key graph points, as they can alert you to possible tricky days.

I have been lucky enough to call some baggers in the past, but they are few and far between. More often than not, it is only because they stock moved quickly that I was able to make such good returns - normally I would be out before the major fireworks (just because I tend to be cautious with decent profits). I find the more CEOs and the like you speak to, the more confident you become (they are probably more scared of us than we are of them) and the more they seem to respect you.

I think, like many Traders / Speculators, I find that my family and friends do not know exactly what we do. Until you have actually traded the markets yourself, it is difficult for people to appreciate the nature of Trading / Speculating. However, I do find that my family dont mind spending the profits, yet they dont seem as keen to share in any losses!! Well, thats life.

Where do you think the Dow Jones index will be 6 months from now? From the current level of 11866.69 (5th October 2006) I believe that the Dow will have slipped back to under the 11,000 level, on a mixture of economic worries and further security issues worldwide. I am very worried that buyers are still pushing the market higher, even though the economic situation is not looking too good in the short to medium term.

On a seperate subject, the UK market is looking a little stronger of late, having just closed above the 6,000 level for the first time in a long while. The economy is in decent shape, although the tax burden in the UK seems to be growing and growing. The only possible "spoiler" is the impending change in Labour Leader, and an election in the not too distant future. Uncertainty is the markets greatest fear, as opposition parties continue to make ground on the Labour Party. Bullish on the markets, but wary on the political situation.

While I can see that the charts are pointing towards a positive run for the Dow, I am not sure this is sustainable. The housing market is pushing to far to quickly, with rents now only covering 50% of mortgage payments. This is a correction waiting to happen, and will put the economy under great pressure in due course.

To be a real success at trading, you need to do more discretional trading than system trading. A big part of the success of being a trader is being able to read markets, stocks, situations, etc. The main positive of system trading is the fact that if enough people use the system, they can sometimes be self-fulfilling prophecies. But I would not bank on it !!

If you are a real "player" in the market, you need to have access to as much information as possible, and try and stay one step ahead of the game. With this in mind I would say that Level II is essential. Even if you only make one extra successful trade because of this, it will pay for itself. While there are many "free" live pricing facilities around, Level II does give you that extra edge.

Warren, That is very good going, especially in the fickle FX markets which can be volatile. What kind of profits are you making, and what is the size of your portfolio? Are you taking lots of small "turns" or fairly large "turns". I have looked at the FX market before, but it is not something I have ever tried. Perhaps you could enlighten us with a breif summary of how you play the market?