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?

I thought it might be interesting to see who we base our trading patterns on, who we respect in the markets, and what kind of strategies we use. I have to say that my favouirte trader has to be Warren Buffett. While this may surprise a few, because he is seen as a "value" trader, he is not against making the odd short term gain. I also have a sneaking appreciation of George Soros (the man who "broke" the Bank of England) for having the guts to go with his Black Monday strategy when all around were denying he was right - but he was. Who is you favourite trader?

Over the last few years there have been so many instances of "mis-reporting" of figures, that we are getting towards a situation when Company Reports are not as well respected as they used to be. What would you trust more? The Company Report of the Share Price Trend? I have seen a few instances in the UK where shares have been falling, but Companies still keep institing there is nothing behind it, then BANG something comes out of the blue - and it all becomes a little clearer. Does that ring bells with anyone?

I think that there is potential to update Wall Street, and maybe base it on some of todays "celebrity" traders. The only problem is that the original Wall Street was based on the excesses of the 1980s, which have yet to be repeated. Also, how do you replace a man like Gordon Gekko? He WAS the 1980s greed culture.

I tend to keep a close eye on trade volumes, as there needs to be a big push to breakout, and if there is no volume behind it, will it stick? Sometimes a "false" breakout can be the first part of a proper breakout. I have seen many situations where stocks have hit highs then drifted back, but after a little consolidation, they have had another go at the breakout point, and passed through. There is no real set pattern , and it probably comes down to gut feeling and experience.

It is the same for most traders - bored, looking for something which is not there, and then regret. I have done this on a number of occassions, but now I try to make use of "slack periods" and maybe catch up on my research, spend some time with the kids, etc. The majority of traders have very active minds which are analysing situations all of the time, and if you are like me, you hate being bored!!!

Some interesting comments, and maybe not the poll vote I had expected. There appears to be some difference of opinion as to what may or may not be ethical, but no matter what we think, the market will always react to different situations and the "true" price will always show through. I think a good trader will just see a situation as that, and not think of the underlying reasons / factors. Follow the Trend has been my main rule since I began trading (with the odd exception of trying to catch a fallng knife), whatever that trend may be.

Sometimes we just need to say "Im not trading today" if the market is looking too choppy, or there is nothing to trade. Quite a few of my friends dont open new positions on a Friday, and are more likely to close a position. The reason is because so much can happen over the weekend, and you wont normally be able to trade until the Monday.

I have been trading on and off for a few years now, but it has never been an aim to make a living from trading - until now. After being a little more active over the last year I have realised that it is possible to make a living from trading, but it takes a lot of discipline. Fingers crossed, over the next 12 months it may happen.

The Dow is not far off an all time high at the moment. It might be healthy for a little pull back, consolidation and then push again. However, I read recently that the difference between rental income and mortgage costs, in the US, has never been greater. Many people seem to be over stretching themselves and they will not all be bailed out by an increase in the value of their homes. Once the housing market cools, we will see the economy slowing, etc. A little depressing, and it does not bode well for the medium term.

Penny Less, You might want to check out the many online stockbrokers for a cheap trade, or you might like to go through your own bank if you are not confident doing the paperwork While the commission will be a little higher through you bank, they will walk you through the process, which might be better for you.