Please don’t preach

  • Posted by
  • on July 27th, 2011

 

We give advice in our newsletters all the time and often write about what we’re thinking on our stream.   Our subscribers know our style and anyone who has followed us for a few weeks on StockTwits knows what kind of traders we are — active traders who trade around support and resistance with an emphasis around intraday/daily bases.     However, we respect all types of trading and it drives us crazy when we see others express contempt for other types of trading strategies.

Why?  Because talking about how bad a certain type of trading behavior is to a general stream just doesn’t work.    The only time this type of “education” works is if everyone who follows you has the same strategy as you.  If we are trying to teach a guy who wants to know how to trade like us “our strategy” then sure, we’ll say do this, no don’t do that, but that’s our strategy and the advice is focused to someone trying to learn this exact strategy.    Posting on a stream is different — you’re automatically talking to traders who use hundreds of different types of strategies.

Our style is to follow and trade liquid stocks that trade usually between $30-$100.   We don’t trade small-caps but you would NEVER find us talking about why trading small-caps is inferior.     We only buy blood on support but we don’t talk smack to traders we see  buying what we consider completely broken stocks.   If they ask us, sure, we’ll give our opinion, but otherwise, we’re very much in the “live and let live” camp.     Any strategy can work — some are harder than others (for example contra-trend trading we find difficult) but they’re all possible.   Never add to losers?   For the most part sure but again we’ve seen traders who make more than us year in and year out do it all the time.    If you want to give advice, explain your strategy and educate people about how you trade but for the love of God stop talking about how you cannot “believe” how traders are making this and that mistake.

The market gives each type of trading its turn — right now this is an amazing market for active traders who trade around support and resistance.   However, it’s not so friendly to trend-following swing traders.   Soon the market could revert to drip-up trend style and leave us underperforming.  That’s just how it is  and how it always will be.     It works in cycles — and just because our style works well now we don’t assume that other styles are inferior because we know 2 months down the road the “sit tight and hold the leaders” a la Livermore could be laughing in our face.

What “best traders” have in common belong to the realm of psychology and risk management not to details of strategy.

On another note — as we have said repeatedly in our posts, we will stay in the bull camp until a) we stop bouncing where we should bounce (even today even though we closed near lows, we first bounced perfectly from trend-line to 20EMA, where we posted daytrader target had been met) and b) March 2009 trend-line is broken.  Basically we won’t get worried until stocks stop bouncing where they should bounce .   Then we’ll step back and wait it out.

For those who think that one day dip buyers will get blown up — again, we don’t understand that.   Retail Mom and Pop investors?  Sure.  Professional traders?  No.  We assume that we are talking to traders and by definition a trader works on some risk/reward notion, whether they buy penny stocks, trade a la Livermore, are value investors, etc.      If we have bought the dip with 2 point stop for 2 years and it has worked the majority of the time — why would we stop now?    Sure, one day it will stop working and we’ll lose 2 points. We would probably try again and lose another 2 points.  Then we’d say, wow things have changed, and we’d step back and re-assess.   That’s what traders do — adapt, assess, and re-assess.

 

 

 

 

The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.

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