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The Stock Trading Advisor’s “From
the Trading Turret”
From: R. A. Christy
Editor, ‘From the Trading Turret’
President/CEO, Christy Investment Group
http://www.christyinvestments.com
Date: December 16,
2007
Current Field Position:
OFFENSE
Bullish Percent Indicators:
BP NYSE
Xs @ 46%
BP
OTC
Os @ 30%
BP
Option
Xs @ 42%
BP S&P 500
Xs @ 54%
BP Nasdaq 100
Os @ 38%
Average Sector Bullish Percent: 38.79%
Favored Sectors: Telephone, Oil Service,
Chemicals, Software, Oil, Aerospace/Airline, Gas Utilities, Electric
Utilities, Precious Metals and Steel
This past week, was one of economic releases. We had Fed
non-action, Fed action, coordinated Central Bank actions, an inflation
scare and the dollar got trounced.
In the
Long/Short Portfolio,
we were stopped out of Ingersol Rand (IR). I still like the name long
term, but a stop is a stop. We have it in place for a reason. I’ll slip
the name back into the watch list to see what happens. It’s a name I
hope to revisit in a month or so.
We also used the volatility in oil sector to raise some
cash. We sold El Paso Electric (EP) for a small gain. The stock was just
sitting there – not much up and not much down. I feel better have the
money in cash for the time being.
On the US dollar front, we were pushed, pulled, tugged
and whacked. We came out ahead on the week and I have the tire tracks
all over my body to prove it. The holiday break can’t get here fast
enough.
This week’s diatribe:
I was thumbing through Jack Schwager’s book, Market
Wizards, the other day and this quote jumped out at me: “Many are
too concerned about finding the best system or the best entry; sometimes
they don’t appreciate that ability to control losses.”
It got me thinking about the trades that we’ve done so
far this year. I pulled out the
closed position report and gave some thought to each position.
I looked at such things as: why did I make the trade in
the first place, how exact was my entry, how much of the trend did I
capture or miss, was my risk management appropriate and why was the
trade concluded.
My objective was to grade out each trade to come up with
an average for this year. Note: I only used positions that were closed
during 2007. I’m not that worried about the open positions as of yet.
What can I conclude about my results?
First, all winning trades aren’t good trades. There were
a couple of trades where I assumed way too much risk for the return I
settled on. There were a few where the entry point was lousy. On the
other hand, there was one or two where I got out way too soon. All in
all, it wasn’t as bad as I thought it was.
Second, all good trades aren’t winning trades. Say what?
Most people think that any trade that turns a profit is a good one. Not
so --- luck is not an investment strategy. If you violate your trading
rules and manage to turn a profit, you should utter a prayer of thanks
and promise to never do it again. Doing it again means that you’re
looking for trouble.
The reason I created the
5 Step Approach was so that I
would be disciplined when it came to the markets. Investing is an art
not an exact science. If you follow your approach and the trade doesn’t
work out, it simply is a trade that doesn’t work.
I would rather have a plan and lose once in a while than
not have a plan at all.
The only guarantee is this – if you screw around long
enough, you’re going to get hurt.
How can I avoid getting hurt?
-
Do not
play macho man with the market. “Macho Man” is a professional
wrestler, not a stock trader. The market gods have a way of humbling
all of us. No person is exempt from this rule. If you think you have
it conquered, you’re toast. Investing is like the ocean. You can’t
conquer it – but you can navigate it.
-
Do not
overtrade. I learned this one the hard way years ago. I didn’t have
a plan, but I knew I was a trader. What does a trader do? He trades.
After several trips to the woodshed, it dawned on me that I needed
to approach the market in a more precise, more disciplined manner if
I was going to have any success at all. Great trades come to those
who wait. Patience produces larger gains with less risk.
-
Do not
take on more than you can handle. Position sizing is paramount if
you’re going to be successful. It doesn’t matter if you’re trading
stocks, futures, options or currencies. There is a right size and a
wrong size. Know what you can handle and if you’re using leverage –
know exactly what will happen as a worst case scenario.
-
Last and
most important – It’s not how much money you stand to make on each
and every trade. It’s about how much you stand to lose. Professional
traders worry about how much they stand to lose and amateurs look at
how much that stand to make. This is why amateurs won’t cut their
losses short. I’m gone at the first sign of trouble. You need to
protect your nest egg as if your life depended on it because it
does. If I were to lose my trading stake, I’m out of the game. I
can’t make any money if I’ve blown up my account.
As we look ahead to 2008, take a minute over the next 2
weeks and look over your trade sheets for the year. How have you done in
2007? What’s your performance? If you use a broker, how much did it cost
for that advice (fees and commissions)? Grade each trade that you made.
Where can you get better? Is it the entry, the exit or the risk
management? What would you do differently if you have the chance?
Do you have a trading plan? If not, why not?
Do you have a trade journal? If not, why not? Do you even
know what one is? (If you want to see what one looks like, just send an
email to
rac@christyinvestments.com and I’ll send you a copy of mine)
Are you being honest with yourself about how you’re
doing? The only person that you have to answer to is the person in the
mirror staring back at you. You know and so do they. The only one you’re
hurting is yourself.
Are you in sync with your timeframe and timetable? How
many trades turned into investments? How many investments turned into
trades?
The learning curve for investing is never ending. Every
day brings something and different. That’s one of things I love about
being a trader.
That’s about it for now. If anything happens out of the
ordinary, I’ll make sure to put it up on the
Stock Trading Advisor Blog
.
Have a great week.
RA Christy
The Stock Trading
Advisor
P.S. Please fee
free to forward this to your peers, friends and associates you think
would benefit from its contents. They will thank you for it - and so
will I!
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R. A. Christy is a professional stock
trader, money manager and author. Mr. Christy is the President CEO of
Christy Investment Group, Ltd., a registered investment advisory firm.
He is also the Managing Partner and Portfolio Manager of Plato Advisors,
LLC. At the time of publication, Mr. Christy may from time to time write
about stocks in which he, Christy Investment Group Ltd or Plato Advisors
LLC has a position. In such cases, appropriate disclosure is made.
Under no circumstances does the information in this column represent a
specific recommendation to buy or sell stocks. Mr. Christy appreciates
your feedback and invites you to send it to
rac@christyinvestments.com.
The Stock Trading Advisor
c/o Christy Investment Group
P.O. Box 625
Alpharetta, GA 30009-0625
To unsubscribe or change subscriber
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© Copyright 2007 RA Christy
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