Trading is Timing

Trading is all about timing. You can significantly cut losses due to an ill-timed trade by following the below simple rules.

The Advantage of Avoiding Margin

Being terrible timer has pros and cons. But some poor timer traders are able to succeed too because they predict the market accurately and the lust for high driven price is not so influential on them. They know what to sell and when to sell. For example in 1980 Rogers made a short trade in gold and sold it at around $675 an ounce while the precious metal rose all the way to $800. Most traders would not have been able to endure such unpleasant price movement in their position. The reason for his success was that he used no leverage in his trade and not employing margin. Rogers’s did not put himself at the mercy of the market and could therefore execute his position when he chose to do so rather than when a margin call forced him out of the trade.

Slow and Low is the Way to Go

Traders should enter into a trade deal slowly, with very small chunks of capital and use only the smallest leverage to initiate a trade.

Using stops

Trader should know where to sell/buy, stop at a loss and where to exit the trade. Using the slow and low approach is successful but it does not use stops. Because such trade can be susceptible to a disastrous event that can take prices to unimagined extremes and wipe out even the most conservative trading strategy. For example Gary Biefeldt initiated trade with bonds at 63 level but they kept falling all the way down to 63. Bielfeldt did not allow his losses to get out of control. He simply took stops every time bonds moved against him. Finally bonds prices finally turned and his approach paid, collecting profits far in excess of his accrued losses.