19 September 2019

The Nature of Preemptive Moves -- The Art of Simple Trading


"We cannot rule out a situation in which a preemptive policy tightening becomes necessary,... Such caution seems especially warranted with regard to the sharp rise in equity prices during the past two years. These gains have obviously raised questions of sustainability."
-- Alan Greenspan

In every field of endeavor there's a time for preemptive action and a time for patience.  In trading, knowing the difference between the two can be what delivers profit or punishment to your account.

This is part of why trading is so difficult.  It requires this weird blend of respect for risk (flattening trades that don't move as expected immediately), while simultaneously having the ability to sit in winning trades as long as possible.

It's easy to find traders who are afraid of their own shadow...those who trade tiny size for tiny targets.  Similarly, there's no shortage of traders who are always willing to forgo "reasonable" profit and go for the bigger win.

The unicorn, so to speak, is the trader who's able to combine the 2 sides of that risk coin.  The trader who can and will accept a sub 50% win rate because he knows that he will have the patience to allow a winning trade to become a bigger winning trade.

Be the unicorn.
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Yesterday afternoon, the FOMC lowered interest rates by the expected 25 basis points.  The market delivered a collective yawn... after a bit of volatility of course.

Here's a video just after the close summarizing my thoughts on the day's price action.


Do you think we're headed higher still or lower in the coming weeks?