Mission in the Rain
Hope for the best and prepare for the worst.
Good morning and welcome to Hump Day in the City of Critters. The Powers that be spoke yesterday and, almost immediately, everybody drew a conclusion as to the short, medium and long term ramifications for the tape. How you approached the action was unique to your indiviudal risk parameters and, as I've often said, there is no blanket answer for what was "right."
As we dig in for another year in the trenches, I thought it might be helpful to share my intended style with the good readers of this site. I operate "inside out" within the context of an "outside in' view, . In other words, I make my living in the guts of the tape while, at the same time, maintaining a big picture (bearish) thesis. If the first step to successful money management is to define your time horizon, the natural question is begged: What's a Toddo to do?
I'm of the opinion that a tactical methodolgy is a most prudent approach to the tape. As the market continues to wring out the residual excess created from the financial bubble, the ability not to trade will be as important as trading ability. The tape is becoming increasingly difficult to navigate and, as such, capital preservation will be a consistant theme in my shop. Many of us have been conditioned to believe that we must play every move, every day, and as such, we're drawn into situations that don't offer optimal risk/reward. My objective this year is to trade opportunistically and maximize returns relative to the incremental risk incurred.
To successfully execute this strategy, I must remove emotion from the process and patiently await the fatter pitches. Whether there's a handful of opportunities or a stealth bull in front of us, the success of this approach is static and depends on two elements: patience and discipline. There could very well be weeks between "good" trades but, at the end of the year, we'll be measured by "wins minus losses." By minimizing the latter we can increase the former.
With this approach, I'm sure to miss trades and it's sure to be frustrating (always is). However, if we're to find our way through this muck, we must adapt our style to the market. While we can all have opinions as to where the Minx will land in December, the truth is that nobody knows--and anybody who tells you otherwise is lying. Scary as it sounds, the "easy" trade (to the downside) has likely occured and '03 could very well be the trickiest yet.
Minyanville was built as an eduational community and our goal has never been to tell you what to do so--please--understand that these thoughts are one trader's (humble) opinion. In the months ahead, you'll see some fantastic developments on this site and our hope is that, collectively, our thoughts will help yours. We're all in this together, cookie, so let's dig in and find our way. With a little luck and a lot of elbow grease, we'll get it done.
Good luck today.
Todd Harrison is the founder and Chief Executive Officer of Minyanville. Prior to his current role, Mr. Harrison was President and head trader at a $400 million dollar New York-based hedge fund. Todd welcomes your comments and/or feedback at firstname.lastname@example.org.
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