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Shadow Boxing

By

May peace be with you!

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You're as cold as ice
You're willing to sacrifice our love
You never take advice
Someday you'll pay the price, I know


(Foreigner)


A jazzy day in Minyanville edges towards the close and, as I'll be attending a funeral tomorrow morning, I wanted to quickly revisit our ten trading commandments. There used to be fifteen but Fokker, in his infinite wisdom, dropped a tablet a dampened the day. Here they are:

Respect the price action but never defer to it.

The action (or "eyes") is an important element when trading but if you defer to the flickering ticks, stocks would be "better" up and "worse" down -- and that's a losing proposition.

Discipline trumps conviction.

No matter how strongly you feel on a given position, you must defer to the principles of discipline when trading. It will differentiate your performance over the course of time.

Opportunities are made up easier than losses.

It's not necessary to play every move, it's only necessary to have a high winning percentage on the trades you choose to make.

Emotion is the enemy when trading.

Emotional decisions always have a way of coming back to haunt you. It's that simple.

Zig when others Zag

Sell hope and buy despair. In other words, take the other side of emotional disconnects in the market.

Adapt your style to the market

At various junctures, different approaches to the market are warranted. Applying the right trading methodology is half the battle.

Maximize your reward relative to your risk

If you're patient and pick your spots, edges will emerge that provide a more advantageous risk/reward profile.

Perception is reality in the marketplace.

Identifying the prevalent psychology is a necessary process when trading. It's not what is, it's what's perceived to be that matters.

When unsure, trade "in between"

Your risk profile should always be a reflection of your thought process. Take what the Minx will give you and don't press.

Don't let your bad trades turn into investments.

Rationalization has no place in trading. If you put a position on for a catalyst and it passes, take the trade -- win or lose.


I know these are difficult times in the marketplace -- everybody's either losing too much or not making enough -- but I will remind you that perspective is a necessary element to a lucid decision making process. Regardless if they fail (and make a new low) or continue higher in a parabolic and spirited sprint, we've seen this movie before.

Make decisions consistent with your beliefs and allow for a margin of error in your approach. At the end of the day, you can only do your very best when it comes to your financial decisions. And once you've adequately handled those affairs, you can focus your energies on the important stuff -- and that's the most important trade of all.

Have a peaceful evening.

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