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Random Thoughts: Defining Risk on a Defining Day

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Use price to your advantage.

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Editor's Note: The following was posted in real time on our premium Buzz & Banter. It's being shared here for the benefit of the Minyanville community. See also Limit Down!


Gate Sniffage! - 10:21 am

  • Where you stand is a function of where you sit. As I entered this session with 100% cash in both my short-term trading and long-term nest egg, I've dipped a pinky toe into this opening mess through the QLD (NASDAQ), SSO (S&P), DXO (Crude, although this last vehicle is particularly illiquid) and the FXI (China).

  • They're starter positions as I want some exposure at these levels while keeping plenty of powder dry should S&P 840 break. I'm also using trailing stops on some of these prickly puppies as they'll protect me should hell that hath no fury like a tape scorned.

  • If we breach that level and melt to S&P 777--a shade below a full 50% retracement in a single year--or S&P 600, I'll have ammunition with which to scale into exposure at lower prices still. Remember, the goal when trading is to be in a position to use prices to your advantage.

  • If we somehow run with the roses higher? I'm there with Ginger and will use my proceeds to take Mary Ann to Sizzler. I'm also using trailing stops on some of these prickly puppies as they'll protect me should hell that hath no fury like a tape scorned.

  • And yes, I'm well aware of the potential for a Black Monday and Turnaround Tuesday. That, however, is a world of trading away.

  • Mama Mia, look at the FXY (+4% to $107). Talk about being penny wise, Yen foolish!

  • Congressman Barney Frank wants a moratorium on all Wall Street bonuses? OK, big dog, but shouldn't everyone who paved the way for Fannie Mae (FNM) and financial engineering be held equally culpable?

  • Strength and Honor, Minyans, strength and honor.



Muse on the Fuse! - 11:45 am

  • The question of the session for yours truly? Trailing stops on the QLD and SSO (and set up "trades with upside set up for net credits" or, as I've initiated starter positions only, hold tight with intentions of adding exposure lower.

  • This is my first foray into the DXO (powershares crude) and it's thinner than a mint. As such, I'm trading smaller as I sniff out the tone and tenor of this vehicle.

  • What happens when you put an A.D.D. trader/writer in a sensory overload environment? He misses trades that he had circled, such as gold when it dipped below $700 (to $685) this morning. I'm not chasing it higher but it's officially on my radar.

  • To answer my first bullet--and as a function of the subsequent lift--I've tossed a $1 trailing stop on my QLD and SSO. I'm using the same approach on the FXI although that hasn't popped as the others.

  • I can't get the Ramones out of my head today and you know what, that's quite alright.

  • On Wednesday, while walking six blocks to physical therapy, I was approached by seven people begging for money. Minyans know I have a soft spot in my heart for the homeless but it speaks to the shifting social mood we've often talked of.

  • Ticks and Flicks? Pishaw! My most profitable trade in the coming days will be jumping down to Baltimore for some Super-Uncle time and the Raiders-Ravens game on Sunday with my brother. At the end of the day, it just doesn't get any better than that.

  • As always, I hope this finds you swell.


R.P.


Did you know the doors to Festivus 2008 are officially open? Have you yet locked your spot for the critter trot as last year's soiree sold out? (This is our annual event to commingle our professors, partners and Minyans while chowing down and listening to live music. The very best part? It's for the kids in the good name of my grandfather.)

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Positions in SSO, QLD, DXO, FXI
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