FuturesTechs Blog

I thought it would be a bit of fun to ask our Professional client base for their favourite market-related catchphrases, and to do a Blog thereon.

There were two things that I didn’t realise when I embarked upon this idea. Firstly that there are so many that are rude, and therefore may be tough to incorporate into such a blog, but secondly that so many had valuable lessons for any trader ingrained into their meaning.

So here’s a few, and I hope you enjoy this piece, as well as possibly get something out of it!

By far and away the one that came put top was (and I really hope this doesn’t offend anyone) “Don’t be a dick for a tick”. Clearly many of my clients have spent many a year working a 15 bid on something only for the market to trade down to 16 then set off on a stonking rally. It is one of the hardest things to deal with as a trader. I’d say it’s probably harder once you’re in a position and looking to get out. Putting an offer in at 30 because FuturesTechs has a level there, only to find out later that it traded 1000 lots at 29 but never got to trade 30 is highly frustrating, especially if this means a potential profit ends up being a scratch or worse.

The next one that really seemed to feature amongst answers given was something to do with what “Bottom Pickers” get. Apparently this isn’t a very fulfilling pastime. I couldn’t agree more, at least where the market is concerned!! Those who try to buy at the very bottom of a move often get in bother. Whenever I do seminars with people who are new to the City or trading I always try and convey the idea of trading in the direction of the Trend. Markets that are plummeting lower can often keep doing the same for longer than you can stay in your long trade. Actually that was a John Maynard Keynes quote: “The markets can stay irrational longer than you can stay solvent”. This whole debate doesn’t stop at one catchphrase though. There were plenty of candidates. “Don’t try and catch a falling knife”, or the one I heard in October 2008 “Don’t try and catch a falling fridge”. What you really should try and do is remember that “The Trend is your Friend”. Just be careful of the “Dead Cat Bounce” though, and don’t worry too much about those who tell you to “Sell in May and Go Away” – well not this year anyway!

This sort of trading is akin to “Picking up Pennies in front a Steam Roller”. Often people lose so much money on these sorts of ventures that they end up with a “Trade that turns into an Investment”. This is why we need to have stops, as long as we use them. “Stops are for buses” is on the “what not to do” catchphrase list, along with “double up to catch up” and “Don’t get out unless it’s a winner” (Very naughty!).

The better advice for stopping out trades may be that “The first cut is the cheapest”. If you end up in a losing trade it’s best to own up and take the loss. Don’t “stick it in the bottom drawer”, after all “Denial is not just a large river in Egypt”!

Trading psychology seems to enter the equation for a few phrases as well. The ones that cropped up a few times in our little survey were “Don’t get high on your own supply”, “Don’t get too long of yourself” and “Don’t believe your own publicity”. They all say the same thing, and it’s a really valuable lesson for any trader at any time of their career. The market is the most fantastic leveller, it seems!

Finally special mention needs to go to the following responses.

“More Shorts than the front row at a Wham concert” made me chuckle, as did “He who finesses, wears frilly dresses”, “Scratching is for DJ’s”, and “If you want to hedge get a Garden”.

Many thanks to all who proffered replies. It certainly made my Columbus Day go a bit quicker!

Have a good week all.

Cheers,

Clive.

I think i did a reasonable job of explaining it on CNBC this morning (you tell me!!) so instead of babbling on too much here I’ll post the link:

http://www.cnbc.com/id/15840232?video=820121614

To summarise I said that 850 is a MASSIVE support level, and that the weakness to here is a buying opportunity, although if 850 breaks you don’t want to be long, and a “stop and reverse” (see below) strategy might be advisable.

We get “proper” confirmation of a bounce happening if resistance levels like 872.6 and 900 are retaken.

In Brent Crude Oil I mooted the idea that we might be due a bounce some time soon as we’re getting close to some important supports.

And in the Bund Futures I talked about a Double Bottom formation which gave us a buy signal last week.

I steered clear of talking about Equity markets because the short term outlook is a tad confusing, and we haven’t had the best of time calling these of late, if the truth be known.

“Stop and Reverse” is where you have a position and you get out of it with a stop order, but at the same time you do the same trade to create an opposite position.

For example say you were long five lots of Gold at 870 with a stop order at 845, that means you want to get out and take the loss on your trade if the market goes down as far as 845. A stop order is defined as a market order that’s triggered if your loss reaches a certain level or price. You should always have a stop order on any trade that you put on, and technical levels can be the best way of deciding where to place these orders.

Many people place their stop orders below important support levels (like 850 in Gold) and sometimes, if you think the move below this key level is going to trigger a wave of selling, you may want to initiate a short position at the same time. If you put in an order to sell 10 lots at 845, to continue using our example, you would take the loss on your 5 lot long, then create a 5 lot short position at 845. If the market then went to 775, as we expect, you will offset the 25 point loss on the original buy order with a 70 point gain on the short trade.

Have a good week.

Cheers,

Clive.