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Yuki,
Well put. In these time as all times, I think of Stanley Druckenmiller's quote from "Market Wizards" :
"When you have tremendous conviction on a trade, you have to go for the jugular. It takes courage to be a pig".
Regards,
GSYuki Taga <yukitaga@xxxxxxxxxxxxx> wrote:
Hi jnk1997,Sunday, September 14, 2003, 3:27:29 AM, you wrote:j> I went "all cash" in my trading account during Thusdays rally inj> order to protect substantial profits.j> Am I "out to lunch" here or are many of you seeing what I amj> seeing in the charts (Dow, S & P and Nasdaq)?Normally would not touch this thread with a 10-foot pole <g> buttomorrow is a public holiday in Japan, so here goes:What I see in the S&P:It has gone nowhere since 6-17. Absolutely nowhere. So, it'salready "flat", and has been flat for three full months. Everythingright now is fully priced in, and there is a broad general agreementabout equity values right now. It's going nowhere until somethingchanges that.What I see in the DOW:About the same as the S&P, just a
hair better, but not much. Butthen the DOW is so narrow anyway.What I see in the Naz Comp:Gee, we are up nearly 12 percent here in the past 3 months -- quite adifferent story.Now . . . Are you out to lunch? ^^_^^Depends on so much that is personal to you -- how you trade, whatyour time frames are, etc., etc., etc. There just is no simpleanswer.However, in a market like this, there is great danger stepping 100percent out until stepping 100 percent out is the *proven* thing todo. Stepping out is how you miss the home runs. Things suddenlylurch higher while you are out, and you simply never find a price youare comfortable re-entering at. Gone. Gone. Gone. I say this fromyears and years of experience, some of it very painful in this exactregard. "Protecting substantial profits" costs additional substantialprofits, time and time again. In order to hit home runs, you have
tobe willing to risk a substantial portion of substantial profits.There is no other way, because they all head-fake and jive you out ifyou play it too tight.Now, I am inclined to think that both the US and Japan have seen mostof the excitement for this year already. But, until this is*proven*, and it absolutely is NOT yet proven in my book, if you aresitting on great positions (positions with substantial profits) thething to do is hold them. Eventually, you are going to take a nickwhen it becomes apparent that getting out is the thing to do. Thatnick may come next week, but it also may come next spring, fromsubstantially higher levels. There is no way to know, and "talkingheads" would be the absolute last to know. (I try and tune thisstuff *completely* out, as I find listening to it gives me a desireto anticipate rather than flow with, and I find this is usually veryexpensive.)But one
should NOT anticipate in the direction *against* the trend,which is what you are doing by going to all cash right now. If youmust anticipate, anticipate *only* in the direction of the trend(anticipate a resumption of trend after a short breakdown). Thisputs the odds in your favor I think. At least, hedge yourself. Goingto *all* cash right now is quite a gamble against the trend.Anticipating the end of an up trend is exactly the opposite side ofthe coin as bottom-picking, and is just as expensive, albeit usuallyonly in lost opportunity (assuming you're not crazy enough to backyour bet with a short) rather than lost capital (going long at a"bottom").As Jesse said, (I paraphrase) "The money in stocks is made mostly inthe sitting, not in the doing. Most men are very good at the doing,but not very good at the sitting." I doubt truer words about themarket were ever spoken or written.My own
experience this year:I caught the early trend in May and June, and made a year in 6 weeks.I got out in mid July on seasonal intuition, knowing our O-bonholiday season would soon be upon us, and trading volume would dry upand long positions would be risky to hold. I would come back in lateAugust or early September, probably.First day of the O-bon high holiday period was 8-11. The Nikkeilurched suddenly higher out of a pull back, but on very weak volume.Very light. But price was very strong. Yuki wasn't about to besuckered back in by that volume though. Not during O-bon week. ^^_^^But volume and price just continued to make stronger and strongerdaily moves throughout that "vacation week",(something I've neverseen before during O-bon, but which is really no excuse) and I justdoubted it, and watched it. By the end of the week we were up whereI'd bailed, maybe a touch higher, and I hesitated
once more. Now weare 7-9 percent higher, and I'm sitting on the sidelines stuck justrunning my short term trades, hoping for a major tradable pullback. Icould have made 2 year's profit since May, if I'd just sat tight. AndI would have had to sit tight from 10,000 on the Nikkei to about9,200. But we are now at about 10,700. (I even had my price levelsfor going back in, as well as time frame; I was going back in aroundlate August, or around 8,800 basis the Nikkei. Ha, ha, ha, Yuki. Itjust never got down there, and it took off when it seasonally simplycould NOT take off.)I guess if I could draw any conclusion about this, and about humannature, it would be that even someone who has been trading 30 years(me) has trouble doing the right thing. Even someone who knowsbetter. So how easy, how utterly easy, it is to do the wrong thing.So we must somehow discipline ourselves to try only those things
inwhich the odds favor us. The odds favor trend resumption . . . everytime. Eventually, trends all fail. But the odds are what we areinterested in, and where the money is.Locking in *some* profit is usually a good idea. Going *all* to cashis pretty risky when it is clearly betting against a fairly wellestablished trend. The earlier you got in, and the more "substantial"your profits are, the greater the risk of getting out without a veryvery clear sign that this is what you *need* to do. You will feelvery uncomfortable getting back in again at prices "substantially"higher than what you paid a few months ago. This is human nature,and very very hard to fight. You can say you will fight it, but whenit comes time to place the order, what usually happens is youhesitate, then don't, or you go in with a very small position becauseof the perceived higher risk.These old saws about the
market always amuse me. One of them is'bears make money, bulls make money, and pigs get slaughtered'. Sotrue. But when exactly is one a 'pig'? When one tries to ride atrend into irrational exuberance and beyond, never taking a cent offthe table? Sure. But maybe one is also a 'pig' when one tries topreserve 100 percent of one's "substantial" profits in a risingmarket. That is simply a different form of "piggishness", and youcan get slaughtered (at least psychologically) trying to do that,too.Yuki (do what I say, not what I do) ^^_^^Send BUG REPORTS to bugs@xxxxxxxxxxxxxSend SUGGESTIONS to suggest@xxxxxxxxxxxxx-----------------------------------------Post AmiQuote-related messages ONLY to: amiquote@xxxxxxxxxxxxxxx (Web page: http://groups.yahoo.com/group/amiquote/messages/)--------------------------------------------Check group FAQ at: http://groups.yahoo.com/group/amibroker/files/groupfaq.html Your use of Yahoo! Groups is subject to the Yahoo! Terms of Service.
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