15 October 05

Futures Trading Update

Hurricanes have affected our recent performance.
Long Island closed out his long soybean position at a loss after dissipating hurricanes watered thirsty soybean crops in the Midwest. As the crops rejoiced, Long Island’s account dipped to $4770.61.

Hurricane Katrina caused energy prices to spike upwards, and I took advantage of the short term psychological extreme by selling short natural gas and oil; when they tumbled, my account rose to $7695.75.

Long Island started a stock trading account on 24th June 05 with a hypothetical initial investment stake of $10,000. After locking in gains in CNS Inc, Motorola, Netgear Inc, and Dresser Rand, his stock account moved up to $14,894.5. He is currently long the US government’s pet contractor and notorious overbiller, Halliburton.

My recent futures account gains were derived from psychological analysis. Each market seems to have its own personality, susceptible to fluctuating emotions and even mental ailments. In order not to be distressed by the seeming irrationality of futures markets, it is necessary to condition one’s mind to be in accordance with market temperaments.

***Readers please note that Jon's and Long Island's trading is hypothetical. Inmates do not have access to computers or the Internet. Nor do they have the funds to trade on the stock market.

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Copyright © 2004-2005 Shaun P. Attwood

1 comment:

Anonymous said...

You have a very interesting view on stock analysis. I would love to hear your professional opinion about the following article I came across, please sent your comments to angle_8866@yahoo.com.cn:

Online Trading

To become profitable doing online trading, you must develop strict emotional discipline. In contrast to traditional broker trading, online trading has simplified the process into a few mouse clicks. Due to the human inclination to instant gratification, it is easy to execute orders without a thorough analysis.

If you find yourself doing hours and hours of research on one stock and end up buying another totally unrelated stock, you are falling into the traps of online trading. Impulses are usually the cause of bad trades. Unfortunately, it is deadly easy to indulge impulses through online trading.

Another trap of online trading is high frequency of trades. Because orders get executed so rapidly, it is possible to carry out multiple trades in a short time. Multiple trades incur a lot of commission costs, making profits further from reality. To avoid this pitfall, it is wise to reduce the number of trades you place online. If you like to set tight stop losses, make sure you study the variance of the price movement so that your stop price cannot be breached easily. If you are a day trader, do not use the normal discount online brokerage because you are up against professional day traders in New York who can place an order for a few cents in commission. If you are a momentum player, make sure the momentum is backed up by some fundamental analysis. The beauty of trading is you can pick your hand before you play the game, and you should not discard this inherent advantage by entering positions without any theoretical backup.

If you find yourself taking positions without thorough research, I suggest you just buy the index fund. Index fund saves the commissions, and statistically it will yield the same results in the long term.

Many people also fall into the gambling mentality when trading online. Because the easy of use and pretty interface, it is easy to forget that the money displayed are real. Sometimes when people make a huge profit, they become less disciplined and start making stupid trades to satisfy their “gambling” impulse. Most of the time, they can have the same satisfaction if they cash out 1% of the profit and go spend it in a casino. So please remind yourself constantly, “online trading is not online gaming”.

About the Author: Zheng Fang is the creator of Advance Stock Pattern Scanner of www.cisiova.com and the owner of several stock picking blogs:

1. Optimal Portfolio
2. Candlestick Stock Picks
3. Cup and Handle Stock Picks
4. Technical Analysis

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Online Trading