Tuesday, January 15, 2019

The Warfare Game ....

This war game is the most interesting and rewarding IF you get to maneuver correctly. There are quite a few rules to follow and most critical is the $$$ (ammunition).

In the Futures (Commodities and Forex), we are in the leveraging (margin) game. One has to get the split between margin versus buffer correctly. This is to ensure we are not caught in a stop out or margin call situation in the event a sudden spike occur.

The ratio which I find is reasonable is for margin : buffer is 1:5 meaning for every dollar of margin needed multiply it by five for the buffer. This allows us to average down IF so needed.

As human we have the tendency to anticipate or predict the trend change. This is our human risk and weakness and most of time will get us into trouble if not managed properly. Most of the time, we will encounter the market is against us before it is for us!!!! Talking from own experience!!!

It is no secret but how often do we sit and think in the most logical and simple manner. The easiest to trade is to take positions when the trend HAS changed. Forget about picking the top or trying to sell at the Top. Forget about buying at the lowest point. As long as we take positions the moment we can CONFIRM the trend change, we will minimize risk to the lowest.

The obvious question is HOW DO WE DETERMINE and CONFIRM trend change!!!!

I am not and never a proponent or believer in microscopic analysis of candles, volume and so many other different variables. All I am interested is HAS the trend changed? Is it confirmed?

From one major trend reversal to the next, it is never a smooth straight line journey but a bumpy ride with different intensity along the way till the destination. Full of false alarms before reaching the destination and trend changes. How do we determine these are false alarms?

Think it over.     

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