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Thursday, July 26, 2012

Investing & Poker

Our decision to go long again at 1331 is paying some nice dividends, with SPX up over 30 points in the past two days.  If we can hang on through tomorrow, we should be up over 50% since inception (March 22.)

A little reminder...  a few days ago I announced a 37% discount to the first 37 new annual members in celebration of our 2nd quarter results (up 37%!)   If you're already a monthly/quarterly/semi-annual member, we'll just tack it on the end of your current membership. If you're already an annual member, tell a friend and earn 3 free months when they sign up.   There are still 11 spots left, so grab 'em while you can.  This deal ends tomorrow, when new rates are announced.  To sign up, click here.

In my old days on Wall Street, this would be a great time to start indexing.  Institutional asset management is all about beating your benchmarks and quartiles, and every manager I know would absolutely sit on a lead like this and ride out the rest of the year essentially owning the S&P 500.  But, you all know me better than that, right?

I am an ardent believer in the chart patterns, channels, harmonic patterns and technical analysis that have enabled us to capitalize on rather than fall victim to volatility.  It's hard work, for sure.  I start around 5:30 am and often nod off around midnight -- still charting.

But, the results are worth the effort.  We certainly won't be on the right side of every move every time; my goal is to get most of them right by sticking to our proven methodology, and avoid being sucked into positions based on hope or fear.

One of our members (known here as Beach Justice) is a professional poker player;  he recently offered me the following sage advice:
There's a saying in poker: "Don't be results oriented," which simply means that just because your play didn't work out and you lost the hand, that doesn't mean it was wrong, and thus you shouldn't bitch about it.  Profitable situations in poker get annihilated by low-percentage cards all the time, but if the expected value of the play was positive, that's all that matters and the profit will be there over the long run.
Trading the is the same way, just because a particular forecast doesn't work out for whatever reason, it doesn't make the position a bad bet.  If I make 10 trades with an estimated 3:1 risk reward and I get stopped out on all 10 of them, as long as the analysis was good that's fine.
Anyway, as simple as that concept is, I never see traders discuss it and just thought it might be helpful in teaching trading.  We're here to take good gambles (and on, learn how to find them) but all a good gamble does is offer an edge, it doesn't guarantee it will pay off every time.
Perhaps a blog about something like this will reinforce to any readers (or haters if you somehow have them), that it won't always work out, and there's nothing wrong with that.  So just a suggestion in case that's helpful.
Thanks, BJ; it's extremely helpful.  Because, I have no interest in sitting on our lead or playing it safe.  God willing, we'll keep doing what we're doing and the results will sort themselves out.

And, thanks to all of you for your emails yesterday.  I will strive to make my posts more succinct for those who want the headlines, and still offer excruciating detail for fellow chart rats.

More charts coming shortly.

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