Trading when liquidity is low...

Kids, today's muse.....

A respected friend of mine once noted "never short a dull market". I couldn't understand his comment at that time.  

What was so different about a dull market versus any other time?

The trick is to understand the players, the motives and the calendar.

1) the players. They are not created equally. Some have more influence on market moves than others. The professional seller will stack as many cards as he can in his favour, that means data and signals. There are notoriously few around low volume days.

2) the motives. The motive for selling is always the assumption that something will go down in price. For that you require a reason or a catalyst. That is unlikely when volume is lower.

3) the calendar. Trust when you are looking forward to a vacation, time away from your screen or about to see Nan for Christmas that you aren't the only person thinking that way. The calendar can play tricks on the stock market uninitiated.

You can look back over a long period of time and rarely do sellers make money over thanksgiving and Christmas. If the market goes your way at these times, be quick to say thank you.

One last note: there are no friends on the other side of your trades! don't think for a moment that the playing field is level, it isn't, so deal with it.

As for today's action, standard operating procedure. Melt ups and rallying high beta at the expense of safety. 

Bonds starting to get antsy on Dec Fed meeting. I just don't see them changing tack with only 2 weeks left in the year (funding for year end issues). 2yr paper is the canary in the coalmine, hence a flattening curve.

Bull market trading still.

 

Potential 2 day melt up around thanksgiving. 

Hopefully Mum excels herself once more for our feast on Thursday! 

 

Queen takes Pawn

First musings for my children......

Blog number 1. Some basics.....

THIS BLOG IS INTENDED AS A RECORD OF MY THOUGHTS ONLY, TO BENEFIT MY CHILDREN.

1) Stock markets are difficult to navigate, lets not over complicate a complex issue.

2) It's a bull market and has been since Oct 2011, in my opinion.

This particular bull run has been difficult to stay seated on. At every turn we are told "the next leg lower" is around the corner. At some point that will be true, the real trick is timing. In the meantime, learn the rules and play the game.

The term "blue-sky" trading applies to being long stocks that trade at new highs, this allows wins to be garnered from market intelligence rather than trying to outsmart the professionals. Some call it momentum, I like to think reading a market correctly is as difficult as an other subject.

3) Bear markets are notoriously difficult to capture from start to finish. Don't try to predict it, let the market show you the way.

4) Yield Curve matters. (gives bear market signals religiously)

5) Capex matters (gives bull market signals religiously)

6) Rotating sectors matter, rotation within sectors matters. (trends can be see consistently)

7) Action matters over price. True bull markets never allow you the re-entry price you are looking for do not make the mistake of always having to buy cheaper than you sold.

8) Swimming against the tide is absolutely fine. (2007 and 2012)

9) Swimming with the tide is absolutely fine. (2012-)

10) Be prepared to lose money and learn. Be prepared to make money and know not how.

11) Learning happens everyday, no matter your age

12) Position size is the most important part of sleeping well. (ask Mum about the 2007 short position)

13) Instinct matters. Trust it, it's yours and you worked hard for it.


I will post links in future as this blog evolves.......

Queen takes Pawn