Monday, August 30, 2010

market timing and 3X ETF's

I knew I was either going to look like a genius, or a total idiot today!
I wish I knew what is going on in the UK, but whatever it is it's causing flight to safety in the dollar.

I received a large donation, last week, and when I thanked him, he said it was the least he could do, because after all I am the "Prophet of Profits", and sometimes I do feel like I'm predicting the future, but the future is today - the news just hasn't hit the street yet - and Greek default, that's bigger than Lehman defaulting right? Right

I was kind of amazed when my trading account hit a new high again today, even though today's sell-off didn't result in a new low on the SPX, but this is what happens when you short the proper sectors, and allow 3X ETD gains to compound in a momentum trade. Compound gains are what give FAZ, and other 3X ETF's, the ability to go from $100 to $10.

 It's as hard to hold into a rally (in a bear ETF), as it is to hold through a dip, and at some point you start getting that nagging feeling that you're getting just a little too greedy, until the anticipation starts keeping you up at night, because you know that once the larger trend changes, the same ETF's you fell in love with, is also capable of taking 40% of your money in just a few hours.

The other reason it's easy to get shaken out, is that we technicians think we're so damn clever, that we can time every move thinking "we can get back in a few bucks lower", but after getting burned enough times doing this I believe this is just another excuse to psych yourself out. You get nervous and sell, and then you're afraid to put the trade back on. It's self defeating! If you were able to take profits when you saw the $VIX selling off on Friday, and then chase the short trade today, you're a better trader than I am. I've always said, "I'm a better chartists than I am a trader". It takes time to master anything, and some never do. I will.   

I've achieved a certain comfort level trading 3X ETF's, but I also understand the risk. If I wasn't so impatient (greedy) I'd trade something less volatile, but the time is short.

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