Jeff,
>>Chip are you stepping aside this week to let the markets finish out expirey?<<
I've been thinking about Risk recently.., and this question gives me a chance to write down my thoughts. Thank You.
Day-to-day price volatility is a bedrock, inescapable risk that all traders face. In the futures and commodity markets these surges and gaps are even more pronounced.
In day trading or position trading they can cause serious draw downs and wipe out profits. Placement of stops will provide some safety, but slippage can be damaging, and close stops will eat away at your profits overtime.
Volatility of expiry week falls into one of these charged categories. I understand that many do not trade this week for that very reason. But risk exists going into a variety of highly charged days. Just look at PPI, CPI and Fed meetings.
Closer to the point and more valuable to me..., is ones exposure to risk and the preservation of any size account. If you're trading $25,000 or $250,000 or $2,500,000..., what you have on the table at any time is the measure of risk that is the most important. Those who are able to remain for years in these markets, both futures and stocks have the ability to manage the risk and preserve their capital. It is a psychological requirement..!
So...., if you are trading a $250,000 account and are long 1 Spoo going into a major move you will make out in any direction. If your long 10 spoos looking for a windfall you could see it all disappear.....in one expiry week.
The psychology of leverage and excitement of making big money quickly, places an inexorable demand on the psyche to overplay your hand. Especially when you are wining. It's a powerful mental passion and requires an equally inexorable amount of mental discipline to not give in.
As Patrick Slevin would say.... "Get my Drift."
Chip |
