The Markets and Whiskey are More Correlated Than You Think

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So given the title of the blog post, what do they have in common?  From my experience if they are taken fast one is to end up in disorder and confusion.  Patience is the key to both the market and drinking whiskey.  For example, if you play the market fast constantly being in it and not willing to reduce some risk, I am quite certain you will end up with a blown account.  I know this from experience as I have blown up three separate accounts before getting my act together and looking at risk instead of constantly reading technical analysis and options strategy books.  Please if you are beginning trading, focus first on risk.  Another experience that relates is with whiskey.  When I was younger I was all about the shots and reaching that messed up state at a rapid rate, only to wake up the next morning miserable and wondering what the hell happened.  Nowadays when I drink my whiskey I enjoy the finer stuff (favorites including Jameson 12 year & Jack Daniels Single Barrel) and just sit back relax and sip on the finer stuff in life.

So how does this all relate to trading?  Recently the market has me concerned.  Going into today I had mostly exposure to the long side that utilized a small portion of my account.  But today’s action action had me a bit worried as  shorts did not run and buyers did not really step in.  This morning watching the futures, the market looked great but when the action/volume came in, it told me to step aside as the bears are still awake and ready to kill any rally attempt.  When the market looks like this I believe that a trader should not look at support unless they are willing to average in, instead wait for conformation to either side and step aside and let the others get chopped.  I am not saying don’t trade, but if you do, trade small with expectation of lower prices and utilizing those stops or averaging down for longer term holdings.  Case in point is a post by @RaginCajun http://ibankcoin.com/rcblog/2012/05/15/bulls-are-weak/ , and from there “After sitting on my hands for a few days, I decided to try a few longs. I was quickly stopped out of $WYNN after trying to catch a falling knife, but got a great add on my $YELP shares. ”

Below is aq snapshot of my positions at end of day.

From the screenshot and going into today I was long deltas in: BIDU, PCLN, & UA and short deltas in CRM, with long day trade in AAPL.  The table refelcts the results:

 

Symbol Date In Date Out Price In Price Out % Gain/Loss on Risk
AAPL 5/15 5/15 3.80 4.80 26.32%
BIDU 5/11 5/15 1.85 1.72 -7.03%
CRM 5/11 5/15 2.29 2.40 4.80%
PCLN 5/14 5/15 1.12 0.79 8.51%
UA 5/10 5/15 4.00 4.40 10.00%

This table is meant to show that I did have some positions on but for reasons of today’s actions in the market I started to get a little worried and reduce some risk and say thanks for the gains so far and go into tomorrow with a clear mind or not trade at all and let things work out for themselves.  There is no need to be a hero and try to guess the bottom as this proved to kill some poeple that saw that hammer back in August 2011:

As you can see this hammer looked awesome as it undercut the previous days lows and saw buying coming (the tail) after what appeared to be a capitulation day.  Needless to say we can see what happened next as commodities got liquidated, much like todays action.

So from this all I can say is be careful and don’t load up. Take it easy and exercise that patience and let market play out and wait for some evidence of buyers to show up.  As quoted from @chessNwine “We are in a short-term downtrend within the context of a bull market correction, until proven otherwise. Aggressive traders have by and large been chopped to pieces in this environment. You simply must protect your capital and confidence here so that you can be properly positioned to benefit from the next trending period in the market.”….and I couldn’t agree more.

Like a fine whiskey, don’t take shots and end up puking and waking up the next day wondering what the hell happened.  Sit back enjoy yourself and watch things prove themselves, sip on that whiskey and enjoy the fine points of the oak and wood-char and relax and be patient!

 

3 Responses to “The Markets and Whiskey are More Correlated Than You Think”

  1. Messed up on stated AAPL trade as I was long puts so short deltas, just wanted to clarify as I said “long day trade in AAPL”

  2. […] into Wednesday with no positions as I closed them all on Tuesday as found in my recent post titled “The Markets and Whiskey are More Correlated Than You Think”. I closed them due to the uneasy feeling of the current environment. I feared the market in both […]

  3. […] have wrote in a recent blog post on how I am expecting some up and down volatility titled The Markets and Whiskey are More Correlated Than You Think. It basically explains that I am not ready to allocate a lot of capital here as I think the moves […]

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