Email of the day - on trading discipline
Comment of the Day

October 07 2019

Commentary by Eoin Treacy

Email of the day - on trading discipline

I have been in and out of this site since just before I was caned by GFC. I ought to feel bitter about loss of savings, however if I added up all of the suboptimal decisions in life, they might exceed a few spectacular dumb decisions 2005-2012 with a few too many zero's for comfort. I am fortunate that I have a great day job, so maybe I might get away with being a bit stupid. I have read some sad stories on this site - that speak to the difficulty of successful trading, and the high rate of failure amongst amateurs like me. I wondered what happened to the authors - did they just walk away? I value learning - have been to the chart seminar twice, and thought it very considered. The best bits for me were the insights into price behaviour, and that price/time only appears to be random; it’s just very hard to predict. 7 years ago, a subscriber asked on this site what was meant by trading discipline. I am sure you and many of your reader know; obviously I am still learning. I won't say what I think it means, but I now understand the value of a trading plan, and understanding market mechanisms. I haven't found the perfect trading guide, but I came across one recently that has helped me understand more about currency markets (and therefore all markets with leverage). It is well written, measured, not biographical but benefits from the author's market experience. So, I thought I would share it with you and your readers: it is a good read, and useful beyond a scope suggested by the title. Brent Donnelly. The Art of Currency Trading. I would be interested in what other subscribers think of its content, and any other recommendations that have had practical and positive effect on trading outcomes.

Eoin Treacy's view

Thank you for this email and I am sorry to hear your trading record has not met your expectations.

In case there is any confusion, whenever I speak about trading discipline, the most important aspect is position sizing. Investors tend to be most bullish at major peaks and most bearish at lows. The best time to take profits, partial or otherwise, is when prices are widely overextended relative to a trend mean on the upside. The best time to think about initiating longs is following periods of weakness when there is evidence of support being found.

Thematic investing, where you can identify a compelling narrative and fundamental rationale, tends to deliver reasonably consistent trends where this kind of positioning is most attractive and likely to deliver investing success.

Today, the clearest uptrends are in the technology sector and the consumer staples sector. The most recent base formation completions have been in the precious metals sector. The clearest evidence of topping seems to be anything linked to China.

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