Some Great Advice from Larry Williams
[I]Just as some days are better than others, some trades are much better than others. Most traders are looking for the big kill trade, the home run.
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I am certain everyone knows that home run hitters strike out more often than they hit a homer. That’s okay in baseball because the size of your loss is equal to the size of your gain. However in trading, just one large loss can wipe out everything you have accomplished. Barry Bonds or Babe Ruth could strike out one or two times, even ten times and still be in the game. It’s not that way when it comes to trading.
So why not go for the easy trades?
Most traders are trying to do something spectacular. They are like the highflying trapeze artists, or the Evel Knievel’s of the investment world. They want to call the high, buy the low, thinking that is where the big money is to be made. Certainly if you look at the charts that seems be the ideal game.
To me a difficult trade is one where the trend is straight up, and you try to call that high. Yes, we know the market will top at some point. But that doesn’t mean that point is now or that you or I have the ability to correctly predict when the ride is over.
Why is it so extremely difficult to accomplish in real-time trading? Simple; you can’t tell when the party is over until it is over.
So, why not wait until we can see that it is over, or more likely to be over, before we hop aboard on the short side? Why are we so attracted to stepping in front of speeding freight trains? Beats me.
Wouldn’t it make more sense to sell a market that is in a downtrend than one that is an uptrend? It certainly seems that way to me, and more importantly has been my experience. In other words, this really is the old adage; the trend is your friend.
That is the low hanging fruit on the vine… that is the fruit that is ready to be picked; it takes the least energy and should be the sweetest. There is more certainty of getting that fruit off the tree, than something way up there hanging on a delicate limb.
It is far easier to find the trend of the market and react inline with the trend.
For my money I prefer to pick the low hanging fruit, I prefer to ride the horse in the direction he is going.
Good Luck & Good Trading,
Larry
