It typically goes something like this. I see an opportunity in the markets and seize upon it, buying the FTSE 100, let’s say. As I expected, the index rallies, perhaps by 60 points or so. So far, so good. Then, however, I get an overpowering urge to take the modest profits on offer, even though I have publicly set a much higher target. No sooner have I pulled out, the FTSE rallies anew, and I miss the next 100 points or more.
I call this problem "premature execution." Besides foregone profits, it leaves me with a nagging feeling of inadequacy. Comfortingly, however, I am far from alone. Men have long suffered with variations of this ailment and some have even taken the bold step of speaking openly about the best way to deal with it.
The most promising advice I have come across yet was that of Barrington Spence, the 1970s reggae artist - (bit.ly/13LkA7P) - who sang: “use Chinese brush, I tell you, it make you stay long.” His lyrical account of the endurance gained from this externally-applied blend of oriental herbaceous oils prompted me to seek out a trading equivalent that would help me stay long - and indeed short - of the markets.
The ‘Chinese brush’ that I have since started using involves doing trades of two halves. As early as possible in a new trend, I open a position, half of which I aim to keep running and half of which I use for trading in and out of the market. This is reflected in the way I now write my Daily Market Outlooks on our website, for which I recommend a strategy both for day-trading and for position-trading over several days or more.
As well as mitigating my own premature-execution problem, I hope this approach will serve you better too. I know from my inbox that readers use my comments for different purposes. Some like to trade a market several times a day, whereas others prefer to let positions run. I plan to refine the approach further, and will certainly write more - or perhaps even sing - about this subject.
Nasdaq buy-signal
Staying long has certainly been the name of the game in the indices over recent sessions, in line with my calls. The Nasdaq 100 index has been particularly rampant, giving a change-of-trend buy-signal on Monday, 29 April, making new bull-market highs in the process. I had never paid any heed to the sell-signal that had gone before. Gratifyingly, healthy traded volumes have accompanied some of the up-days.
DAX flies higher
DAX Coppock dips
My colleague Robert Ansted points out to me that the DAX has just given a sell-signal on its Coppock indicator. The German index also officially remains in a downtrend on its swing-chart. I regard both of these things as no more than irrelevant technicalities, however. My call is still that the DAX is heading back to its record highs at 8152. At the same time, I seek a fresh bull-market peak in the FTSE above 6534.
FTSE heads higher
