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Dennis "The Day Trader" Gartman says buy Gold!
MilesWaits
Posts: 5,310 ✭✭✭✭✭
His three choices for the future (a day or so) via CNBC:
1. Buy gold [GCC1 1372.9 -4.60 (-0.33%) ] and short the euro against it to hedge out US dollar risk.
2. Buy the Australian dollar and short the euro against it.
3. Buy soybeans [SC1 1255.0 16.00 (+1.29%) ] and corn [CC1 538.75 10.25 (+1.94%) ].
The boy bounces around like, say, the price of Gold.
Miles
1. Buy gold [GCC1 1372.9 -4.60 (-0.33%) ] and short the euro against it to hedge out US dollar risk.
2. Buy the Australian dollar and short the euro against it.
3. Buy soybeans [SC1 1255.0 16.00 (+1.29%) ] and corn [CC1 538.75 10.25 (+1.94%) ].
The boy bounces around like, say, the price of Gold.
Miles
Now riding the swell in PM's and surf.
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Comments
<< <i>1. Buy gold [GCC1 1372.9 -4.60 (-0.33%) ] and short the euro against it to hedge out US dollar risk. >>
An interesting thought...
Anyone care to chime in on this one??? What about a position in UUP? I do go in and out of SDS...
I can only guess that once the PIIGS effect subsides on the euro, you'll get a least bad thing... but when will PIIGS end?
Why not save all that extra energy and brainpower and just be more careful in the first place?
I knew it would happen.
<< <i>Hedging just doesn't make sense to me. It's not the same thing as portfolio diversification. If you have to hedge on an investment, why not just buy less of it and save the extra transaction costs? Either an investment is going to go up, or it's not.
Why not save all that extra energy and brainpower and just be more careful in the first place? >>
For me, hedging results in a much higher win percentage. That fits my personality, my trading style. Many traders prefer to have a much lower win percentage, and bigger winners and small losers. I struggled mightily with that, and my brain doesn't like it much, so I found something that works for me. With the higher win percentage, comes small profits. Losses still happen but are rare and one must learn to limit the damage when they do come.
I like the baseball analogies. Some hit for a high average with very few strikeouts. Some hit for more power (bigger winners) with a ton of strikeouts. Both kinds of hitters can be extremely valuable, if they are good at their style. Typically, if the singles hitter tries to be a slugger it will not work. Once in a while someone can do both extremely well, hit for average and power, and they tend to be hall-of-famers. For the hall-of-fame caliber talent virtually any style will work. For the rest of us, understanding our limits and finding a style that suits us, is often the better road.
For the many novices reading along, I suggest that after doing a year or two of trades and journaling them all, see what is working. See what kind of emotions are involved at each entry and exit. A pattern of what suits your personality may appear. I tell people there are a hundred different ways to approach the market. Find one that fits you. Trying to copy someone else's style, when their personality may be entirely different can be difficult to impossible.
Hedging fits some folks just fine. Gunslinging trading styles like some others do is only suited for a few, and only a few can survive that way in the long term. Taking smaller positions as you outline is a way of hedging without hedging on the actual trades. The risk management/money management side is often just as important as picking winning trades. That's why I often opine that predictions on prices are mostly for entertainment value, and that folks actually reporting what they are going in terms of buying or selling, or selling short, or hedging, is much more valuable information.