Jul, 17, 2006 By Vikram Murarka 0 comments
Here is another trading story, again with Dollar-Yen as the background. Many Traders, especially in the early years, do not realize that there are two kinds of market - a sideways ranging market and a trending market. And unfortunately, there are often two kinds of Traders - range traders and trend traders.
This story unfolds in the first half of 1999. The Dollar-Yen market had stabilized after the fall of 1998. It had been trading sideways in a 7-big figure range between 117-124 from Feb-99.
Range Traders were busy making money hand over fist, buying low and selling high. The secret of their success was that few worked with Stops, because Stops have a habit of getting triggered in a ranging market.
But then, the unexpected (though inevitable) happened. Dollar-Yen crashed in July-99 to hit 115. A lot of the Range Traders were caught Long and wrong. Moreover, they did not have Stops in place. Worse, the market paused a bit after hitting 115. Many Traders thought the market was going to rebound and doubled/ tripled their Long positions, again without Stops.
Oh misery! The market resumed its fall, refusing to stop till it hit 105. It was later heard that one particular trader, who had been the toast of the market when it had been trading between 117-124, had been eased out his job and had quietly left the country.
Moral of the Story:
Work with Stops, always. Your stops may be wide; they may even sometimes be mental. But, be disciplined and implement your Stops when the Stop Loss levels are triggered. Otherwise you are committing trading hara-kiri.
In our last report (23-Feb-24, US10Yr @ 4.25%), we had laid out our near term view (that the ongoing rise in the US10Yr may/ may not extend up to 4.5%), our medium term view (that the US10Yr can still fall to 3.5%) and our long term view of a rise towards 5.0% and higher going into 2025. …. Read More
After breaking above the earlier range of $70-85, Brent has moved up higher. Will it sustain and break above $90? Or will it fall back to $80/70? … Read More
Euro could not move above 1.0981 in March and has been trading well below 1.10 post the surprise rate cut by SNB last month. Will Euro continue to trade below 1.10? Or can it remain stable for a while and show a sharp breakout above 1.10? ……. Read More
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