Forum Archive Index - June 2002

["Cheng, Soo" <S.K.Cheng@massey.ac.nz>]

-----Original Message-----
From: Phaedrus [mailto:Phaedrus@techemail.com]
Sent: Wednesday, 26 June 2002 9:58 p.m.
To: Sharechat@sharechat.co.nz
Subject: [sharechat] Charts in Hard Times.


Jefley,
         Charts do not suddenly stop working at times like this. The market 
still consists of stocks that are going up, and stocks that are going down. 
There are more falling than rising just now, that's all. At times like this, 
simply tighten your stops. Carry on executing the buy and sell signals 
generated by your system. You will find you are getting more sell signals and 
fewer buy signals as a matter of course, given the general market weakness. 
 An effective selling strategy should pull you out of trades before a market 
reversal inflicts damage of any great magnitude. While this alone helps to 
protect your capital, the main advantage is that you then have cash and are in 
a position to take advantage of the situation, by buying good stocks at bargain 
prices, when the opportunity presents itself.
 As well as holding stocks, or being cashed up, there is of course a third 
alternative. One that is never really mentioned much on ShareChat - Selling 
Short. I am sure that many people do not realise just how easy and cheap it is 
to do this on the US market. I vary the proportion of short trades according to 
the state of the market. If it is rising, I am 100% long. If it is going 
sideways, I am 50% in long trades, and 50% in short trades. If it is falling, I 
move to 100% short trades, and have been in this mode for some time now. In 
times of political and economic uncertainty, this approach gives great 
peace-of-mind, since a large fall in the US market would bring large profits.

          Phaedrus. 
 


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