THE IMPORTANCE OF TRIMMING
Once in a long while a great book on trading comes out. I have read them all, at least those published through 1988. Very few have impressed me. As E. C. Harwood noted, “ No doubt, many investment advisors sincerely believe that they have found the formula that will enable them to forecast such trends successfully. However, in more than 50 years I have never known even one whose personal fortune reflected his supposed forecasting ability.”
But I know of two advisors who did meet Harwood’s criteria.
Larry Williams published several with a wealth of information. Some of it very useful, most of it not.
Another one of my favorite authors is Ted Warren. Ted was a laborer with 6th grade education who was able to retire in 1940 at a very young age.
I met Larry Williams and Ted Warren while in my 20’s and attended both of their seminars. Their personalities and trading styles were as different as night and day.
Larry Williams was a flashy sort of guy with a wealth of information. But my impression is he violated his own rules on money management, lost everything and restored his wealth selling books and holding seminars rather than actual trading in the 1970’s.
But unquestionably he has the knack for trading. Williams went on to win the 1987 World Cup Championship of Futures Trading from the Robbins Trading Company, where he turned $10,000 to over $1,100,000 (11,300%) in a 12-month competition with real money. Ten years later his daughter, actress Michelle Williams, won the same contest.
Ted Warren was quite the opposite. He published one out-of-print book, rarely held seminars, and lived a frugal life under the vow of poverty. But his livelihood was made by successful trading, especially stocks. He had a very simple method based on the premise that stock prices are manipulated. While I disagreed with his premise, I did not argue about his consistent success.
In fact, in talking with Tyler Jenks he acknowledged that his Hyper-Wave theory was inspired by Ted Warren. Tyler Jenks has taken the simple formula used by Ted Warren to an entirely new level.
But there is one recent book I highly recommend for anyone trading bitcoin or any other market, The Art of Execution by Lee Freeman-Shor. The author is not a successful trader, but rather manages billions of dollars and hires professionals to manage portfolios.
From this unique perspective, he identified the common trading principles used by his most successful managers.
Reading this short book is the best trading investment you can make for just $10 for the Kindle Edition and if you order from the link below you will help support my work. It is a great summary of everything I try to teach here.
One trait the successful traders have in common they cut losses short and ride winners for all they are worth . . . or manage risk.
But along the way, the successful traders do something else. They consistently “trim” their position by taking some profit along the way.
Frankly, before this book, I never knew there was a term for this in the financial world. I learned to do it over time and it's just part of my trading style.
Why is trimming important? Well, the crash we had a few days ago is a good example. I routinely trimmed about 15% of my position by taking profit on a portion of my March futures from 4001 to 4171. Now that was a minimal trim as the crash surprised me, but the fact that I was disciplined to trim a portion of the profit allowed me to restore the position at lower levels.
I remain bullish. I may be wrong . . . . but by trimming the sails . . . you are better prepared in the event of an unexpected storm.
The unfortunate situation is the bitcoin prices are being led by the alts . . . the sell off shook the tree . . . making it very difficult to hold margined long positions. . . a slow grinding accelerating market will leave everyone behind again . . . and further selloff under 3600 should have good support. . . I will be a buyer there, will you?
Hope this helps.
Ugly
PS: Ensenada Tech House will have a grand opening with a little wine and cheese celebration covered with a live stream Friday, March 1st, and 7pm and will bless each room with The Bitcoin Standard Bearer Staff. Don’t miss the fun!
All followers are invited, if you can make it, private message me I will forward the location.
