Robbie Burns’ Top 10 Tips
for surviving the markets
The editor of this magazine emails me to give me a deadline for this month’s issue but adds whether I could write something a bit different this time.
Obviously I began to write back: “Different?!! Whatdaya mean… last month’s not good enough eh? Go and stuff …”
Then I remembered he bought me a very expensive lunch recently… so, okay then. To be fair to me, I only ordered the second most expensive main and the fourth most expensive wine…
Anyway, I mailed him back politely asking him for a suggestion. He came back with a good one:
“How’s about Robbie’s top 10 tips for surviving the current market environment?”
Excellent. It is a question of survival. I’ve survived. Cue in “Eye of the Tiger” music in your mind now.
And I like thinking up Top Ten’s; though sometimes it is a struggle to find number 10 which is usually the craziest.
So, in the hopeful spirit of nabbing an even more expensive lunch next time, here they are:
- DON’T MAKE LOADS OF TRADES EVERY DAY YOU IDIOT!
I can tell you this for a fact: if the trades you are making on your spreadbet account start to mount up every day, you are chasing the market. It will eat you up and toss you down the rubbish chute. The more trades made, the more losses pile up. Only trade when you think the odds are really in your favour. Stop pressing so many buttons.
- HAVE A BREAK!
And not just a Kit Kat sized one. Things not going your way in the market? Stop huffing and puffing and saying bad words at your screen. Especially that one. Sell up. Come back next week or the week after. You don’t have to trade in a difficult environment. Keep hold of your capital and you can fight another day.
- WAIT FOR THINGS TO SETTLE
Don’t just jump in because you heard Greece is saved on the news. Remember, everyone else knows it too. If there is big news about, don’t go straight in — especially right now because Greece can be saved and then lost in ten minutes in this environment. And if Greece is fixed, they come up with another country to worry about. Wait till the whipsawing ceases and you can figure out a longer-term trend is really developing.
- WE’RE NOT ALL IN THIS TOGETHER
The professionals know just how to extract your hard-earned trading cash from you. In current conditions, the moment you are in profit the market will turn on you. And just when you take your losses it will shoot back up. Don’t let them have it.
- BUY WHEN YOU ARE REALLY SCARED AND ABOUT TO SELL THE LOT
The professionals are buying just as the private investors are piling out. Remember if shares are tanking down on fear that prices are actually cheap! It’s amazing how private investors buy at the top and sell at the bottom.
- SELL WHEN THE NEWS IS GOOD
If you bought on the bad, you want to sell on the good. The Euro saved? All in the garden is rosy? Commentators saying the FTSE is going to boom up to 6,500 by the end of the year? Time to bank profits.
- STOP BEING JUST A BUYER
Spreadbet firms will tell you even in bad market conditions that more people are still buyers than shorters. Seems that psychologically it’s hard to be a shorter. But if a share is in a continual downtrend, you must consider making some money on it as it goes down. Don’t just think long; think short too. If you get a decent short in and a downtrend continues, it can pay off handsomely as fellow contributor Evil Knievil will relay with gusto.
- WATCH OUT IT’S A CASINO RIGHT NOW
Especially if you are playing indices. It’s tough to play those. The FTSE opens up 60; suddenly it’s down 30; hang on it’s up 30 again; now it’s down again… During all this mucking about unless you are one of the super special 5% of the day traders that win, the casino is, in effect, just raking in all your chips.
Don’t let this happen. Only put your chips down if you are playing the FTSE when a proper trend one way obviously develops. Steer clear of the really choppy days because all your stops will get taken out.
- DON’T STAKE IT ALL
In volatile conditions keep your leverage low. Play with a smaller amount. If you lost a lot, don’t try and get it all back in a couple of days. Don’t seek revenge on the market; you could lose more. Take your time to get it back then hit a profit.
- DO THE OPPOSITE OF WHAT YOU WERE GOING TO DO!
A bit of a crazy idea… or is it? If you’ve been losing a lot recently, don’t you realise how much money you would have made if you’d done the opposite? Imagine if you’d pressed sell instead of buy and buy instead of sell! So each time you trade, just as you are about to press buy or sell… press the other button instead! If you think that’s crazy, better go and read Evil Knievil. Now that guy really knows what he’s talking about.
Article reproduced from the July edition of Spread Betting eMagazine