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Top 10 Trading Lessons from 2007
By DailyFX Updates | December 24, 2007
Happy Holidays! At DailyFX, we always say that we are Traders First and Analysts Second. Each and every one of the Analysts on the DailyFX Team actively trade in the markets and we wanted to take this opportunity to share with you, real trading lessons that we have learned this past year.
Lesson # 1: Don’t Ignore the Warning Signs
According to Wikipedia, a tsunami is a series of waves created when a body of water, such as an ocean, is rapidly displaced. A tsunami cannot be prevented or precisely predicted, but there are some warning signs of an impending tsunami. In instances where the leading edge of the tsunami wave is its trough, the sea will recede from the coast half of the wave’s period before the wave’s arrival. If the slope of the coastal seabed is shallow, this recession can exceed many hundreds of meters. People unaware of the danger may remain at the shore due to curiosity, or for collecting fish from the exposed seabed. This was exactly what happened to me. Even though, I felt the initial subprime earthquake (I went short U.S. interest rates in anticipation of rate cuts), I failed to run for cover when the first waves of destruction started hitting the U.S. economy (Merrill Lynch, Bear Stearns, UBS all started reveling colossal losses tied to subprime problems). I assumed that stocks would rally in the months ahead because of the rate cuts and went long USDJPY. Next time I see that the sea is receding from the coast I will assume that a tsunami is coming. I will run for cover and come back to the market when the volatility drops to more normal levels. – Antonio Sousa
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