One story I donít mind hearing again and again is the one about when Harvard University decided to hold a course on stock trading. After lengthy negotiations with a very successful Wall Street stock picker to teach the course, they announced the formation of the new class to their business school, and were very pleased and excited to have students lining up to attend this most sought after study. On the first evening, with students filling up the class room and others jostling to get in, the well paid for trader/professor walked up to the front of the room and picked up a piece of chalk. Without addressing the students, he wrote in very large letters: BUY LOW; SELL HIGH, put the chalk down, and walked out of the room, still not saying a word, and was never seen on campus again.
While it was unlikely many in the room realized the valuable advice they were given that day, there were likely a few, and that is the way it always is. The message was clear; the concept of trading is simple. Not easy, but simple in execution.
Todayís equivalent of that sage advice, where the still Darwinian business cycle now enjoys a Keynesian wrapper, might be BUY HIGH; SELL HIGHER. While no one alive knows with utter certainty what will happen tomorrow, we all know what the market did today; we all know which direction it is moving in right now, and for the major currencies and stock indices that is higher. Traders generally donít get paid to think, they get paid to execute, and they rarely differentiate between being long or short. The direction does not matter, only the account balance at the end of the day counts. But for all the fun a big rally is, it is worth remembering that the law of gravity has not been repealed yet. Maybe just temporarily suspendedÖ
Jay Norris is the author of the soon to be released Mastering Trade Selection & Management, McGraw-Hill, 2011.
DISCLAIMER: Forex (off-exchange foreign currency futures and options or FX) trading involves substantial risk of loss and is not suitable for every investor!