When is a trade an investment?

Our post ‘Early on the DAX and JPY‘ still applies. We entered short the German 30 index (DAX) and shorted both the Australian Dollar and the Euro against the Japanese Yen.

It is arguable that a weekly chart is not trading but investing. These trades have been going for so long (several weeks) that they show best on the higher time frame drawings.

If the S&P 500 index takes a drop, then it is probable that the DAX will follow.

The Economist recently reported that Bridgewater (the world’s most significant hedge fund) had taken a $1.5 billion in derivatives short in the S&P 500.

Al Brooks, a technical trader, forecasted at least a 5% drop in price in the index, a decline, he explains, that eventually could be anything up to 20%.

Having said all that, making independent technical assumptions is vital.

The DAX, despite the convictions of those mentioned, is a low probability endeavour. But we continue to hold.

A trader always considers the probability and reward/risk of a trade. A low probability trade often equals a high reward/risk outcome; and a high probability trade a small reward/risk outcome. That is all part of the ‘traders equation’.

The strengthening of the Japanese Yen, on the other hand, is technically, and on a weekly synopsis, a satisfactory probability endeavour.

We continue to trade the remaining fund margin on the lower timeframe, which last anything between a few hours to no more than a few days. In other words, trading not investing.

Leave a Reply

This site uses Akismet to reduce spam. Learn how your comment data is processed.