A recent note from a subscriber alerted me to discuss what I am trying to do with the Newsletter articles and why I am doing it. The subscriber chastised me for failing to comment on the financial meltdown in last weekend's article and suggested that I did not write about those developments as every other Newsletter writer to whom he subscribed did. He took it as a sign that I wasn't paying attention to the market. While I understand his issue, it comes from a misunderstanding of what I am trying to do with the Newsletter articles and my beliefs about market commentaries in general.

I do watch the markets quite closely because I make my living trading. It is a rare day when I am not monitoring movements and looking for entries. However, I do not intend to make the Newsletter articles a regular weekly commentary on the markets. I reserve my market comments for paid subscribers in my weekly Summaries to them and generally try to make the weekly Newsletter articles relevant to trading principles, methods, or strategies. In the Newsletter articles, I try to talk about things I believe are important to traders in general and that might advance their trading knowledge and, perhaps, show some approaches that have worked for me over the years.

The subscriber pointed out that all the other market Newsletters he read did discuss the current financial plight in the U.S. As I suggested in my response, I am not writing a market commentary and have no intention of following the herd. What can one say other than things looked bad and bearish plays continued to be in order. No one, absolutely no one knows what the future will be so attempts by commentators to predict the future are nothing but pure speculation. We can come up with all sorts of rational, logical guesses about what the markets are going to do, but they are just that -- guesses. Just consider the jolt the news that Lehman Brothers was in trouble and the news of its subsequent bankruptcy caused. Until that news precipitated the further news that our whole financial system was on the verge of collapse, the markets may have seemed OK, if not great. I did have a subscriber a few weeks ago who commented that he expected another big failure after Bear Stearns, but he made no prediction of which financial institution it would be. In any event, no matter what the talking heads on TV may say and no matter what market commentators may predict, we must keep in mind that it is nothing more than speculation. If any of us knew tomorrow's news, we would be instantly wealthy beyond belief -- we could buy the winning PowerBall ticket.

One thing I will say with respect to the financial crisis is that I am absolutely sick of politicians. As usual, even in these dire financial times, they have directed their attention to posturing and finger pointing. Everyone but the guy speaking at the moment is accused of being at fault. How about being intellectually honest for once and taking some of the blame themselves. How about working together to serve the people rather than working to blame the other guy? I know it isn't just the politicians who created the mess, but, for sure, they helped. When are we the people going to rise up and demand that the politicians represent us rather than themselves. I know I have mentioned politics and that mere mention usually brings out a lot of political comment, but I would appreciate it if readers would restrain themselves from writing political diatribes or defenses of their particular party or candidate since we really do want to limit the commentary to specific trading issues.

Well, that is my "market commentary" this week. Going back to the issues of prediction, all of us have no choice but to trade in the present. The past, of course, is gone, and try as we might, we cannot know the future until it becomes the present. When we make a trade, it is now. Without insider information, we have about a 50/50 chance of success on any particular trade no matter what we think or believe or bet will happen. In my view, that is why it is critically important to successful trading to have entry and exit strategies in place before we ever enter a trade. In that way, whatever may happen, we have set up a position in which we cut our losses and let our profits run. That method and money management will take us farther as traders than the thought that we can predict the future. Remember, we can have 50% winning trades (or even less) and still be successful if we manage our money properly and have a disciplined strategy to cut losses and let profits run.

Good Trading!
Bill Kraft

September 27, 2008

Copyright 2008, Makin' Hay, Inc., All Rights Reserved

Back To Articles Home Page