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Do you want to play Chess or Checkers?

Chess Or Checkers?Last week’s article on the US Presidential election prompted some interesting feedback! The odds on President Obama winning have come in a touch. Now paying 4/9 (was last week sitting at 4/11 on). 

Over the years, I have seen many traders and investors alike. Fall foul of the notion of trading from the heart.  Success in markets is all about the process. There will be one set of circumstances. That faced by the market should President Obama be re-elected. And another if he is not.  It is this, which is the focus and what your trading processes need to tackle. And, as a consequence. Where the money is made. No emotion – just simply a set of circumstances from which to make decisions.

Gold and oil have found few friends in recent weeks, with oil, in particular, learning to live in a new, sub-ninety dollar range.  Why has this been the case when geopolitical tensions. In both the Middle East and the Far East (China and Japan have resumed their dispute over the Senkaku region and islands)?

Prices have traded lower on the back of an increased aversion to Risk assets. As a consequence of the deteriorating global outlook.  The recent US earnings season was litter with global giants delivering disappointing earnings – a clear reflection of the slowdown in global growth.  Equally in Europe, Spain has continued to suffer, entering its second year of official recession.  China has been slowing too – albeit still over 7% annual growth. What is your view for Oil?

I heard a great quote from a colleague I have immense respect for, just yesterday.  The analogy was that through being educated, skilled and disciplined, your approach to the market should be like playing chess – lots of pieces with lots of strategies – the ability to go forwards, backwards or diagonally and do a most things.  Unfortunately, most retail investors are stuck, having to play checkers – with only the ability to do one type of move – buy and hold.

So here is one strategy for you re-oil – Are you bullish or bearish and how confident are you in that view?

Odds are in the current market – neither – as there are many variables.  How about “I think its going to move and by a fair bit, I just don’t know the direction?”

How do you trade that kind of view – simply, through an options strategy called the straddle.

 

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