The Coolest Guy in the Roomnews. Your basic modus operandi is that once it reaches an extreme
you begin to fade it because then you’re going to get some retrace-
ment and rebalancing, which provide you with profit opportunities.
A: Yes, absolutely. That’s what I have made my money doing.
Q: Of course, that sounds a lot simpler than it is because finding
the top or the bottom during those times is much more difficult in
real life. Timing is everything.
A: Timing is everything and I also understand that I am unlikely
to get the best entry when I first take the position. I almost always
expect to add to the position when I take it.
Q: So you are always a scale-up, scale-down trader. Your first
trade is almost always probative, right?
A: Yes, I firmly expect to add to it anyway. It increases your
chance of success a great deal when you understand that because
trying to make perfect entries and book them—if that’s what it
takes for you to make money—then the market’s going to take
your money and you’re going to lose.
Q: On a day-to-day basis that’s a great strategy. However, we
all know that it comes at a very, substantial cost because in a one-
way market that kind of a scale-up strategy can just decimate your
profits. You can lose sometimes a week’s worth of profits in one
trade, right?
A: Yes, that’s true. But I wouldn’t say it takes a week’s worth
of profits. It certainly can be hard on you for one day. We’ve
experienced some of those markets right now, where the Dow
wants to go up to all-time highs and the rest of the market kind
of creeps up with it. If it trends, it’s very difficult to make money.
However, we are not in that sort of trending market very often.