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Hard To Make Money Trading
Author: Ravi Prakash (info)
Website: http://www.optionstradinglessons.com/
Posted: November 26th, 2007 at 10:28 am EST
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When people first hear that I trade for a living, they assume I am using “OPM” (other peoples money). After fixing that perception, the next perception is “Easy Life Making Money”. This is where I fail to convince them that it is very hard work making money as a trader. I suspect most do not believe me. Especially when they read about the fat bonuses on Wall Street. It took me a long time, hard work and tough choices to be where I am today doing what I like. As someone once said “You have to do what you like in order to someday like what you do”.
As you and I know things are rough right now trading. The Feds have put themselves into a corner. The latest minutes show that they think the economy will slow down, but inflation will remain in check (latest numbers say the price of Thanksgiving has gone up around 8%). They also think the credit and sub-prime markets could get worse. (Surprise, do they want a medal for this assessment?) They also insinuated that there will be no more rate cuts. This is where I think they have cornered themselves. I think we will see another rate cut in December and probably another 1 or 2 more cuts in 2008. They are going to be forced into addressing a potential recession. Forget the weak Dollar. Sooner or later the European and Asian central banks will have to buy the Dollar so as to minimize the chances of importing inflation into their own economy. Or the less attractive option is for Asian countries to un-peg their currencies to the US Dollar and let the value of their own currency move up.
The one day action on Friday does not count, because it was a half day and more importantly the junior desk jockeys were in charge on Wall Street (the big guys were busy eating) and volume was low. I think we are about to see a little more selling in the coming week or so. What could improve sentiment is if Holiday shoppers spent a lot of money using their Visa and Master Card. I know that there is a good chance we will not see the 15,000 on the DOW that I predicted. However, I am going to show you a chart below that shows the DOW has a lot more room at the top in the coming year or two. For now I see the bottom at around the 12,500 level.
A lot of chatter about Oil prices taking a hit down to the $80’s soon. I actually see Oil prices moving up some more from current levels. I also do not see $100 a barrel as a real resistance. When it moves up it will slide right past that number, just like it did with $70, $80 and $90. Long term, Oil is going much higher because alternative energy is still a drop in the ocean and will probably remain a drop for some time. Humans tend to react only when they come face to face with danger, usually a few minutes too late. The world has known for some time about the facts of fossil fuel and potential future outcomes. Yet we are still only paying lip service to this issue. A few hybrid cars on the road will not solve the need for Oil by big industry. Given current technology, I see a big revival of nuclear energy in the coming decades.
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