Wednesday, October 26, 2005

Pain and Profit exist side by side

It is true that pain and profit exist side by side. What begins in great pain often ends up in great pleasure. What begins in great pleasure often ends up in great pain.

It is true that trading the RUT brings great profits, but one must endure great risk to achieve those profits.

Thus I have decided that for swing trades, it is better for me to use the NDX rather than the RUT. To be sure, the profit potential is less, but the lesser volatility of the NDX compared to the RUT and the ability to use a smaller notional exposure allow me to control the risk much better. Trading is all about risk management. At the end of the day, your trades must be commensurate with your risk profile, account size and emotional makeup in order for you to be in full control.

Risk first, then reward.