Walk Away
Why do casinos ply you with free drinks, free meals, free shows and other "extracurricular" perks? Because they want you to lose. The carefully orchestrated kabuki dance of smiles and pleasantries to make you feel like a valued guest is nothing but a smooth con. Casinos know that the longer you stay at the table the greater the chances of you losing money. The free giveaways? Just chump change in comparison to the real prize - all the cash in your wallet and your bank account.

While trading and gambling are different, (a subject for another column) speculative markets can act very much like casinos. The similarities can be striking especially between degenerate gamblers and habitual day traders both of whom participate more for the "thrill of the action" rather than the pursuit of the profit.

History is littered with stories great traders who did not have the discipline to "walk away from the table" with Jesse Livermore perhaps the greatest example of a man who lost as many fortunes as he made.

The speculator's greatest strength is his freedom NOT to participate, yet that is precisely the right that most traders never exercise. Over trading probably destroys as many accounts as bad selection and bad money management skills.

I bring the subject up because of this week's live trading session. This past Wednesday I did not make money for the first time in four months. The markets were choppy, I wasn't reading them well and I was too obsessed with front running the European data to notice better setups elsewhere. I forced a EURGBP short trade at 7931 and waited for EZ data to print.

Up to this point I had done many things badly, but when the data printed I finally did something right. I immediately got out of the trade at 7933 losing only 2 points on the trade. Why did I get our? The EZ data was not nearly as bad as we had expected and therefore the reason to be short euros disappeared. If you look at the charts from that timeframe you'll see that EURGBP catapulted to 7960 and higher soon afterwards.

This Wednesday I didn't make money, but I did something almost as good - I didn't lose money. I walked away from the table. Those of you who trade with me know how valuable that was.

Now let's take a look at this week's trades.