Build Cash Reserves

Posted on Dec 9 2015 - 11:55am by Dan

I’m letting my longer term market positions simply “ride” as I monitor them; while at the same time I have backed off from short-term trading for the remainder of the year.

With the extra time … I’ve had my mind on a bit of macro.  Not a discipline I would really recommend.  A) It isn’t necessary to understand macro in order to trade the markets and B) To even engage with Macro is a bit of an exercise in ego given the complexity of the system and the Grandmasters already in the space.  C) The difficulty in communicating effectively, my thoughts.

Overall, on that score, I am still forming my overall view.  So there is nothing to report really in regards to the broad economic picture. 

I say the preceeding, simply to explain why I have had my eye somewhat on overall equity valuations as of late.

However, given present valuations, and what I have seen from price in all of 2015 … I am beginning to believe that the move to make moving forward may be to raise cash.

For folks who are new (who we try to appeal to), they may misunderstand what this means.  Yes, I often state that new retail traders need to continually contribute capital to their account.  Doing so compounds their returns over time

But for the purposes of this discussion, I am not necessarily re-affirming that belief when I say “raise cash”.  Though that is part of it.

What we are saying, is that it may be necessary to raise the capital ratio of your accounts.

In other words?  Any positions that are lagging?  May need to be cut in order to raise cash.  Yes, obviously capital contributions will raise this ratio as well.  Take a look at volatility exposure.

I am not predicting the future.

I’m simply saying, it may be time to look to build cash.

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