Online day trading in an uncertain market

Beware the promises of online day trading vendors: in an uncertain market, strong risk management controls are necessary. Today was a case in point, the culmination of many days of a market that can't seem to make up its mind.

Is the subprime debacle going to tank the banking sector, or more broadly the U.S. economy?

Or do falling stock prices in the sector mean there are cheap buys out there?

Or are the longs simply the short sellers being squeezed and covering?

Reading the business pages is like getting advice from someone hedging their bets. On the one hand, it is bearish, on the other bullish. Or as we used to joke in law school, the one hand giveth, the other taketh away. The advice and analysis is internally inconsistent, giving mixed signals and utterly confusing, if not ultimately meaningless. That is when one reads the news from a trader's perspective.

Today was a difficult trading day, no doubt, but it was gratifying to read in Sunday's New York Times about the Japanese housewives who have made so much money trading currencies on the sly, at home. On one hand the invisible work has created opportunity for profit-making while playing the dutiful role, the article reported. And online trading makes up a huge portion of the currency market, apparently. But at the same time, some who rang up huge profits also crashed along with the Yen market. In other words, they made money as long as the market went one way and when it changed, they could not or would not read the signals.

Risk management was lacking.

In a sense it's easy to make money in a bull market. Just place all your bets long. But when the market goes two bars up and one down, or two down and one up, in any time frame, and all the time frames are misaligned, or when you a used to a bear market and one day all the old assumptions are out the door, now that takes flexibility. No wonder one trading book I am reading compares day trading to the Japanese samurai code. One must be prepared to face the full extent of the risk at all times. That is why risk management is so important.

So even though today was a challenging day, whether it involved profit or loss it brought a great teaching. It is true that reward is proportionate to risk; it is also true that knowing, and accepting, all of the risk is a key to the kind of yogic or samurai detachment in the battlefield between the bulls and the bears.

And that can only be learned by experience.
___________
Sponsorship
___________
The Law Offices of Michael H. Cohen offers corporate legal services, litigation consultation, and expertise in health law with a unique focus on holistic, alternative, complementary, and integrative medical therapies. The law firm represents medical doctors, allied health professionals (from psychologists to nurses and dentists) and other clinicians (from chiropractors to naturopathic physicians, massage therapists, and acupuncturists), entrepreneurs, hospitals, and educational organizations, health care institutions, and individuals and corporations.

Michael H. Cohen is Principal in Law Offices of Michael H. Cohen and also President of a nonprofit organization exploring legal, regulatory, ethical, and health policy issues in the judicious integration of complementary and alternative medical therapies (such as acupuncture and traditional oriental medicine, chiropractic, naturopathic medicine, homeopathy, massage therapy, energy healing, and herbal medicine) and conventional clinical care. Michael H. Cohen is author of books on health care law, regulation, ethics and policy dealing with complementary, alternative and integrative medicine, including Healing at the Borderland of Medicine and Religion, Complementary and Alternative Medicine: Legal Boundaries and Regulatory Perspectives (1998), Beyond Complementary Medicine: Legal and Ethical Perspectives on Health Care and Human Evolution (2000), and Future Medicine: Ethical Dilemmas, Regulatory Challenges, and Therapeutic Pathways to Health Care and Healing in Human Transformation (2003).
Sponsorship Sponsorship
___________
Health care and corporate lawyer Michael H. Cohen has been admitted to the Bar of California, Massachusetts, New York, and Washington D.C. In addition to qualifying as a U.S. attorney, he has been admitted and to the Bar of England and Wales as a Solicitor (non-practicing). For more information regarding the law practice of attorney Michael H. Cohen, see the FAQs for the Law Offices of Michael H. Cohen. Thank you for visiting the Complementary and Alternative Medicine Law Blog.
___________