A Simple Trading Note

After Friday's rally, which I had described as unsurprising, we had a rally on Monday which can be aptly described as surprising. S&P had moved down on Friday and at one time Singapore Nifty was down by almost 1%. Nifty opened down but quickly recovered and traded in the green for most of the day.

 My two systems which all of you who read this note daily would be familiar with, did what they normally do i.e. nothing. STT is long from 5393 levels. The STT sell trigger has moved up from 5306 to 5443 and I will cut my long and go short at 5443. This will make my book 100% short on the Nifty since LTT is already short. It becomes a buy only above 5610.

Yesterdays note on Risk was very well received by a lot of you and I must thank you for your feedback which is always welcome. I am unlikely to ever write such a long note again unless I again feel strongly about a subject. But I do need to add this. I cannot for the life of me understand why volatility should be equated to risk. This insistence on attaching a mathematically derived number, based on past data, is the genesis of all problems in investing. After all anybody would not mind volatility on the upside. A stock that gives a return of 40% with a volatility of 40% is preferable to a stock that gives 20% with a volatility of 15%. A far simpler method would be to look at the total leverage in the book and worry about the consequences of even an extremely extremely unlikely event- say a  10 sigma event. If these consequences are too disastrous for the  portfolio to handle and essentially means a loss of a substantial portion of the Initial Capital then one has too much Risk/leverage.

 After yesterdays note, I need a break from all serious stuff. I am going to watch the Wimbledon matches tonight. Nadal vs Del Potro should be good. Hopefully Del Potro springs a surprise! 

Current Position

STT: Long since 5393. Will cut long and go short < 5443

LTT: Short. Will cut short and go long > 5610.

I do not know why I get this feeling that the LTT longs will get triggered and that the Nifty is on the verge of a big break out towards 6000. This is not as per any system but just a gut feel.