Thursday, June 29, 2006

Master Trader Session 4 (retake)

Because of the technical difficulties I experienced on Tuesday night's Master Trader Session 4, I contacted Tricia Moore (my coordinator for the Master Trader course) and she connected me in to the Thursday night session. Fortunately it's taught by Matt Gildea, is on the same session this week, and I was able to rearrange my schedule to make it work.

Tonight's retake of the class was without technical problems. It was particularly interesting because of how the market reacted to the Federal Reserve's interest rate increase. You might even say it was a benefit to have the Tuesday night class have such trouble, just so I could retake it after the Fed announcement.

The rally the market experienced today did manage to knock out almost all good Bear Rally Short setups, so we didn't get to see too many live examples. However, it was really great to hear Matt's take on this event. It brings to light one particular advantage an individual trader can use: we don't have to trade. If we're not seeing any good setups for a trade, whether it be an Option Strategy, long or short position. We can wait for the setup to improve.

Tonight Matt gave a different example for selling short, and I think now that I've been exposed to it using so many different examples and in so many different concepts, I definitely get it. For your benefit I'll give tonight's example too. Matt decided that, while he was in town, he'd borrow Jennifer's super-sporty fun car. As Matt was driving around a gentleman in a limousine rolled down his window at a stoplight and said "I like your car, how much?" Matt knew from a previous conversation that Jennifer paid $30k for it. Since Matt is quite the entrepreneur, rather than explaining that it's not his car, he replies with an outrageous number: $50k. The man in the limo counts out $50k and Matt hands over the car. Now Matt is now short one super-sporty fun car, but he has $50k which he can use to purchase a new car to give back to Jennifer. He's expecting that he can go to the super-sporty fun car dealership and purchase a new fun car for $30k and he walks away with a nice $20k profit. Of course, it could be that Jennifer just happened to get a really great deal on her super-sporty fun car and the dealership wants $60k. If the dealership wants $60k Matt will have to come up with $10k out-of-pocket to cover the difference.

I covered most of what the session was about in the previous posting: Master Trader Session 4. This time it was just much easier to follow along because I didn't have any trouble seeing the visual cues for which Matt referred.

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