The Tax Cheapo

As a trader, you may want to have two hats handy. Depending what the market is presenting to you, you may have to trade with two different personalities. If the market is in a serious trend momentum you are going to have to be a cowboy for your entry. If you are looking for dips to enter you may not find any. If you do see a dip in an up trend, you will have to jump in or the price may quickly move away from you. If there is a range bound trading market you may want to act like an actuary rather than a cowboy. An actuary is the guy who develops the life expectancy tables for life insurance companies. He is like an account but without the effervescent personality.

If you do use this dual relationship you will realize the risk and the opportunity will be different for the two situations. If you want to maintain a level risk exposure you can make an adjustment in your position quantity. If you trade or invest conservatively with 1000 shares or 4 futures contracts you may wish to cut the quantity in half for the more aggressive position. Again if you have to chase a price on your entry because of an the established momentum you must recognize you may have to bear with a retracement that is outside your normal stop loss discipline. This is more palatable when you have reduced your position size. You also will no doubt have a higher exit goal for this high flyer, which will be the opportunity side of the position.

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