Hi Anthony,

Thanks for reading and commenting to the blog.

In trading a block of stock, say buying it, a trader will often sell some. In selling a block, they will often buy some. It's the net result that's important. This goes on all day, every day. They do it so as not to make their intentions too obvious. So why make a statement like, "So, let's pretend.."? These tactics go on all the time; I just want to point them out when they appear to me to be affecting the market. It's all educational because it makes people think. The more they think; I assure you, the less they'll follow.

ok, the correct play for a beginner is to think like a merchandiser. If you own goods to sell, you want to sell when the crowd comes in. In the market, that's selling into strength. On the other hand, you want to buy your merchandise when nobody wants it. Same principle applies in the equity market.

But what I try to say in this blog is that you have to have a strategy in place before you think about tactics. At various times, I gather up the evidence (including RSI) and make a decision to accumulate or distribute long positions. Making that decision is my strategy.

If I'm going to distribute, I then look at each long position and start to think tactics. If I think a particular stock is going to move higher or sideways, and I want to keep it in the portfolio for a while, I'll write a short call. If I think it's going to go down soon, I'll sell it, or most of it. If I sell, I'm hoping to do that into a rally.

Say the stock is GM and my cost is 28, and I decide to sell at 35 after 3 months. That's a 25 pct gain in 3 months, or 100 pct annualized. That's well above my objectives, so when I sell, I could care less if GM goes up another 10 pct because I no longer own it. The fact is I already met my objectives in that trade, and I try to do that on every trade. If I can do that on 80 pct of my trades, I'm ok -- if I keep my losses on the others to be small, or at least smaller than my average gains.

Stocks are prices, and you're dealing in percentages. If you own a bar, you don't care whether you are dealing in Guinness or Bud. You know what kind of numbers you need to get every day in order to stay in business. Same for traders.

I think beginners should just try to get the right approach before thinking about the "right" system. In some markets, RSI or MACD, etc, is more effective than others as a trading tool. Elliott Wave is sometimes very effective, and sometimes not.

But the more you know, the more likely you are to succeed. That's why I write about almost every subject I can think of. Some of it rubs off. :-)

/Bill