HedgeFundLIVE.com — Just read John Petak (who now sits on a desk at Hedge Fund LIVE)’s section titled “Don’t Fight the Tape” in the book “Electronic Day Traders’ Secrets.” Petak started his trading career doing overnight trades. In his interview in this book he mentions that overnight trading, while anything can happen to the stock and the economy overnight, actually carries limited risk.
This idea of limited risk in having overnight positions works when you’re following the rule of not fighting the tape- buy strong stocks, short weak stocks (the trend is your friend!). When you follow that rule, the odds are definitely in your favour and the wind is at your back. Then you should have some comfort in taking those positions overnight and you’ll be able to sleep at night.
I couldn’t help but relate that idea to sports. Yesterday I watched the first half of the Chicago Bulls vs. Orlando Magic game. At the end of the first half, I believe the Bulls were up by 14 points or so. I felt pretty comfortable getting up from the TV at that point. I didn’t find out the final result until this morning, and sure enough, the Bulls won: 89-81. (Yay.) The Bulls were on a tear throughout the 2nd quarter and the lead they had over Orlando at half time made me more assured such that seeing the final score this morning didn’t come as much of a surprise.
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