Impatience - and overtrading

Being an impulsive and impatient sort of animal, Flash Rabbit has a propensity to overtrade. In between doing other, more lucrative, things he did that today and as a result didn't make very much money at all- although 90% of his calls proved to be correct, in all but 2 of them he got fed up waiting for them to work out and cut them off prematurely. The sensible thing to do would have just been to make one or two calls and let them work through. He failed to observe some golden rules of trading - 1. don't overtrade because every time you get into a position there is a cost and a risk/reward involved and 2. don't get frustrated - cool off and be technical and detached and 3. don't have too many positions at once, especially when you have very limited resources.

Today the market lurched back and forth - with a mixed to nasty bag of indicators but the fundamental grimness still very much intact. Flash Rabbit takes an extremely negative view of the current prospects - even if oil temporarily drops back, the inflationary drivers will still be there, and we haven't even seen the end of the beginning of the fallout from the current inflationary push; plus the banks aren't really doing much lending at the moment, and borrowers are defaulting all over the place, which will tighten the screws on the economy even more. Flash Rabbit's hunch is that the banks are in much the same condition as many of their overstretched customers, with devaluing mortgage books and a load of complex bonds/derivatives that they can neither sell on nor pay back, many of which are becoming totally worthless as the market unwinds. So they are hoarding money - scrimping and saving just like the householder - refusing to lend, and thus making things even more difficult, gumming up the supply of money even more. Add to this the impact on margins of inflation followed by the skidding screech of central banks raising interest rates, (and the banks nursing their losses from all their long positions in equities that got punked out), wherever and whenever that occurs, and the most almighty meltdown could ensue. The banks might be bankrupt. For this reason Flash Rabbit has taken out a long position on Euribor, even though in typical Flash rabbit style he isn't entirely certain what Euribor is, thinking that banks are inevitably going to want to make it more expensive to lend money to each other for the time being.

HBOS's {estimated?} £1 billion writedown is only the start of something much bigger. Flash Rabbit hates the banks because they merrily pumped up the inflationary balloon, lent out all their profits to increasingly dodgy propositions (or paid bank bosses very fat bonuses), and failed to look beyond the horizon to more uncertain times. With this in mind he put a quick short on AMBAC today - a little after the event but he doesn't expect their lives to get any easier this year and he expects plenty of shockers to come from the financial sector, and more dodgy CDOs to rear their ugly heads.

Flash Rabbit was planning to talk about his remaining long positions but there aren't many of them left. So that will have to wait until next week. Instead here's a rundown of his greatest hits and misses so far:

Flash Rabbit’s biggest hits

A long bet on Apple from 13700 to 15500 – if only he’d run his profits he’d have been an even more smug rabbit by now.

A bet on oil at 119 a barrel to rise at £1 a point – came out of this due to sheer nervousness and tight pants/sweaty armpits at £121 a barrel for a £200 gain but if only Flash Rabbit had let that one run he’d have made some very serious dosh, by his standards, by now.

Short FTSE from 5950 – a shame that he didn’t manage 6200 or thereabouts but that one is still running and looking very profitable indeed.

Flash Rabbit's biggest misses

Some crazy and stupid messing around with oil – dangerous and explosive stuff that has lost him over £300.

More recently, shorting the EUR/JPY cross only to see it soar up about 300 ticks. In fact Flash Rabbit wasn’t stopped out of that one (sensibly, he’d set a wide stop) but was so pissed off and frustrated that he closed the position for a major loss, only to see minutes later that the market dropped down by about 75 ticks. That was probably the stupidest thing Flash Rabbit has done to date as he might now be on the verge of seeing a profit from that trade, had he just left it alone.

Generally dealing in too many instruments and markets simultaneously only to fly into a blind panic when the market turns. That reveals his rank amateurism. However what is interesting about this trading business is that it is an interesting way to do self psychotherapy, provided that you are ruthlessly honest about exactly what is happening at any given moment. It's certainly taught Flash Rabbit a lesson or two about the consequences of impulsiveness and impatience.