Volatility has increased markedly since the sub-prime mortgage and resultant financial meltdown occurred.  The trick is to develop defensive trading strategies that are strictly adhered to.

Learning is continual:

1. The demand for a stock or commodity, as reflected in the direction of its price, is created by human beings and as with all energy, tends to move in cycles from valley to peak and back.  Minute cycles move within hourly cycles which in turn occur within daily, weekly, monthly, and yearly cycles.  The more frequent and intense these cycles, the more volatile the price and the greater the financial risk and/or capital gain.  Day traders focus on the "minute cycles", where I monitor end-of-day prices in the "daily, weekly, and monthly cycles" for opportunities.
    

2. Losses can never be eliminated but they can be minimized by following a structured set of rules.  An investor needs to control the two conflicting emotions of greed and fear by deciding in advance the type of changes that will trigger a sale or a purchase and react without emotion, when they occur.  Fear of loss causes hesitation to enter a market as the price may go against the position. Greed causes hesitation to change positions as the price may still have momentum in your favour. 
    

3. It is easier to double an investment through a series of small gains than from a single drawn out long-term transaction (buy & hold strategy).  
    

4. “When in doubt…get out…or stay out” is a motto of necessity.  It costs only a couple of cents a share in brokerage fees, but can easily save 50-1000 times as much before the price cycles back up (if it ever does…think Nortel).  Caution is used when entering a market but an early exit saves capital for another  opportunity where the signals are providing greater clarity.
    
5. Follow only large volume highly liquid equities or commodities that allow easy entry and exit.  A single investment is normally 8% to 10% of the portfolio balance and less than 3% of the daily average of shares or contracts traded.  For our commodity investments we usually keep a cash reserve of 3-4 times the margin requirements.  These extra precautions lower financial risk by adding a layer of capital protection. 
    

6. Earning a higher than average rate of return has nothing to do with luck or astrology or who you know.  It has everything to do with effectiveness and discipline.  To be effective one needs a structured approach to investment that is correct most of the time.  Discipline is needed to follow the structured routine and control the emotions when the investment strategy appears to be wrong.

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