Using my 'scalded cat bounce' pattern for low-risk trades

All good traders look for high-probability/low-risk trades. That way, you can have more losers than winners, yet still be ahead of the game. John C Burford explains how the 'scalded cat bounce' idea, can help you come as close as is possible to that ideal.

All good traders are looking for high-probability/low-risk trades. That way, you can have many more losers than winners, yet still be ahead of the game. It's the ultimate way to follow at least the first part of the age-old advice: "Cut your losses short and let your profits run".

As most traders who've tried it will know, this is easier said than done. But I have found that by using my 'scalded cat bounce' (SCB) idea, I can come as close as is possible to doing just that. But what is an SCB?

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John is is a British-born lapsed PhD physicist, who previously worked for Nasa on the Mars exploration team. He is a former commodity trading advisor with the US Commodities Futures Trading Commission, and worked in a boutique futures house in California in the 1980s.

 

He was a partner in one of the first futures newsletter advisory services, based in Washington DC, specialising in pork bellies and currencies. John is primarily a chart-reading trader, having cut his trading teeth in the days before PCs.

 

As well as his work in the financial world, he has launched, run and sold several 'real' businesses producing 'real' products.