Saturday, May 06, 2006

scale trading

Scale Trading is a disciplined, mechanical approach to buying low and selling high. It is based on the economic law of Supply and Demand, built on the premise that a physical commodity has an intrinsic value and, therefore, will not likely become valueless.

However, Braden Glett warns that while "scale trading can be a viable strategy when applied to commodity futures, mostly because commodities have inherent value meaning that they cannot decline to zero value. ... [but] individual stocks can and do become worthless on occasion, which is one of the main reasons why scale trading is such an unfit approach for stock investing."

[link from scalenet, 4/24/06]

* * *

Note: Scale trading is an averaging down strategy, which is what Bill Miller does relentlessly.

No comments: