Back in September, I got into a discussion with John Raymaker of Second Life Trading Strategies. At the time, he had been doing a lot of buy and hold type trading, and I was doing a lot of day trading. Since then, I’ve been busy with other things and the markets have tightened enough so that risk of a market move became greater than the expected profits between the bid and ask spread. So, I set aside my day trading for a while as I worked on other projects.

However, recent events caused me to step into the day trading markets again. There is an old saying, “Buy the rumor, sell the news” which fits well with trading in Second Life. On November 19th, Lindsay Druart announced that All Bank Activity Halted Until Further Notice. Others were quick offer their opinions, and Maelstrom Baphomet issued a STRONG SELL which sent share prices tumbling.

Had LNL been unable to recover the stolen funds from Linden Lab, or if this had of been some fraud by Lindsay to deal with other crises at the bank, this would have been good advice. As I spoke with various people, I heard numerous people talk about their dislike and distrust of Lindsay. This brings me to another important rule of trading, keep your personal emotions in check. Try to be sure if your dislike of someone is clouding your ability to see clearly what is going on. I tried to speak with Luke Birdbrain during the crisis and found his responses antithetical to what a good communications officer should be doing, and it almost led me to abandoning my trading strategy.

However, I looked at the event and thought that there was a reasonable chance that everyone was over reacting to the crisis, so I started buying up shares of LNL. Here, I will add another great rule from trading, don’t venture more than you are willing to lose. I’m a pretty small investor. I only bought a couple thousand shares.

Yesterday, the news came out that the funds had been returned by Linden Labs. LNL share prices quickly rebounded. I sold out my position for about a 15% gain. I probably could have held on a bit more and gotten 20% or more, but that illustrates another important rule of trading, get in and out when you are comfortable, and don’t try to hold on to the last minute, lest the market turn against you and you lose your opportunity.

I am no expert at trading, but these are some simple rules that people should keep in mind as they trade in the financial markets of Second Life. Keeping them in mind may make trading in Second Life more enjoyable and more profitable.