3 Winning Trades, and Why Cash Is King

You only have to do a very few things right in your life so long as you don't do too many things wrong. -- Warren Buffett

So far 2009 is my best trading year since I started 15 years ago, but I am currently 100% in cash. I am all in cash right now for several reasons. First, I am already up about 10% this year on my trading account in less than three months, even though I have never committed more than 20% of my capital away from cash at any time this year.

That means that my trades have made about a 50% return on the capital that I've committed in just the past few months. I want to protect those gains and not make mistakes that will create losses.

Second, the recent Fed action of printing $1.2 trillion has dramatically changed the game in ways that are not yet clear at all. I want to see signs of an emerging trend in response to this major shift in the market.

So far all we have seen is the knee-jerk short-covering and commodity rally due to increased inflation expectations and market liquidity. I used that strength to exit my last long position -- at a very substantial profit -- in ProShares Ultra DJ Crude(UCO Quote), which is an exchange-traded fund (ETF) that tracks oil futures.

Third, my trading and investing philosophy for this current treacherous environment is similar to a baseball player who waits for a few fat pitches rather than feel like he has to swing all of the time. So far this year, I have seen three of these fat pitches and was able to make money on all of them.