March 13, 2006 at 10:03 am | | Comments 8

The View From the Hammock

Trading requires lots of “knowing when’s.” Knowing when to buy is as important as knowing when to sell. Knowing when to trade big is as important as knowing when to cut back on your position size. And knowing when to be active is as important as knowing when to walk away from the screens and do nothing.

The market is in a tough spot right now from a trading standpoint. There are not a lot of good setups for initiating new trades, and that leaves only two choices: either lower your standards for what comprises a good setup, or be willing to sit on your hands and wait for better opportunities.

On Tuesday and Friday of this past week, I chose to stand aside. I had no swing trading candidates in my newsletter. They just weren’t there!

There were a few reasons for this. First of all, the market is stuck in a trading range and it lacks a trend (this alone leaves fewer setups with so many stocks stagnant). Secondly, there were no stocks that jumped out at me after running my scans and searching the lists that I couldn’t live without. And finally, I’ve been seeing fewer stocks find follow through out of good bases.

As a result, I was able to set my entry orders and stops and tend to other matters during those two trading days (like taxes – UGH!). While I would have much rather been trading heavily and watching things run, the odds were that dips would be bought and rallies would be sold. It turns out that’s about what we got.

When you run your screens and you come up with nothing to trade other than some decent-looking patterns, be willing to pass entirely. The trading year is long, and there’ll be PLENTY of times to be active in the market.

Sacrificing quality trades for quantity seems to lead to losing streaks for me (and commissions for my broker), so I’d personally just rather preserve capital, manage existing positions, and get some other items crossed off my to-do list. I know that the market conditions will improve, and when it does, I’ll need my full ability to focus!

Jeff White
President, The Stock Bandit, Inc.

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  1. A great revelation to traders llike me. I think sitting in front of the screen some how forces the trader to take trades where there may not be any edge. Transaction costs will ultimately catch up with you when you take large no of impulsive trades

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