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.
www.TheStockBandit.com
Related Articles:
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
[…] Refine your game plan. Keep an eye on key market levels that would trigger a breakout or a breakdown. Have an if/then plan in place. This is so simple that it’s often overlooked by traders, but don’t make that mistake. If the indexes rally above key levels, then it’s time for you to take action. If the indexes crack key support, then it’s time for some short selling. And of course, if we remain range-bound, then it’s naptime! […]
[…] I’ve written a number of posts in the past about such topics as Trading Without Emotion, Trading your Personality, Goal Number 1, Trading Goals, Doing Your Homework, How Much to trade and even When Not to Trade. This series will be an attempt at going a bit deeper on these topics as well as tying them all together for the benefit of any trader, regardless of timeframe or trading experience. […]
[…] Blending Your Style With the Current Environment – Gauging how the market is behaving on your timeframe will allow you to trade aggressively or walk away when the time is right in order to improve your profits and limit your losses. Networking with other traders is a great way to keep tabs on several trading methods and timeframes, helping you to know what is working and what isn’t. Knowing how and when to apply your abilities and resources will help you reach your goals faster and easier. […]
[…] I’ve talked before about when not to trade, but it’s time for me to do that for a different reason - VACATION! So, I’ll be stepping away for the next week or so to put in some beach time and R&R. I love to trade and always enjoy staying connected to the market, but I think it’s a good idea a few times a year to get away and have some fun to recharge your batteries. The market will be there when I get back, and the trip will be a blast. Needless to say, there will be no posts while I’m away, but when I do return I’ll be starting my next series which came by request! […]
[…] At times, you’re going to be better off just not trading at all. For some, it’s the first few minutes of the trading day or the very end of the session. For others it’s when you have personal distractions, such as during the holidays when family is in town, or when a life-changing event comes along. Some traders just can’t stand to trade during the light-volume summer months. Whenever your least-favorite trading time happens to be, it’s up to you to identify it and avoid it. Shutting down the PC during that stretch will keep your mind clear as you avoid any confusion which would result from your trading activity then. You’ll be preserving your trading capital (Goal #1) instead of adding to your broker’s bottom line while your account stagnates. Take a trip. Go tee it up or scratch some things off your to-do list. Just find a way to take a break so that you don’t trade when you know it isn’t your ideal time to locate profits. […]
[…] And last but not least are those trades which haven’t yet proven themselves. These are the trades that deserve the least amount of credit, and a hard stop should be in place at all times for the full amount if these trades start to misbehave. With commission costs so low, there’s simply no excuse for keeping a position once it begins to cost you money. Cut that thing quick, get it off your screen, and re-buy it later if you start to see signs of promise again. In the meantime, kick it to the curb and look for a better opportunity (even if that means going to cash). […]