November 03, 2008 at 1:17 pm | | Comments 0

Are Conditions Shifting For Your Timeframe?

The recent market volatility has been providing numerous opportunities for day trading if you’re quick on the draw, but it hasn’t offered much for swing trading. Those who prefer a little longer timeframe and trades which last a few days to a few weeks have grown accustomed to finding sloppy daily charts which lack well-defined technical entry and exit levels. Sound bases have been difficult to locate in the past few weeks, to say the least. As a result, either you’ve been forced to shorten your timeframe and day trade more, or you’ve sat on your hands in cash and waited patiently for quieter times to come along.

It’s a fact that risk must be taken in order to profit, but our ability as traders to manage those risks is of utmost importance. Anytime those risks cannot be managed appropriately, it’s not the ideal time to be trading. That certainly describes the recent price action for those who prefer longer timeframes than a couple of hours, but the good news is that it won’t be that way forever. Further, it brings up an important question…

Are Conditions Shifting For Your Timeframe?

Fortunately, it looks like we just might be entering into a quieter time, although getting there won’t be an overnight event. Volatility has been running extremely high, and it’s finally starting to back down. That isn’t to say that uncertainty is disappearing, because this market still has much to deal with (election, earnings, economy, etc.). However, we’re likely to start seeing smaller day-to-day moves in the weeks to come as a result of the declining volatility – if it continues to decline. That will not exclude the occasional jaw-dropping rally or gut-wrenching selloff, but it should make it easier to locate better bases for trade candidates, as well as improve our ability to set prudent stops when protecting the downside.

Day Traders

If you’ve been day trading, I hope it’s been good for you lately. There has been no shortage of intraday opportunities in recent weeks, offering quite a bit for traders who have the ability to move quickly. There will continue to be good conditions for day trading going forward, so don’t turn your back on that approach even as things settle down further – it’s great to be skilled in more ways than 1. Instead, just be sure to adapt accordingly so that you aren’t overtrading or forcing the issue once volatility contracts.

Swing Traders

To those of you who are swing traders and have stood aside in cash as opposed to taking trades with elevated risk, congratulations – you’ve made a great decision. That willingness to step aside when conditions aren’t suitable for your primary trading style has kept you objective while simultaneously preventing losses while you were waiting. You’re now poised to resume your trading without any emotional baggage, unlike those who lacked patience during the past several weeks.

Whatever your trading style, it’s always important to remember that the market is perpetually in motion and conditions are always prone to changing. Stay on your toes and watch for even subtle clues that a shift might be coming – it’s a great habit to be in.

It’s time to get back to doing your homework and working the charts in search of setups. We could start to see some nice opportunities surface soon, and those who are digging diligently for them will have a definite edge in the days ahead once they arrive.

Trade well out there!

Jeff White
President, The Stock Bandit, Inc.
Swing Trading & Day Trading Service

[tags]Stock Market, Day Trading, Stock Trading, Investing, Swing Trading[/tags]

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