"Mama said there'll days like this..." is a wonderful line from a great old R&B song from the Shirelles. The song holds out the hope of future love--just not today. While the song is about teenage longing, it fits this careening news-driven market. So, what's a poor trader to do? Especially, now, when the market stretches 200 points in one direction, only to bungie back another 200 points in the opposite direction. Here are a few of my "survival" tactics for today's market.
1) While we may painfully suffer in this environment for several weeks, know that it will eventually end. Better and easier times to trade will come along, so remain calm.
2) Keep things simple. While I'm always trying to simplify both my market thinking, and market trading, times like now require the simplest, easiest, and most consistent tactics.
3) Keep things short-term. Now, more than ever, think in 1, or 2 day segments if you swing trade (I do very little day trading.)
4) Keep size small, and profit expectations in check. Never have more than 50% of your account at risk.Go flat at the end of each week; start each week new.
4) Sell strength, buy weakness. Use short-term indicators (my favorites are 2-day RSI, and 2-day FI).Selling early is good--don't hang on for the last bit of profit. Don't chase morning gaps, either.
5) Psychology is extremely important in this type of market. It's far better to book a small profit, than to let it slide into a loss. Once you start chasing losses, you can do severe damage to your account. Grind it out.
4) Distrust support--sell resistance. Use stops!
5) Concentrate on the indexes--NAZ, S&P, DOW, Russell. My pick is the NAZ, and I concentrate on the 2X ETFs-QLD for long positions, QID for short (inverse ETF).I also trade GLD & SLV and their inverse ETFs, DZZ & ZSL. However, I will trade an individual stock for Spike if I really like the set up.
6) Concentrate on 1 or 2 reliable set ups. I like to flip index ETFs using 2-day RSI & 2 day FI, or I use a highly reliable short-term consolidation breakout system. In both cases, I look to take profits in 1 or 2 days as opposed to a more usual 2-4 day period.
There you have it--a few tactics to help traders get to the other side of this Greek mess. Eventually, follow through will return, and the great intra-day swings that cause our stomachs to wretch will be over.
I'm posting the weekly and daily charts of the Qs. The weekly is worrisome--we may be putting in a lower high. Notice that each upthrust has been on lower momentum. The daily has formed a dynamic triangle and could make a sharp move in either direction--odds tilt downward to a retest of the 200 EMA.
3 comments:
Thanks for great post - having a blank day, what is "FI"
Peter
Please clarify "Never have more than 50% of your account at risk."
Peter
Peter,
Sorry, "FI" is my shorthand for Alex's Force Index--I use it in the 2-day version. Combined with the 2-day RSI, I have a great short-term view of momentum, which leads price.
During choppy markets like this one, I cut my risk way down. So, I rarely have more than a 3-4 positions on at any one time; and never have more than 50% of my account exposed to market risk. Once in awhile, I'll hedge my longs with inverse ETFs;
but since I try to be flat at the end of each week, I'll just play smaller.
Basically, I'm looking for 3-6 good short-term trades a week and will settle for an average of 2-4% profit per trade. This seems to keep me out of harm's way most of the time, and keeps my equity curve growing. I admit that this is easier to do the larger your account size.
Grant
Post a Comment