Ample Opportunity
The Qs are down over 1.5% on
the day as we approach midday due largely
to — what else? — more “not quite out of the woods” earnings
estimate cuts in tech-dom. And while some of the key reversal triggers we’ve
been eyeing for days occurred amidst the FOMC chop and via the overnight gap
down (more on that below), the new 13-minute downtrend has provided ample
opportunity to trade a few pullbacks along the way.
As I mentioned in yesterday’s
column, the momentum of the bounce off daily support appeared to be a bit
suspect, and it didn’t take much to send longs scurrying for cover again. Yet
those who were alert to recent market action and columns likely took the profits
as they occurred and considered textbook trailing stops in the context of key
13-minute or hourly trend supports, both of which gave way yesterday afternoon.
Wednesday March
20, 2002 12:15 P.M. ET
The market
environment over the last few weeks has been quite interesting to observe from a
trader’s perspective and has, in my view, created a bit of a challenge for the
intraday trader. Decreased intraday volatility with insignificant fakes
sprinkled with larger moves and triggers which occur via overnight gaps or
suddenly out of intraday consolidation can make the pickings rather slim. So how
do we cope? Here are a few thoughts:
-
Reduce share
size, frequency and expectations for the time being. Consider it a bit of a
vacation until the market biorhythm reverts back to intraday volatility,
which it undoubtedly will. Market rhythms never stay the same for very long. -
Consistent with
reducing trade frequency, consider shifting your focus to a larger time
frame. For example, many of my recent columns have been focusing on the
daily chart as a result of consolidations on the smaller time frames. -
Remember there
are approximately 250 days in a trading year. Trading income can often be
sporadic in nature (does a real estate broker sell a house every day?) and
that there will always be times when the market isn’t conducive to one’s
style. Above all, and as I state in my QQQ
Trading School, don’t
have some daily quota you feel obligated to fill, as it will do more harm
than good. Should the market not “fit” your style for two
consecutive weeks, keep in mind that still reflects a mere 4% of the trading
year. Corporations report results quarterly largely to smooth out the impact
of minor income irregularities, so why shouldn’t we do similarly in our
business?
Knowing when to back off, and more
importantly having the discipline and comfort to do so, often separates
the minority survivors from the majority castoffs. I personally view trading
income solely as buying time, which can be a tremendous asset when the market
isn’t providing optimal trading conditions. Anyone can have high-probability
profitable trades offset by trades taken with less clear triggers, yet by simply
focusing on reducing the latter, you may be surprised as to the impact on your
longer-term P&L.
Good Trading!
P.S. Be sure to attend my
live
workshop tomorrow at 5:00 PM ET. I’ll be discussing my QQQ trading strategies
in detail with Larry Connors and showing you how I apply them in order to making
a living trading the QQQs.
Click here to register now.