Are You An Antsy Trader? Try This…
First
let me say that I’m glad I didn’t have to write a column yesterday,
since I may have actually been tempted to say something nice about the market.Â
Today’s action took care of any such temptation. After approaching the lows of
the recent trading range yesterday morning, the market turned and rallied in the
afternoon. It actually got near the highs of the range. Today…back near the
lows. In good markets rallies last more than 2 hours. This isn’t a good
market. Don’t take undue risks.
One thing I often stress in my
column is that I believe it is important to always take the trades that meet
your criteria. Don’t pass on a trade because you’re afraid the market is going
to go lower (or higher). If a stock meets your fundamental criteria (assuming
you have some), and then sets up in a tradeable pattern and triggers an entry,
that trade should be taken. Concerns about the market, your recent success
rates, the weather or anything else should not keep you from taking that trade
(although there is nothing wrong with reducing position size and risk when you
feel caution is warranted). By the same token, I believe the opposite of this
scenario is also true.
Patience is extremely important
in trading. There will be times when the market is triggering so many trades
that you can’t hardly keep up, and there will be times when nothing will
trigger for days on end. When nothing is triggering, nothing should be traded.Â
Trade setups and triggers are used by traders to provide them a statistical
edge. Even with the statistical edge provided, it is difficult for most people
to consistently profit. Good luck trying to make profits consistently without
an edge.
Several years ago when my main
focus was daytrading, I began tracking the “reason†for my trade. There were
several setups I used to enter my trades and they all had a name. (For
instance:Â Landry Trend Knockout or Connors Single Window)Â Every trade I put on
would have a setup attached to it. In this way I could run gain/loss reports
over different time periods by strategy. If I entered a trade that wasn’t one
of my standard setups, I would call it a “gut feel†trade. Any trade that
didn’t fit the specific criteria of one of my setups had “gut feel†attached to
it.Â
It didn’t take long for me to
realize that my “gut feel†trades were costing me quite a bit of money. I would
run reports and see that strategy 1 made me x amount, strategy 2 made me y
amount, and “gut feel†cost me as much as the two of them made combined. With
this knowledge, it became very easy to avoid taking “gut feel†trades. Every
time I had to assign the “gut feel†reason to a trade, I felt like a complete
dope. Even if I made money on it (rare), I knew it wasn’t worth the risk.Â
Before long, all “gut feel†trades disappeared. Not only wasn’t I taking them
anymore, but I wasn’t even tempted to take them. I’d rather wait until
conditions improved than throw my money away.
If you’re one of those traders
who finds themselves getting antsy and wanting action when nothing is happening,
I would suggest you begin tracking the reason on all your trades. I doubt it
will take very long before your antsyness is cured. (I know — “antsynessâ€
probably isn’t a word. But I make my money trading — not writing. Therefore I
can make up any words that suit my purpose.)
Sector Action
Some of the most notable and
divergent sector action is taking place in the Drugs and the Semis. If you peek
at the charts you will notice that the Drugs are breaking out of a Cup & Handle
pattern on the daily chart, while the Semis are breaking down from an Inverted
Cup & Handle Pattern.
Best of luck with your trading
(or sitting on your hands not trading),
Rob
P.S.
Click here for the Hanna ETF Money Flow
System.