Discretionary Traders: You Must Recognize This
Short and sweet today.
The S&P and Dow both dipped below recent support today
before reversing to close near even. Another shakeout and fakeout provided by
Mr. Market. The S&P and Nasdaq remain near the middle of their trading ranges.Â
(Geez, I’m sick of the phrase “trading rangeâ€.) The Dow is near the bottom of
its trading ra—-, er, uh,…consolidation. In short, I’m having a hard time
finding an edge right now that would tell me which direction the market is most
likely to go. When an edge is not apparent, it is normally better to wait until
one appears rather than to aggressively trade.
Patience is one of the most difficult attributes for many
traders to exercise. Discretionary traders must be able to recognize when their
strategies have an edge and when they don’t. When they don’t, they must trade
very cautiously and be careful not to risk too much. This is not an issue for
mechanical systems traders because they are automatically taken in and out of
the market by their chosen system. In other words, if an edge doesn’t exist,
they are not in a trade. Discretionary traders, on the other hand must be able
to use their skills to realize market edges. As I write this, I don’t believe
trend following strategies have much of an edge in either direction. I will
therefore preach patience.
Don’t get chopped up trying to catch a trend that doesn’t
exist. Wait for your edge to appear, and then pounce.
Best of luck with your trading,
Rob
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