How To Make Money Over The Long Haul
I’m
still seeing very little in this market that would make me
bullish. Breakouts have been scarce, and most stocks that have managed to break
out recently have had feeble follow through, if any. Volume hasn’t been any help
as accumulation/distribution remains heavily skewed towards distribution. If
you’ve been waiting for a good bounce to sell into, then you’re still waiting —
unless you think good bounces last an hour or so.
The sharp selloff lately has left many intermediate-term traders heavily in
cash. They’ve stopped out of many of their long positions and may not have
initiated much on the short side due to the lack of pullbacks there have been
lately. This can be very difficult for some traders. Like an addicted gambler
who can’t watch a football game without a little “action†on it, some traders
feel they always need to have a position. You don’t.
To make money over the long haul you need to be able to recognize when the
market environment is favorable to your particular strategies and when it
isn’t. If it isn’t then there is nothing wrong with waiting it out until the
environment improves. Bet big when the odds are in your favor and small or not
at all when it seems as though the odds are stacked against you. If you have
little or nothing going on right now due to lack of setups, then enjoy it! Take
some time off. Get in some recreation. The market is cyclical and it won’t be
long until your methodologies begin working again and you won’t feel as able to
take the time off. You can also use down time to study trading books, learn new
methodologies or bone up old ones your already familiar with.
If you are going to continue to trade actively throughout this correction then I
would say the best bets continue to be on the short side. Just be cautious
right now. The market will bounce at some point, and some of the biggest
bounces tend to occur during the steepest selloffs. Like any trades, shorts are
easier to profit from when we are able to set tight stops, and the easiest way
to set tight stops is to wait for a pullback.
Best of luck with your trading,
Rob Hanna