Today was an interesting day with many momentum moves both up and down. The trick recently has been not to be locked into just one dimension, thinking that you can intraday buy and hold. Certainly with the benefit of hindsight there were situations that I could have played better and held the trend longer (BXP short at the high of the day for instance) but for every one of those, there was 20 more on the other side that if I held on to I would have been killed. Todays volatility really showed that if you had a quick trigger finger, you were successful. The opposite is true if were still thinking that you can predict what the market is going to do and hold fast to your decision hoping the trend will continue.
I don’t know which direction the market is going. I don’t know what a stock is going to do. However I do know that when the indexes show huge green or red candles, then I want to be on that side of the trade (or in the inverse ETFs). It really boils down to getting into the flow of the market, paying attention to how it reacts and trading the probabilities.
Like the ocean waves, the market momentum can be ridden and taken to profitable conclusions. Be aware that the waves will end when the force behind them slows. Be prepared to jump off one and on to another.
Check back to some of those market snapshots I posted. If you where experiencing them in real time then I’m sure you felt the power behind them. All you need is to have a good trading stock under you and you can grab nice profits. It’s all you need to do. You don’t need to know why. You don’t need to know where the RSI, VIX, fib lines are. If you wait for those behind the times indicators to tell you to jump, then traders like myself are going to thank you for your buy order when I am selling the 10 minute pop and going short.
Have zero expectations about what is going to happen next. If you have traded on the probability of something happening instead of “I know what’s going to happen next” then you don’t have the emotional baggage that comes with getting attached to those trades that turn into losers. I approach it thinking only some sort of movement will happen and mark my point at which that decision will be proven wrong. If I’m wrong I take the loss. If I’m right then I manage the trade looking for the momo to stall, get out and take the profits the trade presented. Next.
If you’re getting beat up in this sort of trading environment try simplifying your edge down to price and momentum. Drop all the other indicators. Momentum is like the ocean tides. You can’t swim against it so you might as well use it to propel you faster to your destination.
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5 comments:
I was thinking the same thing today; let the market be the market because it's like an ocean we can't really control but try out best to follow it. I've focused my studies on technical, but after getting burned and boneheaded, I realized the emotional and mental impact of the market has to be balanced as well. Keep it up. Good job.
Agree, I've been overdoing it lately looking for THE technical that will be my trick to good trades.
I no longer think it exists. All that truly exists is price and momentum.
I need to shift my thinking and be better at spotting momentum trades and reading the candles.
This blog is really helping, thanks for the updates.
I didn't like the lack of volume today for most of the day. I limited the amount of trading because of it. I'm no where near as nimble as you Scott. Even when I see big huge massive bars I'm typically late to initiate the trade. My avg. trade lasts 3min. Because of the chop I've gotten so used to quick scalps with huge size, size much to big for me to handle still. In out, limit the risk. I'm working hard to adopt your style. Take the probability (star smaller instead of all in) and it either works or doesn't. If it works, add, and let it play out until it stalls.
scott,
I thought you might find this article interesting
http://www.washingtonpost.com/wpdyn/content/article/2009/01/30/AR2009013001164.html. Looking for momo stocks when they come along. I'm going to keep an eye out for fun and maybe some money.
Guys, Virtually 100% of stock sites on the web are focused on charts, indicators and predictions. I post the charts to illustrate my technique. But none of that matters if you can't trade your plan without being affected by fear and greed. How many opportunities do you see the markets present every day that you didn't take advantage of? Dozens? Hundreds? Ask yourself why. The charts were there, the markets did their thing.
I recommend spending whatever time you currently use looking at charts and trying to predict the future, and instead use that time to work on your mental trading package. I've posted a few articles on here that should help you out. Sure, it's boring and not glamorous but it gets you out of the fantasy world of thinking how rosy your world will be if only a stock would do a certain thing that you predicted.
Groggy - There is no holy grail indicator. There can never been because of the human element that makes up the market. It's unpredictable. It would be better to go to a, niteclub, football game, or preschool and observe human behavior in action.
Blue - SKF SRS traded 20 million + shares, that's high enough volume. Who cares what the overall market is doing.
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