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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