An Excerpt from the Timely Trades Letter.
The market has been in a tight trading range for two weeks.
When the market is in a tight range most stocks do not move much
if they hit their trigger points so as noted in previous Letters,
tight ranges like this are best left alone. Trying to force trades
when the market is in a tight range will generally just churn the
account. These tight ranges do not last long, and are often followed
by nice tradable moves. When the market moves out of the range, I
will be actively trading in the direction of the break.
When the market is resting in a narrow trading range, instead of
swing trading I spend some time reviewing lessons I have learned
during the last twenty years. Some of the important ones are:
• There is no magic to trading. It is about putting the odds on
your side and not trading unless they are. This sounds simple,
but it takes a few years to get good at it. And like most things,
while you are learning it is best to work with someone. The
learning time is long because traders have to see how things
behave in different markets, and learn to trade the odds and
not their feelings. Read this paragraph again.
• The market will not adapt to us, we must adapt to it. Swing
trading in a trading range environment presents higher than
average risk. Traders can compensate for higher risk market
conditions by trading fewer positions and using smaller position
sizes. Failure to do this can be costly.
* Successful traders adjust their trading style, trading system,
holding Period, and exit strategies based on the current market
conditions. This is a process I refer to as market adaptive
trading. It is better to Learn how to adapt to the market rather
than running from one trading idea to the next looking for the
next super system. Being frustrated that the market is not doing
not what you want often leads to losses. The market does what
it wants, we just need to adapt to it. This will take time to learn,
be patient. Read this paragraph again.
* As a trader I do not care which way the market moves, I can
make money either way. It is important to be able to quickly
react to whatever the market does and not be emotionally
attached to any particular choice.
* I cannot control what the market does, so I have a plan for
whichever path it picks and then trade the plan.
* Successful trading is not about predicting what the market is
going to do. It is about knowing how to react to whatever it
actually does.
* Always be thinking about taking and protecting profits.
* If you are not sure what to do, exit the position. There will be
other good setups.
* You do not need to trade every day. Let the setups come to you
and take the best ones. When the market is moving there lots
of good setups to trade. If there are few setups, or most are
failing, then listen to the message of the market.
* Do not rush in, there is plenty of time to get into a
tradable move when the market changes. If a trend
is worth trading, then by definition you do not have
to be in on the first day.
* Never enter a position without a plan for exiting.
* Do not count your chickens before they hatch. You do not
have a profit until you are back in cash.
* Never trade with money you cannot afford to lose.
* Trading is not a team sport. Stay away from chat rooms and
financial TV. Seek the truth, not support from others with
your point of view.
Steve Palmquist a full time trader who invests his own money in the market every day. He has shared trading techniques and systems at seminars across the country; presented at the Traders Expo, and published articles in Stocks & Commodities, Traders-Journal, The Opening Bell, and Working Money. Steve is the author of, “Money-Making Candlestick Patterns, Backtested for Proven Results’, in which he shares backtesting research on popular candlestick patterns and shows what actually works, and what does not. Steve is the publisher of the, ‘Timely Trades Letter’ in which he shares his market analysis and specific trading setups for stocks and ETFs. To receive a sample of the ‘Timely Trades Letter’ send an email to sample@daisydogger.com. Steve’s website:www.daisydogger.com provides additional trading information and market adaptive trading techniques. Steve teaches a weekly web seminar on specific trading techniques and market analysis through Power Trader Tools.
Terms of Use & Disclaimer:
This newsletter is a publication for the education of short term stock traders. The newsletter is an educational and information service only, and not intended to offer investment advice. The information provided herein is not to be construed as an offer or recommendation to buy or sell stocks of any kind. The newsletter selections are not to be a recommendation to buy or sell any stock, but to aid the investor in making an informed decision based on technical analysis. Readers should always check with their licensed financial advisor and their tax advisor to determine the suitability of any investment or trade. Trading stocks involves risk and you may lose part or all of your investment. Do not trade with money you cannot afford to lose. All readers should consult their registered investment advisor concerning the risks inherent in the stock market prior to investing in or trading any securities.
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