PLEASE READ THE DISCLAIMER AT THE BOTTOM OF THIS PAGE WHICH APPLIES TO ALL CONTENT IN THIS BLOG AS WELL AS ANY OTHER MATERIAL FROM WE ARE FUTURES TRADERS LLC. READING ANY CONTENT BELOW CONSTITUTES AN AGREEMENT BY ALL READERS THAT THEY HAVE READ AND AGREE TO ALL THAT IS SET FORTH IN THE DISCLAIMER AT THE BOTTOM OF THIS PAGE.
Thursday, May 06, 2010
The one thing you have to master in trading is knowing when to play and when to step back. I love periods now of no trades like I will have today. Why you ask would that be, don't you have to make money every day?
The answer to that is NO and that idea has lead to the death of many a fine aspring traders. You have to know when the odds are the most favorable for you and when they are not. Moves most always go further than you think they will and you will always leave money on the table. Get used to that and get over yourself. We are extending down now early this morning and may completely just rollover. We could fall thousands of points in the Dow at any time just simply because this whole move has been bogus. However, the odds of pressing shorts when we are deep into a retracement in an uptrend is not a good probability play. Could we be beginning another panic selloff? Yes we could but even then there were bounces to enter on. Chasing momentum down against a trend is a slippery slope and I do not recommend it unless you are very nimble or a day trader.
Even if we have topped, we are going to get a very sharp bounce here that could come at any moment especially since we are now into some general support zones on the weekly charts. Had we been with the trend, I would have held all my shorts longer. My plan though due to the strength of this trend was to be pretty nimble on them once I got some decent moves. I followed my plan, made some good profits, now it is time to sit and be patient and wait to see if a bounce happens. You can argue that we have many of the same issues that Greece has and that is actually correct. However, that does not mean stock prices will go down more. We have seen the disconnect between stocks and economics that can at times take place in the last year. Do not assume stock prices will follow economic stories, they rarely track them how you think they logically should.
One of my favorite things to do even when I have taken losses is to take a few days and step back from the markets to see what is really going on and take a fresh look. Sometimes when you just stare charts to death all day long every day, you will actually press too hard, make bad trades forcing things. That will also lead to getting ticked off and missing a few you should not have. At times it helps me to try and run this like I would any other business in spite of how different it is from anything else. You pursue the practices that work and do them over and over. You eliminate the practices that yield bad results. You stay focused on the goals of the business. You create a plan and you follow it.
Do not get tied up in emotion, it will kill you in this business.
Looking at the chart above, here is what I see. The two trend indicators are going down sharply confirming the short term trend down. They are ahead of price indicating a "possible" exhaustion move is here. The longer term trend indicator still shows this as a buy on a pullback. I used to just buy these pullbacks on the close once the %R went into the buy zone where it is now, but I don't do that anymore. I wait for the market to start moving back in my desired direction before doing that. It helps dodge the waterfall moves that this could be.
Short term what I am hoping for is a bounce of a couple of days that I hope will result in the longer term trend indicator at the top rolling over some which would confirm all three measures being together. For this to happen we are going to have to go down more before bouncing. All three of these rarely come together like that but it is on my wish list. If this happens I will load the boat on the short side of things. If this does not happen I will look for this move down to setup some divergences to get long. Either way this means I will be sitting on my hands today and probably tommorrow. Sometimes this is what you have to do. I have made good money this week so if nothing else happens that is ok even though I would certainly like to add to that if I could. No hurry, let the game come to you ( annoying cliche but it does apply ).