Successful Trading In This Market

For those looking to swing trade this market, I think it is important to read Adam’s post from earlier today, as we are consolidating/coiling in a tightening range each day. Instead of trying to predict which direction this market is going to go (and I don’t care how good of a trader one says he/she is, you simply can’t know at this juncture the direction), the best approach is to probably wait for the triangle to break in one direction or the other.

Earlier this week I was building a pretty heavy short position (as much as 60% short) in the SPDRs’ (SPY). Monday and Tuesday the position kept rising against me, but Wednesday the bottom fell out of the market and I cleaned house. I didn’t hold it though as long as I could have since I took the gains early on that morning. But I don’t regret that one bit considering how fast this market turns on a dime. 

But now the S&P, over the past two days is wiping away a majority of the bear’s gains from Wednesday and continues to march higher off of new European rumors (a rumor a day keeps the bears away!). I considered reloading my short position in SPY, and the SharePlanner Reversal Indicator on all fronts shows this market at a reversal point. But instead of trying to get in early, I am going to wait for a break out of the emerging triangle on the S&P daily charts. 

Getting in before that just seems to be too much excess risk to take on. 

On another note, I wanted to provide you with some quick bullet points on what I think will help you quite a bit in this market and to extract gains consistently in doing so. 

• Don’t assume that things will continue to move in your direction – no matter how rosy the outlook is. Take the gains when you have them and move on. 
• If you are going to trade contrarian either A) Add a new position in increments (not all at once) because the market can move very quick against your position – use it as an opportunity to build the position up. 
• Otherwise trade in the direction of the market. Intraday seems to be the best charts for trading. Daily charts are marked by sudden and constant reversals. 
• Shorten your time frame for this market. Gains overnight quickly evaporate and there is no way to know what the latest rumor will be in the morning. 
• Finally don’t be greedy – this market is killing those who are looking for the homerun and rewarding those who are diligent and take the gains when they have them. 

I hope you all have a great weekend and find some time and spend it with the family (and watching football too, of course).