The concept here today is that the markets have been moving sharply and if you’re lucky enough to be in those trades, my opinion is that you need to be very, very proactive to adjust your stops because they can zig and zag very, very quickly. What looks like a very large unrealized gain for you can turn around very quickly and end up being wiped out. And I say wiped out, it doesn’t mean like it’s a huge loss, but it can be frustrating when you’re up quite a bit in a short period of time and you sit on it and don’t adjust your stops to protect your gains or at least a good chunk of them and the market reverses on you. the market is absolutely trading on headlines anymore and so it’s hard to predict what those headlines are going to be.
So if I were you, one way to do this is to set alerts not necessarily stops. So if you’re long or short something and it moves strongly in your favor, you get an alert and at that moment in time you adjust your stops very, very quickly. And again, don’t be all upset about getting stopped out. That’s not necessarily a bad thing. If you buy something at $20 and it goes to $25 within a few moments. And you don’t protect your capital, it trades back to $21. The top might be in for a while and then you’re sitting there having missed the opportunity. So it’s one thing to be in the trade and missed the opportunity. It’s another thing to be on the sidelines and missed the opportunity. So if you’re going to take the risk and this type of market environment, trade very small, I would trade less frequently and I would set alerts to tell you when certain price levels are achieved.
I don’t want to say price targets because that’s kind of ego, at which point you get the alert probably on your smartphone and then you can adjust your stop in the marketplace. This is probably the best way to handle it because it keeps you out of your ego, keeps you out of prediction. And that’s a healthy way to look at things. Let the market do the work for you. Now, if you are a longer term trader where you’re holding things for several weeks, I don’t think now is the time to start becoming a day trader. I think now is the time where again you be proactive and you protect your capital. Trying to become another trader under duress is enormously difficult to do.
I can say over 30 plus years, I have never seen anybody do it with great aplomb. Maybe you’ll be the first, but you have to play the odds and play the percentages. If you have a certain style and that it works and that when you do it, you are expressing a trading edge. That’s what you want to stick with. Trying to become another person because the market has changed, puts you in a schizophrenic way of thinking and then you start losing money and then you’re like, “I should have never done this.” And then you have regrets.
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