|
2009 is now well and truly established with the hangovers from the festive break well behind us. The markets have not been able to easily shake the malaise that has been over them since the end of 2008. With more bad news constantly arriving and nations collectively holding their breath as stimulus packages are prepared and sent into action has the stock market continuing with volatility within a sideways range.
As a directional trader there is nothing more aggravating than a market that will not make up its mind as to what direction it predominately wants to trend. In chart 1 of the Australian Share Price Index there has been a clear sideways movement between 3300 and 3800. A case for bulls and bears exist on both sides but the case stands direction for the investor is still uncertain and traders do have the advantage of a hit and run mission.
Chart 1 – Daily Bar Chart AAI-Spotv
click chart to enlarge
A 500 point range translates into a profitable movement if we accept that we may be in the market for a few days rather than months, and that we are happy to trade the up and down runs (long and short) where possible. This is the mantra of the trader, the direction is secondary, but is there enough of a move to make it worthwhile?
I have met many traders recently especially the ones early on in their trading career and they seem to see ABC trades that do not make it too 100% and beyond a failure! This is not the case in a market that has been easy to get set in but a lot harder to hold for longer moves.
The Smarter Starter Pack outlines strategies to get in early keeping risk small and taking profits at conservative levels at 75%. These strategies have merit in the current climate – as mentioned many of the trades that have travelled to 100% or more require some creativity with placement of stops; as a one day reaction is enough to see the market move sufficiently to trigger protective stops then move on without you.
As we see a sideways market continuing the strategy of hit and run could be well held as long as you have a good grasp on the needs of managing risk and preserving risk and reward ratios.
It is far better to have the bulk of your trade’s profitable and retaining good profits rather than searching for the one trade to retire off. Trading right now is about setting up your run like it’s a marathon, you must be in the right place in the pack when it’s time to sprint, going early will leave you out of the race when all those good 150% milestone trades return to the market.
Aaron Lynch
Good Trading
|