No question the market has turned south as of late. The long-term outlook looks promising, and the short term looks treacherous. What’s a trader to do?
While it is possible to trade the higher volatility in the market and even enter the downtrend by selling and buying put options, another way to go about this market is to sit it out. This can be very difficult for traders, as often one feels that they should be making money daily. The truth is in trading often your income comes in rapid windfalls, avalanches of gold, and waterfalls of moola. Other times weeks can go by treading water. The Professional is disciplined enough to wait for good hands, then extract maximum profits.
When the volatility index(VIX) travels north of 20 whipsaw days are abundant. That’s because there is no clear decisive direction the market is headed in, and if any, when in doubt, sell! You are not alone in a directionless market. Join the crowd.
There’s nothing wrong with having a preset target price to begin entering long positions. Set some alerts on your trading platform for some outrageous low prices. That is the time to buy. When the trimming goes through the fat, muscle and hits bone, its time to buy.
“Be greedy when others are fearful, and fearful when others are greedy.”
Warren Buffett
If you are briefly sitting it out it’s a good time to reflect on the market. Perspective is much easier when you have zero trades on. Everything appears without distortion. You’ll look at the markets with complete objectivity, which should always be your goal.
What it also allows you to do is observe with curiosity only, the masses making foolish trades. From your executive center PFC vantage point, you only watch them and wait for the best time to take advantage of their trades based on primitive reactions buried in our neurology.
Profits in a whipsaw market are often short lived. If you choose to sit this one out, be ready like a good hunter to pounce on your ticker of choice. Like a big game hunter often it’s best to let the average probability trades go by and patiently wait for the big one. That’s the one you’ll talk about years from now.
Enuf said.