So much of trading is learning to position yourself for profit; and to position yourself for profit means to protect your existing capital.
That means when you buy a stock, you have to look at the bigger picture – you can’t go about it blindly without taking into consideration the market’s overall direction.
The same goes for shorting too.
Let me explain:
Yesterday, I was long CVX, UPRO and RHT – the latter two were profitable for me. The market was rallying most of the day, even with the FOMC Statement release. Then 3:30pm hit – which is usually the notorious time for buyers to ramp the market higher. Instead the market dropped hard and fast. As this was unfolding, I discovered the change in character for the market and how it was rejected at price resistance and the 20-day moving average at 2085.
I dumped all three positions, two of them for profit. Essentially I managed the risk on the trade and in doing so, I managed my capital too.
It set me up to be in a position today to profit from the market, as there was a 21 point dump at the open today. I bought near the lows (not at the lows, but near it as in $63.29 on UPRO).
Because I didn’t force my will on the market and chose to position myself to profit from the market when the opportunity arose today, instead of being stopped out of three positions this morning, I came in 100% cash and put the capital to work when the time was right.
Now here is the other side of the coin. In my Splash Zone Chat room this morning (30 minutes after the market opened), I told people this morning that, “It seems to me that we are getting a lot of shorts and scared buyers selling…could setup for a squeeze or a bounce later today if the market takes a notion.”
That did end up being the case, not because I willed it or was prophetic, but because the market decided it to be so, and I was in position to profit as a result.
But the bigger issue was the emotional shorting that was taking place at the open. When the market is down five straight days, that is not the time to start loading up on short positions in fear of missing a bigger market correction. Instead, you should be positioning yourself for the dead cat bounce. Doing so is the only prudent thing to do here.
So much of trading and even life in general is about putting yourself in the right position for when opportunity comes knocking. If you hold onto old ways and old trades that clearly are not working, the trades you could have had will blow right past you.
If you are interested in joining me in learning how to trade or simply receiving access to my chat room and all my real-time trade alerts, you need to sign up for the SharePlanner Splash Zone. With your subscription, you will get a Free 7-Day trial that you can cancel at any time at no charge to you. But give the Splash Zone a try, learn what it means to be profitable, and you’ll never regret it.
With The Splash Zone, you will get my low risk and high probability trade setups that no other trading service can offer.
Start Your Free 7-Day Trial Today!
