One of the biggest edges the screen based trader has is his option to choose NOT to trade. The professional screen based trader’s job, regardless of the time frame he chooses to trade, is to identify opportunity and trade only when an opportunity with a positive expectancy presents itself. In any time frame, there are relatively few such opportunities. It is extremely liberating when a trader progresses to the point that he is quite comfortable sitting in front of a screen and doing nothing all day, or all week if necessary.
Auction Market traders are opportunists; we look for specific opportunity. We have defined what we look for in our trades and we all have different favorite set-ups and/or Market Conditions we prefer to trade. If you aren’t sure what’s going on don’t trade. No one can trade every squiggle in the market successfully. In general, the less you trade the more successful you are likely to be. This is true regardless of the time frame you trade. Condition yourself to look for very specific Market Conditions that lead to good set-ups. No, it is not easy.
You have to be different to become successful in this profession. I’m not referring to “odd”; I am referring to using some basic logic and reasoning that leads to the recognition of the fact that hardly anyone makes money as a trader. So doesn’t it stand to reason that a healthy exercise might be to find out what all those people are doing and NOT DO IT. You don’t have to think differently, just THINK period! It’s a low bar.
Which brings me to today, Wednesday, May 1, 2013. The FOMC minutes are going to be released this afternoon. The non-farm payroll report is going to be announced this Friday. The stock indices are trading at or near yearly and all-time highs. This is a Market Condition strongly conducive to a lot of random price behavior that has a higher degree than usual element of noise. Specifically, out-of-the-blue sharp drops and equally sharp retracements are likely to be commonplace through the end of this week. If you choose to trade in this environment understand the Market Condition and be prepared for “whippy” trading. If you are very experienced and well-capitalized you may be quite comfortable in this immediate environment. You also may be well-capitalized and experienced and also wise, and choose to leave the next few days to Hal 9000 and friends.
There is infinite opportunity; you have a finite amount of capital. THINK about it.