Morning Market Thoughts
Good morning. We’re getting a slightly lower opening this morning, which isn’t surprising in light of Apple’s (AAPL) poor earnings results. I don’t have much to say this morning that was not mentioned in last night’s Strategy Session. One mistake that so many traders make is that they believe they must trade every day. You see all the traders on financial TV and in print. And because they are talking about stocks, options, and trading, you get the impression that they constantly trade.They don’t. Stop and think about it — if they were trading so much, when would they have time to write articles or make TV appearances?
Good traders trade when the trading is good. There are certainly good opportunities each day — opportunities that, if spotted, would lead to very profitable trades. But there are two problems with this notion. First, what is your timeframe? If you are looking for a “good trading opportunity”, you are probably looking for good entries — that is, being able to buy a stock very close to support (or sell a stock very close to resistance). This type of opportunity lends itself to good risk definition because you can place a stop quite close to your entry without risking getting stopped out unless you are actually wrong.
But the other problem is this: What is your desired timeframe for holding the stock? Are you really a daytrader? Is today’s “opportunity” an opportunity for anything more than an intraday bounce? (Nothing wrong with this…but I can tell you that most traders aren’t looking for those…and most traders don’t have the time to sit through the grind of daytrading. Chances are that you are being sucked in by movement, and then wind up in a trade with no defined exit.
Have a plan that’s based on self-awareness. What type of trading do you like to do? Do you prefer holding stocks for a week or two…or a month or two? Or are you a real investor who plans on holding something through the daily and weekly ebb and flow and instead allowing the stock to climb the “wall of worry” as it drifts higher?
You’ve got to know yourself before you can know how to trade. If you don’t know yourself, you’ll see opportunities everywhere. Most just won’t be YOUR opportunities. And when you get caught up in the wrong opportunities for your style of trading/investment, then you’re more likely to miss the opportunities that truly do suit your preferred style of trading.
See you in the forum.
Dan
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