– After a lull (chop, quiet market) a new set of waves (setups, breakouts) will appear. Often, the first wave is not the best wave. Don’t get too excited because you see an OK wave (false breakout) after you haven’t seen any good ones at all. Often there is a better one behind it (look for confirmation).
– If you catch a wave ride it as long as you can, until you see yourself heading into shore, rocks, or other people (end of trend).
– Get into position and be ready to go for a wave so you’re ready to take a good setup once it appears. (focus, attention)
– Once you see a wave you want, commit to it to getting on it. Paddle as fast as you can to get enough speed to go with the wave. (have a plan, preparation, confidence with entry, execute with precision)
– Don’t try to catch the wave too early, make sure it has built up enough energy to carry you along (overly eager entries, wait for confirmation)
– Don’t catch the wave too late or else you’ll catch it on the top of the wave and it will throw you down into the seabed (buying tops or selling bottoms)
– Don’t try to surf every wave (over trading), just the ones that look easy to catch and worth the energy required to catch and ride it (capital preservation, high probability trades)
Any other surfers out there have some surfing/trading parallels? – If there’s no waves (setups) be patient and enjoy the water and sun. A setup will come. If not, then it wasn’t meant to be (sit on hands day) or not a good spot (market). Come back tomorrow or find another spot. Don’t try to make something of nothing.
From Richard Russell:
Primary trends can be likened to the power of the ocean tides. Build a sand castle against the ocean tide, and the first wave will wash your castle away. Build a cement wall against the tide, and in a matter of years the cement wall will be reduced to sand and rubble…primary trends, one way or another, go to completion. Or to put it another way, a primary trend will go to completion, no matter what..I said from the beginning, “let the bear market fully express itself.” One way or another it will express itself regardless of the wishes of Washington or the Fed or the Treasury. Interfering with the primary trend will just drag out the situation and make it worse — it will be turning a menace into a Frankenstein…According to Dow Theory, neither the depth nor the duration of a bear market can be predicted in advance. In this bear market, the Dow could fall to 4,000 or 400. I honestly don’t know the answer. In my experience, primary trend tend to carry further than anyone expects. I do know this — yesterday the following broke below their June lows — the Dow, the Transports, the NYSE Composite (which includes ALL NYSE stocks), the S&P Composite, the NASDAQ and the Russell 2000. Any way you look at it, that’s bad action. Maybe just as bad, new lows on the NYSE surged to 164. Hundreds of stocks are breaking down, and even more are hovering just above their 52-week lows. The lower depths of this market are opening up like a giant graveyard. It is said that in a big bear market, stocks return to their original homes — Wall Street.”
Can it happen? Yes. Does anyone know for sure? No. Follow trends.