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Long or Short Position

  
  Education
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Do you need to long or short the market today? If you’re a day trader, forget this question and ignore this post. But if you’re a positional player, perhaps having a holding period of at least 5 sessions, the above question is necessary.

Let us ponder.

1. What are your chances of success (initiating a trade that will eventually turn into a satisfactory profit)? Since you’re going to hold for several sessions, possibly facing several opening gaps along the way, might as well establish a position that you’re going to sleep with. So, unless you get the price you’re comfortable with, stay aside. Particularly practical with long holidays.
2. Is this your original plan? Are you trading according to your overall strategy or purely intraday impulse? I don’t think its very difficult to tell the difference. If you trade base on intraday impulse, you get a little more excited than usual.
3. ‘I have been dormant for some time, and I seriously need to do something’. The degree of this itchiness varies according to individuals. If you come from a day trading background, you’ll have a tougher time adjusting. After all, the mindset of ‘If I don’t do anything, I am not going to make anything either’ is in every human’s mind. Think about it. Position trading involves much passiveness, so technically, after establishing a position, you are dormant in some way.
4. ‘I am sure this is a solid short term opportunity’. I think this is the mother of all trading sin. Of course, this does not apply to day traders. But if you’re now a positional trader, stay a positional trader. Learn to let go the small fish.

Control

  
  Education
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Control-Stocks rise when they are being bought up. Stocks fall when they are being sold off. I always ask myself “Who is in control. The buyers or sellers.” Control changes often and in different time frames you can argue that one party or the other were merely taking a rest.
I generally buy stocks that are going up and short sell stocks that are falling. But I also play the sharp reversals that happen if there is a huge gain or drop as I know gravity will take effect and profit taking will occur. The smart way to day trade is to be on the winning side be it buyers or sellers.
As a small fish in a big ocean I can only ride on the coattails of the big boys who actually move the market. My job as a trader is to recognize when trend or momentum is starting to kick in and climb aboard. Short term trends or momentum are the only thing that I trade. The old cliche’ “the trend is your friend” is so very true.
I only trade in the direction the chart is telling me to. Maybe you can watch the talking heads on TV blathering on or read about how great some stock is without forming an opinion on it. I can’t, so it’s safer to insulate myself from any and all information. I actually don’t care what, where, why, how or when a company does what it does. Who am I to be able to process all this information? I do know that when a stock is rising, more people are buying it than selling it and vice versa. Seems easier to me to only look at and believe the chart and trade accordingly. If I have preconceived notions about what the stock may do, I will not be able to cut my losses when the chart tells me to. I will hold on to the dream all the way to the poor house. Always trade with the trend.
Cutting your losers is one of the most important aspects of trading.Unless you have an unlimited pile of money to fritter away you must admit you’re wrong and exit the trade. If you don’t you will not have enough to remain in the game. End of story.
Letting the winners run is also important. They are winners after all and that is all that counts. Adding size (buying more shares) can turn little winners into big winners.
If you disregard any or all of these 3 simple rules you won’t be around trading very long.

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