In this article, I will explain why the cliché’, “be careful what you wish for”, pertains to trading in this environment with increased movement and volatility. With the expansion of the wider than ‘usual’ movements in what seems like any and all financial instruments across the globe and from talking to our international clients a lot more than usual, it seems more and more traders and ‘swing traders’ (I do both) are having increasingly more trouble holding on to profits and sticking to their disciplines. If any my previous quotes/clichés/lessons etc. make any sense or not, I can accept that. I am just trying to paint a clearer picture and mostly repeat things that I have heard through the years; but if I hold any one of them, and it is my mantra which I trade by and actually came from arguably the biggest COFFEE trader in the country (whose life is predicated on the weather as well) and it is this…”the markets are greater than us all”.
Much like how fishermen respect the ocean. I am no fisherman but I have heard that some of the best fishing is before and after a storm. he most seasoned fishermen anticipate a storm, prepare through experience, have a plan and once they are satisfied, they count their bounty. Only the novice and desperate ones stay out longer than they should…It’s the same as traders. You have to take what you can get and be humble…….personally, that what gets me up every morning, and I STILL am, as excited as a rookie. My peers at Tradeview see this and so do my clients. You can do 99 things right throughout the day but it only takes 1 thing to give it all back and that’s why I go back to my “the markets are greater than us all”. We are only as good as our last trade.
As mentioned above when volatility, like it is now, has increased and has stayed volatile longer than usual. I actually think this is more detrimental to traders even though there is ample opportunity to make more money. Some reasons are obvious and some are not but what I have found by talking to some of TradeviewMarkets retail clients is that many are making more money and having wider P&L swings than usual. Bravo.
Our traders and clients now have a higher win % than they usually do (this comes from timing the markets because when you are right you are right with all in wide futures moves). What is alarming is that their average LOSER far outweighs their average winner. Why is that?
Common trader mistake…..sell winners and hold losers. I fell into that trap late last week which upset me so much that for the first time since I can remember, I had to take a couple of days off. (Side note: had nothing to do with losing $ on the trade which was nominal….symbol was $XON on NYSE by the way). Last Thursday, I bought a bunch of biotech stocks, much like many did which were due to ‘bounce”…and they did. Some stocks I bought WERE not holding up the best and in fact were beaten down the most and I urge to take a look at these charts ( HZNP HRTX ESPR NVAX BIB IBB….XON). So in these conditions, when things turn, as they did, you really never have enough. So they bounced and violently. Except for one and the stock was $XON which some have dubbed the AAPL of the biotech world and down 50% off its high from just a couple months ago. I have no idea what they do by the way and it didn’t matter because the price action told me it was a dog. As I unloaded my stocks mentioned above, I made a crucial mistake. Instead of adding to my winners, which were nominal in size, I sold them and sat with a large position in $XON.
I won’t get into it because now I am getting upset again but what happened to me happened to our clients and it’s that they timed the market right, on smaller positons, and added to the weaker one(s) in hopes that somehow I am the only one watching this stock but as I have said in many of my webcasts, in wide ranging futures moves, stocks show their hand way more than in any trending market or sector rotation.
It happens and I am done beating myself up but my point of the article is that in any extreme circumstances, usually extreme actions are taken and that is human nature I guess; but I will handle it like this for now on. If I stick to what got me here and hold to my disciplines, I won’t have crazy P&L fluctuation….I will just make more than I usually do and will hope the volatility stays longer than normal. Trade well!