I'm sure I'll add some more to these subjects later, but for now... Well said. New traders take note, different trading setups for different market conditions is one thing books rarely mention. However, as whitster explained, trading styles that change with market conditions are very integral for many traders. Listen to what the market is telling you and make your trades accordingly.
In regards to the first part of the post, yes this is part of what I try to explain when I talk about aligning the different variables. A well stated post andread. As far as purely mechanical rule-based trading goes, I'm probably the last person who should comment on their performance... I've never traded a mechanical, any-idiot-can-do-this, system. In the long-term, I don't think there is one that can consistently outperform discretionary trading. Mechanical systems can often times forget what truly moves prices... the herd's sentiment. Good post.
I'd prefer to have some others join in on this topic, but I have a few things to add myself... "He's no hero": If a trader made a 70% net in 1999 or even 60% in 2003, one could say that "he's no hero" although I wouldn't... If a trader made (with a sizable account) 40% net in 2004 or 2005, he has some serious credibility though. Take a look at some NASDAQ charts from those years, you'll see what I'm talking about. On the flip, If a professional trader (with the ability to short multiple vessels) lost 40% or more during 00/01 or 2002 then he's a retard (this is arguable because in 01/02 everyone thought it was just a pullback for quite a while, so for arguments sake lets just say during the several month span of the biggest drops in the techs). Nobody is a hero while the trend is their friend, but when you outperform a trend (or perform well without one), that's something to be acknowledged and held in high regards when discussing one's ability.
During a long-term bear, rebounds usually run (up) longer but over shorter periods of time. During long-term bulls, pullbacks usually run (down) longer but over shorter periods of time than the overall bullish trends. (Did that make any sense?)
Typically, most traders aren't as comfortable going short as they are long, and it's easier to get into a trade at the appropriate time when buying than it is selling. Some setups disappear right after you finally get your short position, if you even get into the move at all. The opportunities and setups in bear markets are the same (albeit polar opposites of bulls), but quality entries just aren't as prevalent. Trading in bull markets isn't really any easier than trading in bears, I'd say it's just a LOT more convenient. Another problem is wanting to short something that your broker doesn't offer. If it's an intra-day setup, fuggetabowdit. If it is a swing or investment setup, most brokers will work with you and attain shortable shares from elsewhere, but if you aren't trading with much size, good luck finding quality (and timely) special treatment.
You're welcome. (ego stroking is fun
) Feel free to add or ask.For young traders (in my opinion) the best bet is to learn patience. Not just in the length of trade, but patience in stock selection, patience in market timing, patience in exiting trades, heck... patience with the learning process too. Overtrading is a common mistake made by young traders (and sometimes experienced ones too). The markets move very quickly (on good days anyway) but the ability to use good judgement and determine when to not trade is easily as important as what to do with a stock that is stuck in the mud.
To answer your specific question though, if you're holding a stock that is moving only a few pennies and/or see-sawing back and forth, then just get out of it... unless it's only been a few minutes and your expected trade time is hours. (New traders, write down the entry time if you have to, just don't make assumptions about how long you've been in a trade. When you're still green, twelve minute trades feel like hours.) When a position is/was just chopping around, look for something else... Can't find anything? Then don't trade anything. If a stock is approaching a stop loss, and is showing you little reason to stay in for a bounce back, then go ahead and exit. Just remember to exit when you're supposed to exit. Don't keep mental stops, you'll end up watching it blow right by them. Don't jump right back in after taking an exit from a losing position either, especially when it has yet to re-pass your first entry, or if you can't find any other quality setups. Don't overtrade. If you've made several trades outside of your target time-frame, whether you are up or down, then just sit back and watch what's happening and wait for the market to tell you what to do. Sometimes the market just keeps telling me to wait longer, and that's alright. It's okay to trade only a few hours of the day, just make sure that you're trading the good hours and not the bad... And don't use that last statement as an excuse to be lazy or slack off either. If you're not in a trade, do something constructive. Start screening for new positions, or run some laps, or post advice on ET...
) best of luck selling your system...
