Still a Waste of Time

On June 23rd, I wrote a blog post saying that: “Trading this market over the next 3-6 weeks will be a total waste of time.” Well, it’s exactly 7 weeks later and I’m extending that statement. I’m not sure for how long, but I don’t think there will be any REAL opportunities to make money until sometime in September/October. Of course you can day-trade the market and try to scalp a few pennies, but I’d rather wait for healthier conditions and make dollars, rather than kill myself to make pennies.

I’m sure most people’s immediate thought is: “What am I supposed to do? How am I going to make money unless I trade?” Here are a few responses:

1) I respect if you work for a prop trading firm and HAVE TO trade. Just keep in mind that trading the market doesn’t automatically mean you will make money! If you HAVE TO trade because it’s your job, my best advice is to keep positions small until market conditions improve.

2) Define yourself! I am a swing trader looking for high probability situations in a healthy market. If there are none, then I don’t trade…PERIOD! Again, I’m not going to agonize and kill myself over pennies when there are dollars to be made later.

3) The key in corrective markets is not to make money, but to protect your capital. As Paul Tudor Jones says: “Play great defense, not great offense.”

4) “Wait until as many factors as possible are in your favor before making a trade. It’s the patience that makes the money.” — Jesse Livermore

As most of you know, I’m not a big fan of predictions because ALL of them (including mine) are useless. I also realize that I could be wrong and conditions could improve quickly (which is why I do my homework EVERY night). Right now, that work is telling me that the market will continue to move 2 steps forward and 3 steps back until we truly bottom.

One last note, the true response to the question above is: Do post analysis of your work and look at your P+L over the past 6 or 7 weeks. If you made money during this choppy time, then you have proven you can successfully trade in these types of environments. If you lost money, you are better off protecting your capital and sitting out until conditions improve.

Follow me on Twitter @jfahmy

The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.

Tickers: ,

You might be interested in:
blog comments powered by Disqus