Trading apex
A few years after Anne and I started trading, back in 2001, I created the phrase 'do nothing when there is nothing to do'.
This was us to prevent us from trading when we should really be standing aside.
It was particularly useful during periods of consolidation that I personally was repeatedly not spotting (or dealing with properly).
We shared our phrase with Dynamic Traders from 2007 and it has probably been one of the most used of all our trading quotes - but least applied by those who have heard it.
That's not a surprise - as I had difficulty following it myself, as you know.
In a prior webinar, I mentioned what could happen in September- based on seasonality, along with other contributors for trends such as the election and holidays.
As you have seen, doing nothing this week has been the right thing to do.
In contrast, the dumb money will have been fairly active in doing lots of trading - and then seeing lots of stops get hit.
The Apex
If you follow Formula 1, or have ever driven a car around a race track, then you will know when entering a turn you aim for the apex and accelerate from that point out of the turn.
In trading, assuming bullish conditions, the apex is the end of the pullback and the start of the uptrend.
So where is this apex in trading?
We have not been buying of late - but will start to if these criteria are met:
Markets hold at support.
Strength begins to appear in certain areas.
The apex will be a support zone - with ideally a chart/candlestick pattern.
Add to this the price depth and time period of an appropriate breather zone (around 12-20 days).
To get to the apex - the new buy point during the noise of tree shaking - we have to be patient.
And if we do not have a breather then we wait for a breakout followed by a pullback.
Get in early and light but don't be emotional and reckless.
If you accelerate into the turn, you will be nothing but lucky to come out the other end.
Chances are you will lose control of your vehicle and go off track or, worse, crash and burn.
In trading terms, blow up your account.
If you are lucky and accelerate into a turn but manage to come out the other end without a scratch, you are lucky - but remember, you can't emulate luck.
So if the dumb money are fortunate enough to make money when the odds are against them, they have been simply been lucky.
Wait for price to come to you.
In this phase of the market, pick your stocks carefully. Let the price come to you - and be patient.
Breather zones will typically retrace 10-20% from their highs but an overshoot or 38-50% from the low (March 23 2020) to the high (Sept 2 2020) or towards major levels of support (figure, pivot, moving average etc) can and often occur - and often does occur.
Be patient, aim for the apex, wait for the set-up - then get in.
STEAL
Stock
Trading
Early
And
Light is better than trading late and heavy.
Enter once the set-up has occurred - but test the trade with reduced risk.
A pilot position forces you to be in the trade so there is no chance of missing the trend if it unfolds - and also gives you a real feel for what is happening.
Watching a car being driven around the track is very different to driving a car around a track.
In other words, watching stock move up without you is a very different feeling to being in that stock as it moves up.
If we get a new round of opportunities, be prepared!
Let's go trade!
