Tuesday, October 14, 2014

Tip-toeing back into the market

Looking at the returns achieved here, it is clearly that the last few months have been the poorest in terms of performance over the last couple of years or so. This can be clearly attributed to the lack of direction in the indices. As a result, I did not place a single trade for four long weeks. Cash is a position that the individual trader can retreat to if market conditions are not favourable. In that time, shorter-term or swing traders no doubt did very well. Such are the ups and downs you encounter as a trader.

Already we can see that some things in the general market are different - volatility is generally higher, intra-day price moves are quicker, we are having to deal with opening gaps up and down both the UK/Europe and the US as the indices react in tandem with those on the other side of the Atlantic. We are also seeing markets generally opening or moving up early in the day, before selling off over the remainder.

It should be clear for anyone who has followed me for a while that the bias in my own trading is now geared towards the short side. So, I am now actively putting on new trades and looking for decent setups which meet my criteria to trade the short side.

No-one knows whether this will turn into a pronounced downtrend or not - all I know is that the direction of the trend on my timeframe is now clear, and therefore it is a my job as a trend follower to trade in that direction.

As always, I will be disciplined and slowly add positions while controlling my open risk as much as possible. No piling into a whole bunch of trades in one go. If the trends then fail, then the prudent risk control used will keep my losses small. But I am giving myself the best opportunity to profit from following the trend, by trading the line of least resistance, both in the individual stocks I trade as well as the general market.

Time will tell if any of these set ups I am waiting to trigger will ever be entered and turn into profitable trades or not.

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