Sunday, May 31, 2015
A change of scenery
While on vacation last week, I was quickly stopped out of my remaining positions, all on the Tuesday. I was therefore placed back into 100% cash, and I was able to enjoy some peace and tranquility, the walks and the views...
It is good to sometimes get away from the markets, even if only for a few days - as much to recharge your mind as anything.
Certainly being out in the fresh air most of the time, and not stuck in front of the PC, was a pleasant change. The fact that this break coincided with the UK and US markets being closed on the Monday and the current level of volatility and indecision in the markets, while not planned in that way, was well timed!
In the last week or two, there have been a few other traders commenting on the current state of the markets - Steve Burns (@SJosephBurns) mentioned on Twitter that this has been the trickiest period since the last quarter of 2011, and I am in total agreement there. Going through that period re-confirmed to me that I should be cautious in taking new positions and risk - the odds of getting into successful trends were significantly reduced then, and the conditions are the same at the moment.
As mentioned on a few recent posts, stocks that have made it onto my watchlist have, for the most part, not broken out, or have attempted to and then quickly failed, or in some cases price started picking up pace in the opposite direction. In addition, the number of potential setups I was tracking have been reduced due to the level of volatility increasing, which was another warning signal. Hence my cautious approach the last few weeks.
We also know that these non-trending, volatile market phases will resolve themselves, and will then move into a new trending phase. Trend followers need trends to make money. Choppiness combined with increasing levels of volatility, both in the general markets and in the individual stocks we are looking to trade, are where we can easily chew up equity if we are not careful.
So, at the moment its a question of remaining diligent, disciplined and patient, but still identifying potential setups that meet your criteria which may then start to act better.