Dealing with priorities

As I returned from holidays on Friday, I had to deal with the fact that I needed to be "back in the game" but with a market that was running hot. It means trying to jump on a passing boat. More chances to miss and fall in the water than not.

In such conditions, my objective is to manage my worst enemy: ME!

First, I "need a piece of the action," otherwise I will feel out of it and it will be difficult for me not to buy any leading stock, doing this probably at the wrong price.

Hence, I use to take a general SSO or SDS position on the market. This way, I avoid having to take a trading loss on a poor entry on an individual stock. SSO and SDS are not very volatile instruments. These are for me the standard psychological trades which allow dealing with my urge to be in.

Once the "trading beast" has calmed down, it is much easier to wait for rational opportunities, which are on the long side of leading stocks that are pulling back or even by shorting one of the weak stocks that is in the list of potential shorts. You will note that all except one of them are in their short range.

Another nice aspect of having entered a long SSO position is that a short trade on an individual stock will now feel like an hedge trade (lowering risk,) which is also good for the trading psychology.

By the way, I believe that on Tuesday we will have the un-employment report that was left out last week due to the shut-down. Tuesday will hence be a volatile day, which is one more reason why we should expect a pull-back on Monday, since funds will be cautious and eager to protect their recent gains.



Pascal