3 Keys To Trading In 2021

2021-01-11

Looking back, 2020 seems like it was a decade ago.

This year is advancing rapidly, and possibly more volatile than last year. What’s a trader to do?

Keep emotions in check (stay in cash when needed) and consider following these keys to trading in 2021.

Go Small Scale

To navigate this wild market, consider easing into trades on a small scale. Consider your usual risk tolerance and consider cutting it in half. Lowering risk capital for each trade (and for your overall account) means you can still take trades and stay on track with your trading plan. When the timing is right you can always work your way back up to previous risk tolerance.

Wait For The Setup

It is easy to jump into as many trades as possible, but is this the best consideration for finding “perfect” setups? Patience while waiting for all indicators to line up and then putting your capital into play makes for a stronger chance of profits compared to a chart with just a few indicators lighting up.

Avoid “Lotto” Plays

When you have any concern about the market, doesn’t it make sense to stay away from “Lotto Trades?” (This is important as earnings season begins.)

“Lotto Trades” are placed in anticipation of an earnings announcement or where a market pin might be setting up at the end of the week.

Lotto trades can be a big rush for traders when they work out, especially with significant profits possible. The downside is these trades don’t work out as consistently as traders may expect and don’t necessarily follow a technical chart setup. The winners vs losers ratio isn’t always positive on these trades. It’s more like the win/loss ratio of a scratch off lottery ticket.

Doesn’t it make sense to save capital for high-probability setups and increase the odds of trading success?

This year in the market hit the ground running wild, so Simpler’s traders are staying mindful of capital risk and sticking to a predetermined trading plan. No need to let emotions in as we maintain a calm, cool focus on what this market presents us.

We Saw: Market struggle amidst political, tech turmoil — 

  • Big tech moves affecting bottom line
  • Walmart moving into banking, investing?
  • Billions erased in bitcoin pullback

We’re Watching: Continued market being supported by Fed —

  • Will it be “turmoil Tuesday” or “turnaround Tuesday?”
  • Cautiously taking chips off the table
  • Setups in: SPX, ITB, UBER, FUV, MET