Is it time to wait out the market?

2020-02-21 | Simpler Trading Team

One of the most beneficial and difficult traits to understand and learn about trading is the need to wait.

However the market may act, no trader can put in “hard work” and change its direction for a more likable outcome. Waiting out the market or major news events that are perceived to affect the market is a disciplined skill applied by veteran traders.

But waiting is hard to do sometimes. Traders are people with a desire to get things done, so not doing anything is a difficult task. When waiting is appropriate, traders can make use of this time by reviewing and updating their trading plan.

A great place to start is to define your money management strategies, your risk tolerance, and applying a method to track your work. How much capital will you free up for your trading account? What percentage or maximum are you willing to risk? Which trading setups will you apply? How will you track all your trades?

Answering these questions helps you develop a trading plan that gives you something to follow as you grow and improve as a trader.

Some more points to consider when developing a trading plan:

  • What is your “why” when trading?
  • What are your immediate and long-term goals?
  • What securities will you trade? Stocks, options, futures? Just one or a combination?
  • What setups will you use? How can you learn more about these setups?
  • How can you make money with precise entries and exits on your trades?

Answering just a few key questions like these can help you quickly develop a solid trading plan. When the market gets rough you’ll have a plan to follow and when it’s time to wait out the market you’ll have a plan in place to tweak and adjust according to the action in the market.

We Saw: the market dropping and trying to recover — 

  • AAPL lower on the day counter to longer outlook
  • China announces more coronavirus cases, along with other countries
  • U.S. company says it has coronavirus vaccine ready to go

We’re Watching: monthly expiration of options  — 

  • ST traders looking to move to cash for weekend
  • Hold through weekend if you want, but beware of risk
  • Waiting on the market is a strategy into the end of the month

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