Watch For Next Wave Of Market Opportunity

2020-10-28

Can the market get worse before it gets better?

Yes.

By contrast, the opposite is just as true — this wild market could suddenly shift and run up.

Not knowing the direction is all part of the risk-reward reality of the trading lifestyle.

In a volatile market like we’re in, people tend to forget some harsh truths about the market.

The number one reality about the market is that it doesn’t know “you” exist. The market is not your friend, and it’s not your enemy.

Imagine the market as the ocean, and you’re like a surfer. You’re catching the waves that let you cruise back to shore and avoiding the ones that can crush you. And, you can’t surf the entire ocean (or catch every trade possible).

As a trader, the number one goal is to make money. Simpler’s traders use all the strategies, tools, and plans they have available with this single goal in mind. At the end of the day, week, month, and year the goal is to grow the trading account.

The number one rule that supports a profitable trading plan is: avoid risk. Risk management depends on, “What is the most amount of risk you’re willing to take?”

Simpler’s traders follow a premise that if they hit a risk threshold, they get out. This may not be fun, i.e. avoiding more risk might include cutting a loss before it gets worse. This week of harsh selloffs has seen Simpler’s traders moving out of positions that have grown risky. They also want to avoid any “big bets” in this market that screams “caution.”

Everything that’s happening in the world — U.S. presidential election and Covid-19 — may seem newsworthy, historical, and “not normal. Yet, this environment is normal.

Before the current events, there were harsh sell-offs, wild rallies, and at times nastiness. This market is cycling in a way that, again, doesn’t care if we’re surfing in its ocean or not.

In this volatile market where “normal” just doesn’t seem to apply, focusing on these “number one” areas mentioned above can provide a sense of normalcy.

We’ll continue to trade the market in front of us, watching for what tide it offers, and not trying to guess what’s happening somewhere else across the ocean.

We’re looking for the next setup, a simple wave of opportunity.

We Saw: Another fast, steep sell-off day — 

  • Big tech facing off with Congress
  • Fed limited on props without stimulus
  • VIX (“fear gauge”) spikes to high level

We’re Watching: For select waves of opportunity —

  • What the market provides today
  • As traders let news influence them
  • Trading stocks, not situations