Oct
29
2009

  Hurry Up and Wait

This is the hard part about trading, there is a lot of just sitting around doing nothing. Not exactly doing nothing, you've got to keep an eye on the charts, but it's like watching the kettle waiting for it to boil.

Yesterday, I moved all my stops up so I will profit no matter what, it will just be a matter of how much. If the market heads lower, I'll profit more than if it turns up. But even if it turns up, I'll still eke out a little extra cash.

So I'm eager to find out what the market's gonna do. Me, and every other trader in the universe. After a significant drop yesterday, the market gapped up this morning, which is not surprising. I'm waiting for it to turn around and head back to around yesterday's close, also a typical intraday move when there is a gap on open. It's what happens after that that will be telling. If it hits yesterday's low and continues lower, there's a good chance it will continue to fall to the next support level. Maybe not all in one day, but given the distance down, probably within a week to hit the first support. If it hits yesterday's high and bounces back up, the market might rally again. Or it might be a fake-out rally and go back down to test the low again.

Anything can happen from here, so traders are being nimble to capitalize on whatever happens. But one must be careful not to over-anticipate the market. You have to wait for the move, THEN jump on the bandwagon. How do you know when the move is definitive and it's time to get on board? Ah, there's the rub. It depends on your timeframe, day traders can play changes in pennies. I don't intentionally play anything that I think won't move at least $1, although preferably $10, and it usually takes days if not weeks. But no one really knows FOR SURE what's going to happen, it's like playing poker, there are only more likely and less likely scenarios and odds.

And on days when you have to sit and watch the action, there is a strong desire to DO SOMETHING. But it's important to let the market come to you. Don't try to chase the market. Let it come to you.

So I've got my stops set for my current holdings, and I'm not going to mess with them (at least on the downside, I might still adjust the upside trades if my directional guess was correct). But I did go ahead and buy more stock. I picked up another lot of GLD, and also some SRS.

The SRS is the ultra-short for the real estate index. Real estate is actually approaching a long-term buy signal, but in order to finish the count it's got to close lower by several dollars. Markets like to finish their patterns, so I'm guessing the index will go lower to do that, so I'll pick up a few bucks if that happens by putting my money on the inverse. But as soon as that target hits, I'm outta the SRS since the odds will then turn on me, and it's likely the index will start heading up again. At which point I'll go long, and buy the ETF of the index itself (IYR).

It's nice to be able to place little fast trades to kill time while waiting for the big one. But it's not always possible, so I'm just lucky today. Well, a little bit lucky, we'll see how the day ends. . .