I am sure many are shocked with the Dow dropping 250 points in the US and oil dropping below the psychologically important level of $80 – now down to 77.95. This, after the Greek elections happened, EU and US central banks implemented stimulus… surely that led me to believe that things are going to get better. It kinda gets frustrating doesn’t it!? For me, it’s time to go to a happy place!
Yes, I did believe it will get better — that the market could be bottoming out if we don’t get lower lows within the month. However, when it comes to having a trading position, it is always necessary to allow “that you are wrong” 🙂 Yes, the market does not care about you or your stellar research or painstaking analysis. No, it does not care how much money you have at stake either.
So what’s the best way to manage and make money from this kind of market uncertainty?
- Position Sizing – I talk about this throughout the blog, and stated simply, it is determining how much you will risk for a given position. And you should have a strategy of allowing for a string of losses. One of those position could have the minimum risk you assign to it, one of the positions could then yield many time over what your risk. Does that make sense?
- Determine your profit targets according to the market type. We are in a bearish market few weeks back, then there was a bullish sentiment early this week — taken together, (the 6 months chart will tell you this) we are in a sideways market. So you profit targets, should be attuned to the pulse of the market.
There are a few more finer points. I share them all in my book “High Heeled Traders” available here.
As for my position, I have kept my protective position (last Friday prior to the Greek election) — so while that took a floating loss, today it will regain value, it may even be profitable with a big drop in the stock today. It’s STOKF7 if you want to check at the asx.com.au site.
Bye for now!
You might find this news handy for getting ideas about the market.
http://www.bloomberg.com/news/2012-06-21/u-s-stock-index-futures-fall-on-china-pmi-index-decline.html
Happy Place
