Yesterday was a bad day for the markets. Today really didn’t show much recovery. Our goal is to “flow” with the markets. And we must be involved when it’s moving up. Right now, it’s choppy. So we play defense!
We always start with the big picture. What are the indexes doing? Then we look at leading stocks and the MAXLIST. When you see most stocks falling on HEAVY volume and bouncing back on less volume, you become cautious. Yup, we’re cautious.
I pointed out in MissionWinners.com that RH was gapping up this morning. I told the group to WAIT about 30 minutes before buying. Chasing gap ups in crummy markets is a recipe for losses. If you watch the video you’ll see where RH gapped up. Went up. Reversed down. Dropped hard. We avoided that mess.
Another point: When markets are choppy it’s best to trade smaller, if at all. Hang onto your hard earned capital.
Finally, we discussed trade psychology. If our head isn’t proper, the financial turmoil grows quickly. I encourage you to read “Market Wizards” and “The New Market Wizards” from Jack Schwager. Great books.
