Protecting one’s self-confidence is key to long-term market survival. If I had to sum up what’s going on in the markets in one sentence it probably would be the following:
This is an extremely dangerous market, hence it is best to stay out.
The current market environment is one of the most dangerous, treacherous and choppy I have encountered in my trading career. I recently went back to 100% cash and will stay in cash for the time being. My job as a trader is to protect both mental and financial capital in order to be able to get exposure once sustainable trends emerge. We continue to see a world class chop-fest. Only the very best and most nimble traders are able to strive in this environment. The great majority is churning their accounts and slowly bleeding to death.
In my opinion the best traders are not those who try to trade every single day of the year. The best ones are those who can identify the ideal trading environment that fits their technical abilities and trading personality. Put another way: If you put on several trades in a row that do not work because you constantly get stopped out it is time to ‘get smaller and smaller and smaller’ as Dennis Gartman once said. Personally, I go even further than that. When my own equity curve is going nowhere for a while I force myself to take a break for at least one or two weeks. That’s when I relax, rebuild mental capital, rebuild self-confidence and reassess the overall market trend and market environment. It basically comes down to staying in control.
These choppy market conditions forced me not to take up my seasonal portfolio YET. I don’t know if i will, it all depends on the market conditions. Right now the conditions are getting worse. Volumes drying and support coming into play, basically exactly the opposite is happening. Whenever i think i can test the waters the tide turns back. Whenever the stocks break down, they somehow manage to creep up in the range again. It is a mess out there and i really don’t like to mess my self up.
Conclusion: The market continues to chop most traders to pieces. Whenever that happens I don’t try to be a hero. Instead, I step aside and watch. That’s how I protect myself and how I make sure to be ready and rested with plenty of ammunition once conditions are conducive to position trading during strong trends.
He who knows when he can fight and when he cannot, will be victorious. - Sun Tzu
