Posted June 07, 2021
By Alan Knuckman
Managing The Chop, A Crash Course
There are no two ways about it, the markets are choppy right now. And when we’re dealing with choppy market environments it can be difficult to trade in the short term successfully.
That’s not to say it can’t be done, like I always say: volatility equals opportunity!
But how can you continue to trade successfully and not get caught in unfavorable market action?
Well, you have a few methods available to you…
For starters, you can simply trade in smaller positions. By using smaller positions, you can avoid churning your entire portfolio off one bad trade. Choppy market or not, it can be advantageous to use smaller positions so that you don’t tie up all your money in a trade that takes a while to pay out.
Second, you can be more selective about the trades you put on. For example, if you’re swing trading, you might only want to put on trades that show promising momentum. As opposed to speculative runners that might see trend reversals.
Lastly, and maybe most importantly, exercise patience! It might take a little bit longer for a trade to play out the way you want it to... That’s okay! If you’re still bullish on a stock's momentum, try not to let a fake-out move shake you out.
If you’re trading with options, make sure you’re buying yourself enough time to be right. You can also opt for in-the-money options so that you have additional downside protection.
Bottom line: It’s not impossible to trade successfully in these types of market environments, it just requires a little adapting!
Keep it In the Money,
Trading Tip of The Day: Meme Stock Mania
The market is hot with meme stock madness right now…
These Wall Street Bets names like AMC are posting some crazy intraday action.
While these major moves might seem attractive, it would be all too easy to get chewed up trying to trade them. Proceed with extreme caution!
Looking at some of the heavily shorted names out there -- it appears that everyone is anticipating more squeezes. Premiums are OUTRAGEOUS on many of these call options. Of course, not all of them will run... if any do. Best to be cautious there...
If you are trading these names, you almost have to day trade them. One day they’re up and the next they’re back down…
Regardless of if you’re a meme stock speculator or not, you don’t want to upend your entire portfolio off one bad trade. So like Alan was saying, it might be in your best bet to trade with smaller positions!