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Flexibility Makes The Trader


Trading stocks has nothing to do with luck, guesswork or happenstance.


Flexibility has been a topic I have written about extensively and I have often concluded that one of the reasons most traders struggle with true, unbiased flexibility is due to its perception in all other areas of life.

Most individual traders I have met, who seek to take control of their financial future, inherently posses the character trait of firm determination. In most areas of life it is this straightforward focus that brings success but it also may mean a person remains on a narrow road, seeking to accomplish the goal they have set out to without failure and through all obstacles.

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There are those who doubt this person, who preach that something can't be done, but the individual pushes on and eventually meets success. We all know those who lack the focus to see things through as they one day possess a plan to do such and such, but only days or weeks later another plan has been hatched. Unfortunately, this lack of followthrough hinders them from getting anywhere and they continue to move in a frustrating circle.

When embarking on the trading journey, many individuals struggle with flexibility simply because it is against their nature to change their minds. Over time, however, most learn that this area is a key component to trading and, while still find it a challenge, start to embrace the notion and put it into practice.

Flexibility is a must and each and every trader has no option other than to seek it out, but there is an area where one can completely mold their personality around their trading, which is within an individual's personal trading style.

As time goes on all traders start to develop a trading style that is unique to them. While it is important to learn the basics or nuances from others, ultimately, trading comes down to the confidence one has in his or her own style and ability to execute that style through a variety of market conditions. You see, it is flexibility towards the market that will keep you open-minded, but it is your own personal style that will determine your success.

Unfortunately, many confuse a style with picking stocks, and while a style may favor large versus small, or high beta versus low, the vehicle isn't what matters. It is the style in which you trade the vehicle, regardless of what that vehicle happens to be.

There are many styles of trading, and only the ignorant believes that certain styles are superior to others. If a style has been tested and proven successful, there is no reason it isn't as good as another that has the same history.

As traders we should always be refining our style, seeking to improve on our core set of rules or guidelines and we can only do this when we get our minds around the fact that your style is the foundation and that trading stocks has nothing to do with luck, guesswork or happenstance.

As you continue to navigate these choppy waters, I challenge you to analyze your style. Discuss this style with another person. Write it down. Ask yourself a few simple questions.

1) What are my personal trading rules?
2) Does my style fit my personality?
3) How is my style working?
4) What areas of my style need improvement?

Whenever we approach the markets, one thing all successful traders will have in common is their flexibility to adapt to any situation. The difference will be in how each of us pursues this, utilizing our own unique style that makes us who we are.

This morning, the news flow surrounds Morgan Stanley (MS), which reported terrible numbers, but the question is whether or not this is baked in. Yesterday, Goldman Sachs (GS) fell after its report, breaking a key resistance level. I will be watching this sector closely as I believe the market needs to see stabilization out of these names in order to feel comfortable playing other areas. One thing that was very interesting to me yesterday was the strength in Freddie Mac (FRE) and Fannie Mae (FNM), both offering up decent opportunities intra-day. I am watching these names closely to see just how far they can run but won't venture in with anything more than a day trade.

Alternative energy stocks continue to perk and lately we have seen strength broaden from the solars to ethanol. These stocks have been trashed for many months and may offer up a decent trade. I am watching Pacific Ethanol (PEIX), Aventine Renewable Energy (AVR), US BioEnergy (USBE) as well as a rail car ethanol carrier American Railcar (ARII). In the coming days these may actually continue to run but we have to let the trade come to us rather than chase.


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No positions in stocks mentioned.

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