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Early Bird Trading: Don't Be a Hero

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Most market participants seek action at all times however the risk reward is only in their favor when a clear trend has been established.

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Good morning Minyans.

We have a sour mood to start the day with futures off sharply in the very early going. We're in the heart of earnings season, which doesn't seem to be helping the bulls and the technical picture is deteriorating quickly. Bears are taking center stage in the media and once again telling participants just how awful the landscape is and bulls are now in hiding.

One of the hardest things for a trader to do is play the waiting game. Adopting patience feels unproductive and goes against the grain of what a trader does however at certain times it is the best course of action. Now is one of those times. It is tempting to adopt a grand thesis at any stage and even more so when we see a major move in one direction or the other however doing so is a dangerous game and one I am not interested in playing at all.

Most market participants seek action at all times however the risk reward is only in their favor when a clear trend has been established. When we go through times when that trend is challenged and it looks as if things may change, rather than siding with one argument or the other, adopting a 'Swiss-like' opinion is the best. It isn't easy and I always struggle with the temptation to wade in on one side or the other however I have learned that the only thing this does is increase my frustration levels.

There are many who will attempt a hero trade in this environment or claim they know the future direction. It is tempting but in my opinion must be avoided. Respect stops and when they are triggered move to the sidelines and wait it out.

Our starters from last week included Charles Schwab (SCHW) and Blackboard (BBBB). Unfortunately both were stopped out on Friday for losses and while I still very much like both companies, I will have to wait patiently until the technical damage is repaired before venturing in.

The good thing about any downturn in the market be it short or long term it always eventually leads to opportunity. Rather than trade and face mounting frustration, I will be working on updating my watch list for the coming weeks ahead. It is a constructive exercise and won't cost me a dime.

Patience is the key for today Minyans, exercise it and you will be pleased with the results.
No positions in stocks mentioned.

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