Getting Your Edge

Today’s market action created an environment that could have blown up your p/l if you were not careful and expected more than what was available in the markets. My trading plan coming into the day was skewed to the long side as most of my stocks showed good buying overflow. I expected the buying to continue in today’s open with the price action closing near it highs at the end of yesterday’s trading.

The market opened gaping higher slightly above yesterday’s highs which was good for my long ideas such as Broadcom (BRCM) and United Airlines (UAL). BRCM was especially looked attractive as it traded above and held yesterday’s highs for the first 45 minutes of trading. But as we know the SPY could not break above pre-market highs and subsequently sold off which put a stop on the longs. Following my trading plan I planned on trading the first 15 min swing low that formed in my strong stocks. But as the day went on that didn’t produce much as the SPY continued to sell off for the rest of the morning session.

At this point I had to realize that my plan was not unfolding and I needed to step back and adjust my trading to fit the current market conditions, which was to not trade. There is no point in putting on trades if my plan was not unfolding in a way that gave me an edge. Often time’s traders can get upset when markets dint unfold in their favor or their trades don’t follow through, when in fact this should be an acceptable part of the business. If you find yourself anger or irritated while trying to execute your plan you should step back and re-evaluate the markets conditions and determine if they provide the best probabilities for your trading.

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