I did quite a bit of cleaning up of the trade ideas section today, re-categorizing many of the Trade Set-ups that no longer offered an objective entry at current prices, even if there is still plenty of room before the next target(s) are hit. Many of those trades are still listed in the Active Trades category while I also found several trades that were either stopped out or completed (targets hit) recently. I’m also working on the next batch of improvements which will help make for a more fluid & efficient experience while using Trade Ideas section of the site, such as the ability to sort each trade category (set-ups, active and completed trades) by most recent date vs. the current system which only sorts alphabetically by symbol. I also plan to sub-categorize the trade ideas by both long and short trades as well as add an additional category for longer-term trade and investments ideas, for the part-time swing traders and longer term investors. Finally, I plan to add some type of feature that allows users of the site to be notified whenever a new post is made such as an e-mail of the post, an RSS feed, etc… I don’t have an ETA on these change from my programmer yet but will keep everyone posted.
As far as the market goes, I continue to study the charts looking for a reason to abandon my bearish bias as one thing that I’ve learned over the years is that although being a successful bear in the right market conditions (a correction or bear market) is considerably more lucrative than being equally proficient at trading the long-side in a bull market, staying too late to the bear-fest will usually cost you all of your recent gains and often, then some. That statement about shorting being more lucrative than buying stocks long is based on my own personal experience however, a quick glance at any longer term chart of any index or just about any stock will quickly confirm my claim: Stocks fall during a correction or bear market much, much faster than they rise in a bull market or typical uptrend. During a correction or bear market, stocks will often wipe out weeks, months or sometimes even years of gains in just days, weeks, or months. Again, a quick glance at just about any long-term chart will confirm this.
Another thing to consider is this: For a trader, profitability is all about velocity. I would rather make 10% in two weeks on a short than 10% on a long that takes 2 months. For example, if an active trader starting with $10,000 were to make just one trade for month for a 10% gain (reinvesting his gains), every month, at the end of one year they would have $31,848.28. If another trader who started with the same $10k, reinvesting the profits into each new trade made the same 10% per trade but had a holding period of 3 months to do so (4 trades per year), they would have $14,641.00 at the end of the first year…. less than 1/2 the amount as the trader with the higher velocity but same percentage gains per trade. This is why I will often state that I think full profits should be taken at a final target even if I believe that the trade might continue to play out for additional gains over time. It’s a matter of being able to re-deploy that capital into another trade offering a much better R/R profile and usually a much shorter expected holding period to make the same percentage gain on the next target.
The thing about allowing yourself to fully embrace a bearish trading bias is that the market tends to go up (both time-wise and percentage-wise) a lot more often then it falls. Therefore, bears/shorts don’t have the luxury of being “bailed out” by just waiting for the tide to start falling again they way that a long-side only trader usually does when he or she gets stuck on the wrong side of a trade, as sooner or later the tide will begin to rise again. A trader playing the short-side must always be on the lookout for any signs of a likely reversal, especially an end to the current downtrend. This is one of the reasons that I am continually looking over my shoulder when trading but especially when trading short. With all that being said, I continue to believe that, regardless of any near-term bounces, as powerful as they might be, that the risk to reward ratio (R/R) continues to favor the short-side for now. This conclusion is based on many factors including but not limited to the longer-term technical picture (weekly and monthly charts). I will try to do a video overview or at least some static charts sometime this week updating some of the things that I think support this view. Also keep in mind that the only guarantee that you will ever get from me is that I have been wrong before and I will be wrong again. Therefore, as always DYODD before buying or selling any security.
Finally, as anyone who knows me can attest to, I am an equal opportunity trader… favoring the best technical patterns, long or short, obviously preferably aligning my trades with the prevailing trend but often looking to catch the major inflection points (tops and bottoms, or “turns”) in the market. Although I can trade the trend with the best of the trend-chasers, my biggest gains often come around major inflection points in the market. This trading style is not for everyone and as such, I will usually state, often ad nauseam, the potential risks involved when posting a counter-trend trade (like shorting at market tops while many believe the trend is still up or catching a falling knife for a long-side bounce or bottom when nobody else wants to touch it). As my trading style varies widely, probably more so than most traders… anywhere from active day-trading of aggressive penny stocks to swing trading a ho-hum blue chip stock in one of my IRA’s for months on end, you must decided which trades fit your own personal risk tolerance, trading style and experience level. I could write an essay on every stock that I trade if I desired but my goal is to keep the commentary and trade ideas on this site streamlined and effective and being that this is about as many words as I’ve typed at once since I was in college, I will end things here.