Boost Your Profits - Altering Your Current Trading Plans To Match Market Conditions
When I initially began trading back during the '90's, I was extremely fortunate. I had begun trading during a period when the market was headed virtually straight up. My first strategy was writing covered calls which blended with a rising market in such a way that I virtually never lost.
The perspective of time allowed me to discover that no market, good or bad lasts forever. The only constant is change. Under such factors, I learned to 'go with the flow', adjusting my strategies to match market conditions.
Medium Term Trades
As I explained earlier, my preferred medium term technique has long been the covered call. This technique enabled me to manage my fiscal affairs. By setting up trades designed specifically to 'mature' on a predetermined date thirty, 60 or 90 days out into the future, it gave me cash I could count on to help get over any slow periods of day-to-day cash flow.
When the premium began to dry up, I found writing covered calls more and more complicated. I began to look especially for those stocks which were volatile, which could be utilized to temporarily take the place of covered calls as my medium term strategy of choice.
Stock Movement
Let's look for a stock which moves a lot. I have my Chart Navigator system produce this by instantly calculating the average daily range of stock for the last month or so. I will then look only at the stocks which have at least a dollar and fifty cents or more movement every day.
You have got to have some concept of WHICH way they're most likely to move. We further narrow this search of high volatility stock to merely those stocks which move in a somewhat predictable range, much like a 'channeling' stock.
Given these facts, let's look for a few more characteristics. First of all, notice that the stock has stayed close to or within this range for a number of months. Additionally, each 'oscillation takes about a month, moving from the top of the channel towards the bottom.
Bottom line, this stock is moving a whole lot, but going basically sideways. Now, let's trade this one medium term. If we can do that regularly, then maybe we can stop being concerned regarding the availability of covered call trades!
The Trade
Before you trade a stock, it's typically a great idea to know which way it's going. That's the challenge! Trade it BOTH up AND down. These are the only two ways it is likely to go (keep in mind the high daily movement).
We know we can't buy the stock As well as short the stock (at least not within the same account), so why not buy a put And a call?! In this case we might think about acquiring the thirty five dollar put as well as the thirty five dollar call. Typically referred to as a 'long straddle', the position allows us to profit no matter WHICH direction the stock moves.
Now, isn't it time to adjust your strategy to match market conditions? If you're a little hesitant or perplexed in any way, employ the help of an investment professional. They may be quickly located online by doing a search for: reverse mergers, company going public, or reverse merger shell. Ultimately, it'll grow to be easier for you to 'go with the flow' as well.
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