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Increase Your Profits - Altering Your Current Trading Strategies To Match Market Conditions
When I initially began trading back during the '90's, I was quite fortunate. I had begun trading at a time when the market was headed almost straight up. My first strategy was writing covered calls which blended having a rising market in such a way that I practically never lost.
The perspective of time allowed me to understand that no market, good or bad can last forever. The only real constant is change. Under such conditions, I learned to 'roll with the flow', adjusting my strategies to match market conditions.
Medium Term Trades
I explained earlier, my favored medium term technique has long been the covered call. This technique enabled me to control my fiscal affairs. By setting up trades designed specifically to 'mature' at a predetermined date 30, 60 or 90 days out into the future, it gave me money I could count on to help eliminate any slow periods of day-to-day cash flow.
While the premium began to dry up, I discovered writing covered calls increasingly more difficult. I began to look specifically for those stocks which were volatile, which may be employed to temporarily substitute covered calls as my medium term strategy of choice.
Stock Movement
Let's search for a stock which moves a lot. I have my Chart Navigator system provide this by automatically calculating the average daily range of stock for the last month or so. I will then look only at the stocks which have a minimum of a dollar and fifty cents or more movement every day.
You've got to have some concept of WHICH way they are most likely to move. We additionally narrow this search of high volatility stock to only those stocks which move within a somewhat predictable range, much like a 'channeling' stock.
Given these facts, let's look for a couple of more characteristics. For starters, notice that the stock has stayed close to or within this range for quite a few months. Additionally, every 'oscillation takes about a month, moving from the top of the channel to the bottom.
Bottom line, this stock is moving a lot, but going basically sideways. Now, let's trade this one medium term. If we can do that frequently, then maybe we can stop stressing regarding the availability of covered call trades!
The Trade
Just before you trade a stock, it's generally a good idea to know which way it's going. That's the obstacle! Trade it BOTH up AND down. These are the only two ways it is likely to go (bear in mind the high day-to-day movement).
We know we can't purchase the stock And short the stock (at least not in the same account), so why not buy a put And a call?! In this instance we might think about purchasing the thirty five dollar put along with the thirty five dollar call. Normally referred to as a 'long straddle', the position permits us to profit no matter WHICH way the stock moves.
Now, are you ready to adjust your strategy to match market conditions? If you're a little hesitant or perplexed by any means, employ the help of an investment professional. They may be conveniently located on the internet by doing a search for: reverse mergers, company going public, or reverse merger shell. Ultimately, it will become easier for you to 'go with the flow' as well.
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