Friday, March 11, 2011

Just money management is not enough

My trading strategy for today remains the same as what I stated a few days ago. Contrary to what a few traders or for that matter, even a few trading books think, just good money management is not sufficient to make money in the markets. It is necessary but not sufficient. In order to make profits consistently for a long period of time, you need an edge. Something that makes you stand out from the rest of the market. For some, it might be their ability to read balance sheets, or expertise of a particular sector, or ability to trade the news. For me, technical analysis is that edge and in news dominated markets like the one we currently have, I lose my edge. And once I have lost my edge, I know that a monkey throwing darts at a dartboard filled with stock names can quite possibly do a better job than me. Hence, no edge, no play. Its as simple as that.

6 comments:

Mingoman said...

Excellent point...........

Anonymous said...

So true!! Nothing to add to this, it's just plain and simple. Don't trade just to trade, better stay out of the markets instead.

Anonymous said...

That's all true for swing trading, but intraday there were great opportunities today - the breaks of key resistance on enormous volume in CYTX and ANIK for example, were as easy trades as my not very experienced mind can imagine.

Ivan

ppmoore said...

Excellent point.

But do you mean that technical levels of resistance being formed don't apply? For example, on Friday SPY bounced off the 129.5 resistance level. If this is confirmed by Monday's action, would this count as a mini double-bottom in technical terms?

Thanks for the market insight,

Trin Café said...

I can't agree more about needing an edge.

positiontrader said...

Thanks for the comments guys.

Yeah, the volatility is great if one is a day trader but could really hurt a swing trader.

It all depends on the magnitude of the news pp. Such levels are always one to watch out for but their significance gets reduced in a news dominated market. One can still take swing positions based on them but remember to keep these positions smaller than usual.Its a tough market out there for swing traders and one can always side with the winners once the tug of war between the bulls and the bears gets resolved.