In my decades of helping people learn to make money in the markets, the mistake I see most often is trading for the sake of trading. Many investors simply can’t sit still and wait for a trading opportunity to arrive; they go out and try to make a trade happen only to see their capital dwindle away.
At the moment, I’m intentionally light in all of my portfolios for Trending123, Parabolic Options and Power Trading at the Open. Why? As traders, we need at least one if the following events to effectively trade options short term (holding a few hours to a few days):
1. Short-term trades can be made on reversals.
2. Short-term trades can be made on pullbacks.
3. Short-term trades can be made consolidations.
As of now, the market isn’t meeting the criteria for any the basic short-term trading setups needed for a good risk/reward picture. On top of that, this is a holiday week with the market closed on Friday in observance of Good Friday, so volume will be light. And with the futures acting relatively well on the news of the Cyprus bailout, we are likely to get a volatility reprising which is just one more thing working against opening new short-term trades at the moment.
I do think the tide will turn very soon and offer new trading setups but for Monday’s session at least, smart traders might be better off on the sidelines.
InvestorPlace advisor John Lansing tracks the charts all day and offers expert technical analysis in his day trading, options and trading services: Power Trading at the Open, Parabolic Options and Trending123. For more information on which service is for you click here.