Trade The Journey

Trade The Journey

Developing my Trading System

Markets retreated from their highs as fears of inflation rose due to rising bond yields. Some countries stepped in and have begun making purchases to keep their bond yields from rising further. The Fed doesn’t seem to be worried and has remained committed to low rates.

There can be ramifications for rising yields like increase borrowing cost for companies and margins tightening. I’m still learning about bond yields and how they affect the economy. Almost everything was down at Friday’s close, especially cryptocurrency, which remains volatile.

The market retreating from its highs could be the long-awaited correction; only time will tell. I suspect the market will remain volatile until the Covid situation is contained, which could be some time.

I recommend keeping stops in place. There’s an artform to setting stops where they don’t get hit and allow enough room for the stock to make its move.

As you can see from last weeks trade, things can happen fast. I was lucky to get out at a profit before the stock dropped the next day.

Without the required amount needed to daytrade, sitting in front of my screen earning a living isn’t an option for me yet. It can be challenging managing positions and maintaining a steady job or business.

Not being able to constantly check the charts means I have to place trust in my chart reading abilities. To be honest, this is the best way for me to trade.

Last week I started brainstorming different ways to conduct a thorough overview of the market and my trades. I needed a system that I could complete even if I’m tired.

Unfortunately, I’ve yet to find any system that doesn’t require any resilience or discipline. TD Ameritrade is my preferred platform for trade review. Whenever I have free time, I browse the website to become more familiar with its resources.

I don’t think you need to become a member of a bunch of websites for accurate market information. More information isn’t always better. You need a reliable platform and maybe one or two additional sites for market summaries. Most trading platforms provide a news section and a section of charts detailing the market action for the day.

Stockcharts is a personal favorite mine for ease of use and access to the day’s market summary in chart form. I also use Bloomberg and Reuters for news and current events.

A system is a set of interrelated processes; at least, that’s the definition I remember from school. To me, it’s developing a set of processes that can be completed efficiently and effectively, in the same manner, each day. Trading is about preparation.

Linda Raschke recommended keeping the same process for entry and exits into and out of each trade. She also said everything begins with completing your nightly homework before the next trading day. For a while, I had no idea what I was doing.

I’d be all over the place when conducting the end-of-day market summary.

I’d read an article on one site, see something of interest, and the next thing you know, I’m reading about a strategy that has nothing to do with a market overview.

Not good if you have a limited amount of time. So, I took a step back and asked myself where I should start my market overview?

For me, I like to start at the top. I get my market overview from TD Ameritrade. They provide a detailed review of yields, rates, economic data released worldwide, and updates on any significant events. Then I go to stockcharts to review how the market performed for the day.

Understanding internals and market breadth can only deepen your analysis. The put/call ratio, VIX, TRIN, and advance/decline ratios are what I pay attention to. After reviewing this information, I have a good sense of market sentiment.

I then complete my sector analysis.

Finally, I look at the charts of any positions I have open and assess where the stock may be headed. If I don’t have any positions open, I look for opportunities.

That’s my process, and the best thing about it is there’s a rhythm to the process, and I know what to do each day. The most challenging part of the system now is completing the process.

All the great traders have a system for completing their analysis or homework for the night. I detail what I find, think, and feel in my journal each night. I’m building on my experience in the market with each days journal entry.

Take some time on the weekend and develop a process you feel comfortable completing each day. A trading system doesn’t have to be complicated, it’s probably better that it isn’t.

Markets are hard enough to decipher, so a simple system works best. The most important part of your system is your execution.

Like Jim Rohn said, “Don’t wish it were easier, wish you were better.”


Week in Review:

The cash-flow crunch continues. I used most of my savings to cover my expenses and luckily I didn’t have to withdraw from investment accounts. Now, I’m focused on building up my savings accounts  which will take time.

This past week, I’d like to give myself a “C” for steadiness.

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