Trade The Journey

Trade The Journey

Trader Paradise!

Greetings. For the last four months, our society and economy have been on an emotional rollercoaster.

 

One minute the outlook is optimistic, the next its dire with hope slowly slipping away. Normally, the United States serves as the model due to its resources and protocols in place.

This time it’s different. Very different.

It’s sad to say, but this country can’t afford another shutdown. When the first shutdown occurred, it was met with fierce protest and condemnation. Some citizens felt like their right to earn a living had been halted, and the government’s overarching reach would consume their freedoms.

Some heeded the warnings, and for a while, the stimulus was adequate, and so was the temperament. Tensions already rising due to racial inequality boiled over after George Floyd’s death. Protests overtook the country.

The protest continue, and so do the rising Coronavirus numbers. Some states continued to defy the Virus safety measures and have seen their numbers soar. The economy was on the verge of reopening and is now on the verge of shutting down once more.

With talk of schools reopening, the sentiment is becoming even more fearful. Will the kids infect me? Will I transmit the virus to family, friends, or co-workers?

If you still have a job, consider yourself blessed. Many have joined the unemployed or will be in the coming months. Renters and eventually, homeowners will struggle to make payments and possibly be evicted or foreclosed upon.

The senate still in deliberation regarding unemployment payments have continued to add to the rising fear that we may be entering a depression.

While all of this is happening, the market has continued to maintain the levels seen pre-pandemic. Trading platforms are reporting profits beyond expectations due to the rise of retail trading. As the level of retail trading rises so does the disconnect between wall street and main street.

The experienced investor played the situation as if it might be a long-term recovery. I thought that a recovery would not come without a long period of pain. With the injection of liquidity by the Fed, the stimulus payments, and the rise in unemployment insurance, inexperienced traders entered the market.

Because market valuation is a reflection of the prevailing sentiment among its participants, the market maintained its optimistic outlook. I watched the “smart money” look at the market in befuddlement, wondering how it could not falter with all the current events.

Some stayed on the sidelines, others have entered the market cautiously, and some are betting on entire industries to collapse. Retail traders have bid up the market, and the impending collapse may be a painful lesson to learn.

Unfortunately, as more people realize that the giant bubble in the market will pop, everyone will proceed to the exits. The illusion of the market is in fooling you into believing that you know what will happen next. But no one knows when and how severe a collapse will be.

The Federal Reserve issued a warning a couple of months ago. The advice stated that while the stimulus seems to have assisted the economy this time, another shutdown would be catastrophic. Companies, families, states, and the economy would need another round of stimulus.

Of course, there’s a chance that this all reverses with the invention of a vaccine. With a vaccine, countries can safely reopen and resume their normal activities. The economy would recover, and we’d see a renewed effort to ensure this never happens again.

As we head toward the election, the volatility in the market will intensify. The two opposing candidates resemble a vastly different story in America, and the voters know it.

Looking past the elections, I wonder what the standing of the United States will be around the world when we emerge from the virus and election?

Does the perspective change on the safety of their money in the United States? Can we do a better job of maintaining the value of our money?

Where do the relations between the United States and China end? Will superpowers be able to coexist, or will world domination continue to be the goal?

How will the people survive without a stimulus check or decrease in their unemployment benefits?

These are times that will be edged in history as both a learning lesson and maybe a costly error.

The seriousness of the virus is slowly beginning to be understood in the United States. I do mean slowly.


What does this mean for me as a swing trader?

 

Now is the time to be cautiously bold. I’ve come to accept the wild swings in the stock price as a sign of the times. Since I’m home more, I’m able to keep mental stops while watching my position.

So far I’ve been able to limit my losses by accepting quickly that the position has turned against me. I’ve been guilty of trying to find a trade when one doesn’t exist.

I finished a book recently, called “One good Trade.” I highly recommend reading this book.

It’s not about being in the market to identify yourself as a real trader. It’s about finding your trading rhythm and a position size that fits you and seeking one good trade.

When I virtual trade, I work on accepting my losses and placing a trade when I see an opportunity. Once you know the technicals, the most crucial aspect of trading is psychology.

Psychology makes all the difference in the world. Understanding that each trade is unique, and the outcome is unknowable is the root of probabilistic thinking. When you think in probabilities, a volatile market becomes a trader’s paradise.

During these times, probabilistic thinking is required to trade in these markets. Fortunes will be made, and fortunes will be lost. The key to your success as a trader will be the ability to stay in the game.

 


This past week in Review:

I mostly remained at home, so the spending was kept to a minimum. Most weeks, I don’t feel the urge to eat out, except for the occasional pizza. I’ve done most of the cooking at home.

I’ve become accustomed to my own home-cooked meals. If I had a machine that could make candy, I’d be in heaven. I’m hopeful that this virus will reside but the stressful part is not knowing when.

I am prepared for the uncertainty of both the economy and the market.

I’ve continued to pay my bills on time with a fluctuating income.

This past week deserves the grade of a “C+.”

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