Maintain an Edge

Trading during the volatility of a major selloff is always challenging but double up on the volatility adding in an earnings season, and traders will likely find it very difficult to maintain an edge.  Trading without an edge is gambling with the house odds stacked heavily against you.  Gambling can certainly be exciting at the beginning but keep in mind at the end of the day there are no medals for bravery in the market.

Trading is a marathon, not a sprint and if you expect to win you have to stay disciplined to a plan.  If the market is open, many traders feel the pressure that they have to trade, but trading just for the sake of trading is a business model for losses.  If you have an edge, then by all means trade!  If you don’t have an edge and stand aside, you protect your capital.  Losing can certainly be character building, but the winner will be the one that traded wisely growing the account trading only when they had an edge.  Who would you prefer to be?

On the Calendar

The Wednesday Economic Calendar starts early with the MBA Mortgage Applications report at 7:00 AM Eastern.  The market-moving Housing Starts at 8:30 AM expects a slight decline in starts to 1.216 million while at the same time permits are rising to 1.272 million according to consensus estimates.  !0:30 AM brings the EIA Petroleum Status Report with a Fed Speaker to follow at 12:10 PM.  Then we will get a little insight into what the FOMC thinks when they release the last meeting minutes at 2:00 PM.

On the Earnings Calendar, we have 63 companies.  As earnings season continues to ramp up, make sure you are planning all your trades having checked them against the earnings calendar.

Action Plan

After such a blowout report by NFLX yesterday afternoon, Asian markets closing bullish across the board and European markets mostly positive, US Futures are pointing to a modest decline at the open.  After rising 547 points in the Dow yesterday, I view only a slight pullback as a substantial win this morning.  However, as the indexes rush back up into major resistance levels, we need to watch for potential pullback and failures.

Earnings season and how companies report will add a significant challenge for swing traders.  Volatility will remain high and we significant overnight index reversals are certainly possible greatly diminishing the swing traders edge.  However, this could be a very good environment for day traders capable of handling very fast price action.  Standing aside and waiting for your edge to return is a very viable solution to this problem.  You have nothing to prove by fighting the market and will gain no honor in doing so.  That is, of course, easier said than done so if you do decide to trade, consider smaller positions and a willingness to remain flexible and take profits faster in this volatile environment.

Trade Wisely,

Doug