Hey Guys,
The market dropped again over the weekend. In fact, it dropped enough that the S&P 500 chart itself now qualifies for my trading strategy conditions. You can see it in this image:
The S&P 500 has been in a strong up trend over the last few weeks, with prices driving through that upper Keltner Channel (tan line), and as of this morning the price pulled back to the moving average line (the blue line). This epitomizes my trading strategy. This is when I like to buy a stock.
And that's exactly what I did this morning. The market dragged a ton of stocks down with it and there were dozens of tickers that met the trading strategy conditions this morning. I bought AMZN and PLD in the main account. I picked up options for MCHP and SBUX and the extra options account. And I bought stock for MCHP and SBUX in the low-priced account.
This was one of those days where almost every ticker from the watch list met its entry criteria. On days like this, I have my pick of which stocks I want to buy since so many meet the criteria. So before the market opens, if I notice the pre-market price for lots of stocks is already low enough to qualify for entry, then I just pick the two stocks I'm most interested in. Typically that decision is based on 1) diversifying industry exposure in my account, 2) individual stock track record (which can be seen here), and 3) buying power impact. So given that I had so many tickers to choose from, I chose Amazon and Prologis for the main account based on those factors. I did not set up buy limit orders for any other tickers in that account this morning.
The market is dragging most stocks down with it, and as a result I'm in the red on most of my open positions. I also hit a couple of stoplosses this morning. When everything is red like this, it can be tough to keep trading because emotions can be pretty intense. What I remind myself is that in the back tests I ran, no emotion was felt by the back testing software. It simply executed the trades every time they set up. My overall goal is to honor the back-tested trading strategy, so I try to recognize and acknowledge any feelings when they come up while maintaining my intention to stick to the trading plan.
If the emotions that are coming up right now for you are so intense that you've having trouble trading or even looking at the market, that might be a sign that your position size is too heavy. The ideal situation is that you are using a position size that allows you to be able to live through the drawdowns and stick with the trading approach, because ultimately that's what it's going to take to realize the potential long term benefits of this trading strategy.
If you have any questions or feedback, I'd love to hear from you.