Trading sessions like today show how dynamic the psychology of fear can be in the markets. On the way down, there is great fear amongst traders of getting caught long during a crash. That can quickly shift when we see a huge gap higher like this morning’s, where all of a sudden the fear actually morphs into one of missing out on a spectacular rally. In this day and age of social media and internet, allowing both types of fear to seize control of your trading via egomania can do great damage to your portfolio. One of the recent themes of my posts has been using social media as a trader to your advantage, rather than allowing it to adversely affect your craft.
A better approach is to check your ego and acknowledge that just as good poker players often fold winning hands, good traders often take a pass on potentially profitable trades. There are simply too many stocks and sectors that makes moves on a daily basis to catch all of them. Indeed, in this life, you can anything, but not everything.
The market has done very little since this morning’s opening gap higher. Price has essentially gone dead, as you can see on the 3-minute chart of the SPY below. The VIX remains stubbornly above 30, which is problematic for me in terms of putting on long swing trades with any type of conviction to hold for more than a few days. Thus, I am still being selective in my long ideas, preferring to focus on clean charts such as SWI, which is above all moving averages and capable of a breakout should the market improve.
___________________
@chess, Nice post. It not only damages the portfolio, but does great damage to the trader’s ego.
Indeed. Thanks.