No matter what your time-frame, be patient enough to trade against an edge

  • Posted by
  • on November 2nd, 2012

It’s important for us to have a big tool-box because it enables us to be patient enough to trade against an edge.   We do two basic strategies:  1)  trend trading which means we look for stocks with good bases and buy or anticipate breakouts.   2) reversion to mean trading (still though often within the direction of the longer time frame trend)  which means we look for extended moves into support for longs and extended moves into resistance for shorts.

By combining these two strategies it means we have a lot of potential options for trading.   We are the most patient short-time-frame traders you can imagine– we don’t get involved until we have  a hard edge to lean against, i.e. when the risk/reward is compelling.  Anything in between we sit out or make small bet (1/5 to 1/10 the normal size) intraday-trades using intraday patterns.  But the big money/big bets always comes at the big spots.

We wrote on stream yesterday that $SPY was going to hit the 50sma and daily resistance at 143.7


But even more importantly was the idea that you had to just sit on your hands and wait for that big price to hit first:


Today’s high?  143.72;  and the resistance alert from our  newsletter last night? 143.7-144 with 30-40 cent stop.

We imagine that many shorts put on yesterday were stopped out at the gap open.  Why put on a trade in no-man’s land?  It might work here and there but in the long run you’re setting yourself up for failure.   Be patient, wait for that good risk/reward edge, and trade against that — that’s the basis of our whole strategy, and it’s been good enough to keep us in the business for 15 years.


The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.

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