Knowing when to Trade

One of the most important lessons I have learned from my experience in stock trading is understanding when to trade. You have to know you own strengths and weaknesses as a trader in order to determine what types of markets you trade best.

The current market is one that I am approaching with a great deal of caution. The longer term trends (if you look at a two year weekly chart) of the market indexes (IWM, SPY, QQQ, DJIA) are still in an uptrend. The market indexes seem to be trying to find some support around the two hundred day moving average. The intermediate term trend (six month daily chart) we have been in a down trend for the past two months. The short term trend (10 day hourly chart) it looks the market may be trying to stabilize around current levels.

I prefer not to trade aggressively in the current market environment. Overall, it has been quite volatile and in a down trend. In my opinion, the current market, is best suited for very short term traders (day trading or scalping). I prefer a swing trading style where I can hold positions for at least a day or two.  I may look try some trades with smaller position sizing if the market shows some strength and follow through.  Specifically, I would be looking for a break above approximately the 130 level on the SPY.