Only a few months ago we were talking about how difficult the markets had been, particularly during 2012. Despite an extended period of difficult waters to navigate, the secret to long term success in the markets is having a plan and the discipline to stick to it.
Not everyone does and not everyone will, that’s just a fact of life. But for those that stick to their guns and ride the ups and downs that inevitably the markets throw at us, rough patches eventually pass.
All of a sudden a few months later and the outlook suddenly looks very much rosier. Sticking to plan with just a few tactical tweaks here and there plus a dose of common sense occasionally, our short-term trading has broken out of the doldrums of the dull period and we’re regularly seeing new equity highs on the model account almost weekly.
That is not to say these markets have been easy of late because they certainly haven’t. Not easy but at least tradable again, sufficiently so to get upside traction in the equity curve. Personally I’m happy with progress here. My only regret is that I can’t MAKE people stick to their game plan. I always encourage, try to motivate, try to coach and handhold those who work closely with me – to give them the best chance of being along for the ride at the times that matter.
Fortunately many do have the tenacity to hang on in there. But the actual determination to stick to plan can only come from within and that has really been put to the test over the last year!
Longer-term still lagging
But it’s not all good news. Our longer term trading which has also been irritatingly moving sideways for an extended period of time has not yet broken out to the upside. It will, it always does. It is just a matter of time. The only question is how many traders have the determination to gut out the dull periods, to stick to plan until better times appear?
On the horizon
The markets are now picking up. Literally as I write this (June 3rd), coming back from a few days break I see the VIX at 17 which looks like it’s setting up for a big breakout (a close above todays high would be significant in my view). We also can see [ismember]shifts in the yield curve, potential big moves setting up in the dollar and foreign currencies. The general “feeling” is that there is going to be lots of activity this summer. Remember, “activity equals opportunity”.
So the big questions for many traders who have struggled with the very difficult markets presented in the last year or two, are these:
- Are you ready to switch gears, to start lifting size again?
- Is your trading plan in place, clear and easy to follow?
- Have you stuck out the hard times and kept faith that things would get better?
Many have come through the doldrums, in decent shape, held their nerve, managed drawdowns professionally, and are ready for the upturn. Generally these are traders who have been in the markets for a longer period of time, who have previous experience in riding the waves up and down, are practised at sticking to their plan and waiting patiently for the markets to do what the markets are designed to do. These are the folks who are currently being rewarded better and who should be prepared for a bumper harvest this summer.
Sadly not everyone will have come through in such good shape. Those least likely to have survived last year’s difficult markets are the newer traders, although that is far from a complete picture. Many career traders threw in the towel at the end of last year in disgust. My hope is that readers of this newsletter are still hanging in there ready for the good times that I believe are on the way.
I know many people who trade part-time who have been able to wait reasonably patiently on the sidelines hoping that better times would come back before too long. If that’s you, I believe that now is the perfect time to start climbing back into the saddle. Dust down your plan, get your mind back in touch with the markets, get organised, get your software up to date, and start dipping your toe back in the water. You need to be up and running, fresh and alert – ready for this summer.
Not every summer is a dull event even though conventional wisdom says Summers are quiet. We have seen many times when that is not the case, particularly when everyone is off guard, everyone thinks all is quiet and complacency is at a high.
I may be completely wrong of course, but right now there are many different clues suggesting that easier times are just round the corner and we need to be as prepared as we can be to make the most out of the good times in the same way that we tried to minimise the damage during the rough times. That’s the secret to riding the waves that the markets throw at us over time. Back off both activity and unit size when it’s tough, press ahead and lift unit size when things are good.
I wish you a wonderful summer, and hope that this article will serve as a heads up to make the most of what I believe will be a very good few months ahead of us.
Until next time, wishing you every success!
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