Boost Your Earnings - Adjust Your Current Trading Strategies To Match Market Conditions
When I first began trading back in the '90's, I was quite fortunate. I had started trading during a period when the market was headed virtually straight up. My first strategy was writing covered calls which blended with a rising market in such a way that I virtually never lost.
The perspective of time has allowed me to learn that no market, good or bad can last forever. The one constant is change. Under such circumstances, I learned to 'go with the flow', adjusting my strategies to match market conditions.
Medium Term Trades
As I explained earlier, my favored medium term strategy has long been the covered call. This strategy enabled me to control my fiscal affairs. By setting up trades created specifically to 'mature' on a predetermined date thirty, 60 or 90 days out into the future, it gave me cash I could count on to help eliminate any slow periods of daily cash flow.
As the premium began to dry up, I discovered writing covered calls a lot more challenging. I began to look especially for those stocks which were volatile, which could be employed to temporarily replace covered calls as my medium term technique of choice.
Stock Movement
Let's search for a stock which moves frequently. I have my Chart Navigator system supply this by instantly calculating the average daily range of stock for the last month or so. I will then look only at the stocks which have at least a dollar and fifty cents or more movement every day.
You have to have some idea of WHICH way they are most likely to move. We also narrow this search of high volatility stock to merely those stocks which move in a somewhat predictable range, much like a 'channeling' stock.
Given these facts, let's look for a few more characteristics. For starters, notice that the stock has remained close to or within this range for several months. Additionally, every 'oscillation takes upto a month, moving from the top of the channel towards the bottom.
Bottom line, this stock is moving a whole lot, but going basically sideways. Now, let's trade this one medium term. If we can do that regularly, then maybe we can stop worrying about the availability of covered call trades!
The Trade
Just before you trade a stock, it is usually a great idea to know which way it's going. That's the challenge! Trade it BOTH up AND down. These are the only two ways it's likely to go (remember the high day-to-day movement).
We know we can't acquire the stock As well as short the stock (at least not within the same account), so why not buy a put And a call?! In this case we might think about buying the thirty five dollar put and the thirty five dollar call. Normally referred to as a 'long straddle', the position enables us to profit no matter WHICH direction the stock moves.
Now, isn't it time to adjust your strategy to match market conditions? If you're a little hesitant or perplexed in any way, employ the help of an investment professional. They can be easily located on the internet by doing a search for: reverse mergers, company going public, or reverse merger shell. Sooner or later, it'll grow to be easier for you to 'go with the flow' as well.
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