Tuesday, January 19, 2010

Fighting Market Moves

I've talked with a few traders this morning who found themselves fighting the move higher in stocks. A common refrain was, "We shouldn't be this strong."

One of the great challenges that I experience in markets is achieving a sense of market trend and context to frame trading ideas, but not getting so married to those ideas that I lose touch with how the markets are trading right here, right now.

That is why I ground myself in such intraday basics as where we're trading relative to VWAP; how many stocks are advancing vs. declining; how many stocks are upticking vs. downticking; and how much volume is executed at the market offer vs. bid.

I create a mental checklist out of those basics and don't allow myself to trade against the intraday tide, if there is one.

It's great to trade with hypotheses, but dangerous to allow hypotheses to become conclusions before the data are in.