One of the most frustrating aspects of the current market is the choppy action.
It’s obvious with individual stocks – where a stock will start to run, pushing up 3% or more one day and looking like it’s ready to press higher.
Then it backs off 3% or so the next day, basically wiping out whatever gains it had previously.
Lots of action… but, no real movement.
The same is true for stocks that fall one day, and finally look to be beginning a correction phase. Then, those same stocks recover the next day.
That choppy action just drives traders crazy. Most of the time, the initial move isn’t enough to justify taking a profit on a trade. So, we hold on to it – hoping for just a bit of follow-through on the move.
Then… the move reverses and whatever slight gain we had just disappears.
Personally, I’m sitting on eight positions in my trading account – six long trades and two short trades. Every one of them is stuck in a “chop.”
To make matters worse… even sectors that I’m waiting to buy into are stuck in a “chop” as well.
Gold stocks (GDX), for example, have been chopping back and forth for more than three months. Every time it looks like GDX is finally going to break down and decline to where I’d like to buy it ($25-ish), it somehow finds support and bounces.
Then, every time it looks like it’s ready to break out and start a new rally (above $28) GDX hits resistance and turns back down.
In this sort of environment, the ONLY smart thing to do is to simply wait it out.
Yes… it is enormously hard to be patient. But, the “chop” will eat you up. It will mess with your emotions. It will wear you out. And, it will eventually convince you to abandon your trading discipline and just make trades for the sake of doing something.
And then the “chop” will take all of your money.
Don’t let that happen. Instead, just wait it out.
Here’s the great thing about the “chop”: All the back-and-forth action builds up energy. At some point that energy will be released with a big move in one direction or the other. And, that move will be more than enough to generate gains that will make up for an extended period of inactivity.
But, you have to have money available to take advantage of it. If you’re forcing trades just for the sake of doing something in a choppy environment, then you’re probably going to churn your account.
And, you’re not going to have money available to take advantage of the breakout/breakdown when it happens.
Stick with your discipline. Only trade new positions that offer you a low-risk/high-reward setup. And, be willing to accept the fact that sometimes there just isn’t anything to do. Choppy markets eventually turn into trending markets.
So, if you can avoid chopping up your account, then you’ll have money available to take advantage of the next trend.
Best regards and good trading,
Jeff Clark
P.S. By now, you’ve probably heard about Larry Benedict’s Trade-a-Thon going on tonight at 8 p.m. And, you might be wondering if you should take the time to attend…
Well, I’m here to tell you… If you skip it, you’ll be missing out on something truly unique and valuable.
Larry’s 35-year hedge fund experience is something I just haven’t seen anywhere else in newsletters. He’s giving away his personal favorite list of 50 stocks to trade, free to all who attend. And, he’s sharing the results of a challenge to generate at least $70,000 in a single trading day – along with all the methods he used.
From someone who had a 20-year win streak from 1990 to 2010… and who made $95 million in 2008 while most investors got crushed… That sounds to me like something you can learn a lot from.
To make sure you don’t miss out, just click this link and sign up.
Reader Mailbag
Today in the mailbag, subscribers give their reviews of the new and improved Jeff Clark Mobile companion app (subscribers, download the free app here for iOS and here for Android)…
LOVE the new app. All four subscriptions in one place… I’m no longer guessing which one the alert is for because the app always opens to the previous alert. I also like the blue dots and
the increased line spacing.GOOD WORK, thank you.
– Beth
Just yet another note to thank you for your terrific newsletters. I look forward to your comments every day.
You are essential reading because 1) you’re often right (which is valuable) and 2) because you are extremely informative. I deeply appreciate how you continue to educate us on market trends, and how/why you make your recommendations.
Your newsletters “teach a man to fish.” I really couldn’t be more pleased or more grateful for your service.
Second – I wanted to say I love the new phone app. I only noticed the terrific changes today. Everything in one place… in a very nice scroll. It’s very convenient. I love it!
– Gregory
Love it. So much better than what you had previously.
One thought for future development…. on my iPad I used a keyboard case and thus view my iPad all day in landscape mode.
Your app does not rotate from portrait to landscape thus making it useless for me on my iPad the way I have it set up.
I think many people use their iPad in a similar way, so updating the app to rotate seems to make sense. I know I will use it more if it rotates! Thanks for your consideration.
– James
Thanks, everyone, for your valuable feedback on the new mobile app. We’ve sent it along to our development team. Keep an eye out for future updates!
Moving along… Don reports on his experience using Jeff’s services…
Jeff, I am a member of all of your services. I’m up 30-40% over the past few months. I really enjoy your instructions and care.
– Don
And Mark has a theory on the recent “baffling” market action…
I know why the markets are so baffling right now. It’s QE5 (or whatever the current level of Fed meddling is).
People everywhere are baffled. I monitor several advisories, and they’re all missing their calls; lots of negative numbers showing in people’s portfolios. And this is the mother of all bull markets! It’s trading on steroids.
– Mark
Thank you, as always, for your thoughtful comments. We look forward to reading them every day. Keep them coming at [email protected].