We continue to see Small Cap Stocks lag the broader market as the NASDAQ and S&P 500 continue to push higher. Small Caps are typically seen as a risk-on trade. Traders and investors alike are not flooding to the group as we would like to see for a bull market. Earnings season continues to move along and so far we have yet to see the market react negatively. A correction could be around the corner, but we and others do not know the future. What we do know is what is in front of us without bias. It is easy to get stuck thinking you know where the market will go next. What is in our control is how much we have at risk. What is our position size and where are we exit a trade. We are not the pioneers of this method, but we employ it to our advantage. Successful traders know their risk. This market is certainly an interesting organism and we will follow along.
Our most important tool in our toolkit is knowing where and when to cut a loss. Most do not like to admit when they are wrong and hang onto positions when they should be exited. Position sizing is another important piece to the trading puzzle. Many simply trade by the seat of their pants without a plan in place. Most learn the hard way. We exist to help those along in their trading journey avoiding costly mistakes. Big Wave Trading has been around since 2007. Not because we were lucky, but because we follow a simple process and are on point with our risk management process. Successful traders are those who have a solid process cutting losses and riding winners. The formula is not complicated and takes discipline to follow.
Big Tech earnings are set to be released over the next week or so. It will certainly be something to pay attention to as the NASDAQ will follow along the likes of FB, MSFT, AMZN, GOOGL, and AAPL. Trying to game a stock during its earnings release is a risky gamble. It boils down to whether or not you have proper cushion in a stock. Up 20% or more? Riding out earnings may be a bit easier than if you are flat on a position. We aren’t about to risk capital when we do not have an edge. Pat attention to when your stocks report and address the position accordingly.
We hope you had a great long weekend and a great week of trading!
