Uncertainty over US and China’s Trade deal continues as the markets began the week lower. While volume was lower across the board sellers were able to keep the market suppressed. At this point in time there is a very real possibility we see this market see lower prices in the coming weeks. Seasonality is not in favor of this market as we are in a weak period. Perhaps a trade deal will help this market avoiding lower prices, but anything is possible here. There are no guarantees and we cannot predict what will happen even if a deal is struck. Our purpose here is to maximize our profit potential. To accomplish this, we must contain our losses. Risk management continues to be the highest priority as we navigate this market. Wherever this market wants to take us we will follow along.
Discipline is key to success, but right now with regards to our risk management is paramount. Knowing what our open risk is and where the exits are will help you avoid massive losses. These losses will destroy your ability to maximize your profit potential in the future. Taking a loss is an admission you were wrong about a stock. It is okay. Be prepared to be wrong a lot. However, when you are wrong you are wrong small. On the flip side, when you are right you are right big. This formula is not new by any stretch of the imagination, but very difficult for most to implement. We cannot force you to follow this philosophy, but what we can do is tell you it works. Many traders fail because they simply cannot control their risk properly. Do not fall into this trap.
Last week we mentioned TNDM and MDB. These two stocks are still doing well and are holding up despite this market’s inability to push higher. There are stocks out there setting up within bases and acting just fine. If you keep an open mind and have a process you will find these stocks. Big Wave Trading can help you find new winners to add to your portfolio. Of course, we also identify where we would exit trades. There is always the entry and exit. We don’t just identify stocks to go long. Knowing where to exit is more important than your entry unless you are chasing a stock. We never chase an entry.
Where we go from here will be interesting given some of the challenges we face. As of 6:20am Dow futures are pointing to a higher open. Let’s see what the market has in store for us today. We hope you have a great week of trading!
