Please Bear With Me

The predator is back and we are all its prey. 

There are quite a few things that this market is teaching a neophyte like me:

1. Pick a set-up and be great at it.

Unless you're Sherlock Holmes, you can't master every play in the book. So you choose one and you study like hell to perfect it.

I am far from perfecting mine, but I have always leaned towards stocks that show forceful momentum and so I have always been a breakout trader.

What is a breakout trade?

Once a stock touches its resistance, it can do one of three things: breakout, consolidate, or untog.

Breakout

Conso

Untog

I buy on breakout because it signals a strong momentum. When resistances are broken, the stocks are free to fly as a bird. Until of course, they encounter another resistance, and the process would then repeat: breakout, consolidate or die.

Think of the stock that's about to breakout as the "unstoppable force" and its upcoming resistance as the "immoveable object."

An unstoppable force and an immoveable object both cannot exist at the same time. It’s a hoax. For better or for worse, one of them has to give way—and you better be ready whichever one chooses to.

When Hillary ran to be the first woman leader of the free world, most journalists, artists, people of color, and women were behind her. After all, she was running against one of the most misogynistic bullies the modern world has ever seen. The polls predicted her win since day one. She has her faults but she has it in the bag, the analysts said. She showed so much force and momentum, it seemed as if America would finally have a Madame President.

But alas, the glass ceiling was reinforced with white supremacy stronger than steel beams and she failed to break it. It’s THE immovable object, and Hillary was stopped short. Maybe it's not yet time, maybe the world is not yet ripe for a breakout. One day, the glass ceiling will be shattered. Until then, life goes on and we move on.

And we hunt, and we study, and then we study some more.

2. But learn to go out of your comfort zone.

I started dabbling in stocks May of last year, but I only actively traded January of this year. My trading career is as old as the fetus in my neighbor’s 9-month old belly. But as a fetal trader, this is the most blood I’ve seen. So many plays with a promise of ever-after, only to end in a break-up shortly thereafter. 

On a market condition like this, ang hirap maging breakout trader. Breakouts turn into fakeouts. You press buy today only to cut your losses the day after. It was a little disappointing.

So how about we try expanding our horizons? I tried looking into sleeper plays, or studying more about bounces. I don’t have a decent batting average on those plays. But just because I’m not good at it, doesn’t mean I can’t be. The market is giving us a chance to grow. We take it and break, or we take it and be better.

3. Curb your expectations.

During and a little after the ZFT course, my biggest port movers were the ones I did not put target prices on. It was position trading. I used trail stops on them instead allowing my profits to run as much as it could until the chart says stop. 

MAs as trail stop

But these past few months has taught me that setting target prices is wiser on a market season such as this. I’ve had pera-na-naging-bato-pa moments because I expected the market to adjust for me. The market never adjusts to anyone. And those are moments I’d rather not relive. Ang sakit eh. Setting target prices (TP) means protecting your profits on a season where plays expire in a day or two. 

But as in all things trading, TPs should be reasonable. Why did you set your target on a certain price? Does it have a technical basis? Or feel mo lang?

4. Set tighter cut loss points.

These days, I let go of positions the minute they reach the -2% mark. It’s a personal preference and it’s an awfully tight cut loss point, but I just don’t trust the market enough to let my losses turn into bigger ones. As a result, I've had whipsaws more times than I could keep track of. I cut positions a day, an hour, or a few minutes before they fly. And I'd be lying if I said I was immune to the inevitable headshake and to thinking sayang. But such is the price we pay by following the number one rule in trading: always protect your capital. 

There are days when I’d think, “I should have held on a little longer.” But then there are more days when I’m thankful I cut as early as I did, “buti na lang.” It might have been a bad entry, an incorrect bias, or whatever it is that colors your port red, make sure to let it go fast.  

I don't know if it's just me, pero 'di ba mas masarap matulog kapag walang pula sa port mo?

5. Choose your battles wisely.

Cash is also a position. This has been played like a broken record. But it’s something only a few people understand. Traders have an itch that they can only scratch by hitting the Buy button.  I’ve been a victim, I probably still am, and so are a lot of people. It’s what makes us lose money; getting into war you never prepared for.

You don’t have to buy one stock every day or even have one every week. Maging maarte ka, maging choosy ka. Look for the outliers; those that turn green in a sea of red, those that rally when all the other stocks are rolling down the hill. But if something moves and you want to press the Buy button, ask yourself first: Is this the fear of missing out? Is this according to my trade plan? If you've prepared for it, then please by all means, go get it. Otherwise, sit back and enjoy the show.

Be on the defense when the market is charging on the offense, because the market always wins.