So many traders have been getting chopped up the last few days with the market stuck in a tight range. There was a ton of volatility in the markets the last couple months, and recently we have seen a major contraction in the range of the overall market. We are too overbought to have a high probability of long trade, but there has been no weakness to suggest that short plays are on as well. 

Today we are going to talk about how to develop the patience for the best opportunities, and how to capitalize on them in the current market conditions:  

Patience For the Right Opportunity

The ability to know when to trade or not is the most important skill a trader can have. When you look back at your PNL at the end of the month, you will realize that a lot of your losses came from subpar setups, that you know deep down you shouldn’t be trading.

Everyone has different A+ setups, because everyone has a different style of trading. You have to define your trading style to the point where you can distinguish between low probability and high probability setups. Once you can identify all the characteristics of a high probability setup, you will know what stocks to avoid, and which ones to really size up on.

Getting Back In

The best opportunities will often setup more than once. Don’t make the mistake of thinking that the trade is over after you get in and out once. Until there is an obvious sign of the trend changing, there is no reason to not keep buying dips until it stops working. Adding to winners as a distinguishing trait of all winning traders.  

A+ setups do not come along every day, and when they do, it is your duty to capitalize on them. It only takes one good day with one of these opportunities to make your week’s pay. You cannot control when these opportunities will appear, but you can control whether or not you capitalize on them.  

MBOT

MBOT is a great example of the kind of A+ opportunity to wait for, and one which you need to hit multiple times. After it had the opening range breakout, it had multiple opportunities for a reentry:

When you see a former runner like MBOT rotate its float in the first 5 minutes of trading, you know it will be high probability play to the long side. Stocks like this can run further than you think, so don’t be afraid to reenter, especially once you are in the green and have some cushion. 

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The post Day Trading In Play Stocks to Start 2019 appeared first on Bulls on Wall Street.

Most traders today have never seen a bear market before, and have no idea how to capitalize. Today we will give you our best strategies and tips for day trading market volatility, and talk about how you can build up your account in 2019:

Inverse ETF’s

My favorite way to capitalize on weakness in the overall market is to long inverse ETF’s. Inverse ETF’s are very simple: They appreciate in value when the overall market depreciates. Our favorite instrument to trade is TVIX. On some days when the market is rolling over, it can go up 10%-20% in a day.

Note that leveraged ETF’s should just be used to capitalize on short term momentum in the market. They also have major pullbacks since they are leveraged, and can fall just as fast as they rise. I never hold positions in them overnight, as they tend to decay overtime, and they have huge gaps in both directions.   

Keep Size SMALL

Many new traders are under the impression that increasing position size will automatically make you more money. In volatile markets, trading large position sizes will actually make you less money. You will become more emotional and as a result make poor trading decisions. You will see some wild swings in your PNL, and you will focus on the money instead of the market’s trend.

You don’t need trade that much size to make good money when you have this kind of volatility. When trading something like TVIX that can move 5 points a day, you only need to be taking 100 shares of it to get $200-$300 days, especially if you are scaling your positions.

Scaling In and Out of Positions

My favorite trick to capitalize in volatile market conditions is to scale in and out of my positions. This means that I will buy and sell ¼, ⅓, or ½ my positions, instead of buying and selling the whole thing each time. This useful in volatile market conditions when there a large swings in each direction.

I find that scaling helps newer traders stay less emotional and keep losses small. There is nothing worse than getting a big move in your favor, not taking profits, and then having it completely come back to your entry price and turn into a loss. Taking ½ or ⅓ of your profits allows you to get some cash flow, while also keeping yourself in a position to capitalize on a bigger move.

You can also scale in with your entries. This allows you to keep your losses small if you are not on the right side of the trend. If you only take ½ of your planned position size at first, if it turns out you were wrong you are taking a very small loss. Next time when you get on the right side of the trade, you can add the second ½ of your position and have a much bigger winner. This will keep the risk vs reward ratio strong, and make having a high win percentage less important.

Don’t Blindly Short

Most traders reading this have not traded in a bear market before. Most are under the impression that the market just goes down everyday, and you just need to short at any price and you will make money. Bear markets are actually periods when the market sees some of the largest rallies.

If you look back at 2008, you can see the S&P had multiple periods were the market rallied 10%-20% in just a few days. Just last week we saw a 7% rally in just one trading day. If you short at the wrong time, you will get squeezed badly, especially if you are trading leveraged ETFs. You need to learn how to wait for a market pullback. 

Pullbacks

Buying breakouts and shorting breakdowns is the last thing you want to be doing in volatile market conditions. More volatility means all instruments are trading with larger than average ranges. If you are chasing strength and weakness you will get smoked out. If the breakout or breakdown doesn’t follow through, the market will likely have a huge reversal and you are going to be underwater.

Instead, wait for pullbacks to the intraday moving averages and the VWAP. You want entries that give you a sold risk vs reward ratio, ideally at least 2:1. Given the range of everything in the current market conditions, you can get some very high reward plays, sometimes 4:1 or 5:1,if you are patient for the right entry on a pullback.

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The post Essential Tips for Day Trading The 2019 Market Volatility appeared first on Bulls on Wall Street.