Most years in trading, there will be tree shaking and so contraction in the market begins, shaking off all the weak apples before the expansion and a bullish trend.
Some years there will be a full blown bear market such as in 2000-2003, 2007-2009 and while officially 2020 went into bear territory, it did not last long.
Other years we will see nothing but sideways action and not much else which can pound our patience.
This year brought a new dimension to the market for everyone to experience for the first time. Fastest ever decline followed by the fastest ever recovery. Not to mention fastest ever bear market.
However, actually going through that swift bull – bear – bull market was not as easy as it sounds as all of you will know.
Below is a chart of our percent of return (POR) displayed on the right of the chart.
The periods where the line is flat is when we were mainly waiting and our POR (about -50%) was not going anywhere due to lack of buying into the market. There were some missing updates during that time also so although the flatline is not accurate, there was not too much in the way of action.
Dips in the POR line seem easy to deal with but the reality is it does require some discipline to stay the course.
After a year of unprecedented price action and uncertainty around the world, of all our trades, a handful made it through the other end to really outperform the market.
You have heard me say you only need a few good trades to have a profitable and successful year. Those trades are listed below in the chart. And each of them have tested us in different ways so don’t assume any of them gave us immediate gratification. It was hard work.
ZM had an abundance of negative security news but we kept on buying more stock.
TSLA would not give us an entry so we had to stand aside and watch it move up without us onboard until the pullback.
MSFT was quite docile in its uptrend but probably the least testing of these.
NFLX went sideways for over 2 months.
AMD went sideways for almost 3 months.
This has without doubt been the most difficult year in trading we have had to face but no different to what we have to do each year.
- Know when to trade
- Ignore the noise
- Watch the dumb money
- Follow the smart money
- Enter on the trade set ups
- Stay disciplined and follow the trend
Knowing when to trade is the most important point as you will know.
Ignoring the noise on the chart is also important so as not to be distracted.
Majority of traders are usually wrong. So we watch them so as not to do what they are doing.
We watch the smart money to see what they are buying so we can look to see if there is suitability for us.
We look for the high probability and/or low risk set ups regardless of the circumstance.
Ignoring the news and near term noise allows us to focus and follow the trend.
Just a few more months before 2020 comes to an end.
Let’s go trade!