Protect Capital Even in a Bull Market

This market sure has been strong – we have yet to see a pullback which has lasted longer than a few minutes!

Instead, we’ve merely seen brief pauses of sideways price action, which is quite nice…if you’re long.

A powerful market like this does have a downside though, which is fewer quality setups for new long side entries.  And shorting?  Well, let’s just say some feelings have been hurt for the bears!

We’ve come a long way since the July 8th lows, and right here, it’s very easy to chase stocks if you want to get long.  It feels like it almost can’t go down (famous last words), and thus confidence is really high.  But that doesn’t make buying here a good decision.  In fact, sometimes it’s best to actually let the market come to us after such a move.

Protecting capital is the top priority of all successful traders. Making money is secondary.

Even strong bull markets like what we’re seeing right now require that we protect capital. It’s easy right now to think making money on the long side must be easy when the market rallies almost daily.

But trading out of fear that the market will run off and leave you behind is a recipe for forcing trades, which will usually cost you more money than it’ll make you!

Stay Focused

Our job as traders is to take only the best setups with the highest reward and lowest risk associated with them.

Keep that in mind here, as the market remains quite extended on a short-term basis. Manage your open positions the best way possible, and be willing to patiently let the market come to you.  Once it does, then set up new trades.

There will be plenty of good setups in the next few days and weeks, but it isn’t wise to lower your standards and buy stocks that are technically extended just to get long.

A lasting bull move will offer plenty of chances to buy, and that’s best done on pullbacks or after resting phases.  If this breakout sticks, we should see many opportunities in the weeks to come.

Thanks for stopping by and I’ll see you here soon with more. Until then…

Trade Like a Bandit!

Jeff White

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