Increase Your Profits - Adjust Your Trading Strategies To Match Market Conditions

When I initially began trading back in the '90's, I was very fortunate. I had started trading during a period when the market was headed practically straight up. My first technique was writing covered calls which blended having a rising market in such a way that I practically never lost.

The perspective of time allowed me to learn that no market, good or bad lasts forever. The one constant is change. Under such circumstances, I learned to 'go with the flow', adjusting my strategies to complement market conditions.

Medium Term Trades

I explained earlier, my favored medium term technique has long been the covered call. This strategy enabled me to manage my fiscal affairs. By setting up trades created specifically to 'mature' on a predetermined date thirty, 60 or ninety days out into the future, it gave me money I could count on to help eliminate any slow periods of day-to-day cash flow.

As the premium began to dry up, I found writing covered calls a lot more challenging. I began to look particularly for those stocks which were volatile, that may be employed to temporarily take the place of covered calls as my medium term technique of choice.

Stock Movement

Let's look for a stock which moves frequently. I have my Chart Navigator system supply this by quickly calculating the average daily range of stock for the last month or so. I will take a look only at the stocks which have no less than a dollar and fifty cents or more movement every day.

You have got to have some idea of WHICH way they're most likely to move. We also narrow this search of high volatility stock to merely those stocks which move in a somewhat predictable range, much like a 'channeling' stock.

Given this information, let's look for some more characteristics. For starters, notice that the stock has stayed close to or within this range for several months. Additionally, each 'oscillation takes upto a month, moving from the top of the channel towards the bottom.

Bottom line, this stock is moving considerably, but going basically sideways. Now, let's trade this one medium term. If we can do this frequently, then maybe we can stop being concerned about the availability of covered call trades!

The Trade

Before you trade a stock, it is usually an excellent idea to know which way it's going. This is the obstacle! Trade it BOTH up AND down. These are the only two ways it is likely to go (remember the high daily movement).

We know we can't acquire the stock As well as short the stock (at least not inside the same account), so why wouldn't you buy a put And a call?! In such a case we might think about acquiring the thirty five dollar put and the thirty five dollar call. Typically referred to as a 'long straddle', the position enables us to profit no matter WHICH direction the stock moves.

Now, isn't it time to adjust your strategy to match market conditions? If you're just a little hesitant or perplexed at all, employ the help of an investment professional. They may be easily located online by doing a search for: reverse mergers, company going public, or reverse merger shell. Sooner or later, it'll grow to be easier for you to 'go with the flow' as well.

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