Raise Your Earnings - Adjust Your Trading Plans To Match Market Conditions

When I initially began trading back during the '90's, I was quite fortunate. I had begun trading at a time when the market was headed nearly straight up. My primary 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 understand that no market, good or bad can last forever. The only constant is change. Under such circumstances, I learned to 'roll with the flow', adjusting my techniques to complement market conditions.

Medium Term Trades

I explained earlier, my favored medium term technique has long been the covered call. This technique enabled me to control my fiscal affairs. By setting up trades designed specifically to 'mature' at a predetermined date 30, sixty 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.

While the premium began to dry up, I discovered writing covered calls more and more challenging. I began to look specifically for those stocks which had been volatile, that may be employed to temporarily take the place of covered calls as my medium term strategy of choice.

Stock Movement

Let's search for a stock which moves a lot. I have my Chart Navigator system supply this by automatically calculating the average daily range of stock for the past 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 concept of WHICH way they are most likely to move. We further narrow this search of high volatility stock to only those stocks which move within a somewhat predictable range, very 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 quite a few months. Additionally, every 'oscillation takes about a month, moving from the top of the channel to the bottom.

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

The Trade

Just before you trade a stock, it's usually a good idea to know which way it is going. This is the obstacle! Trade it BOTH up AND down. These are the only two ways it is likely to go (bear in mind the high day-to-day movement).

We know we can't buy the stock And short the stock (at least not in the exact 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 along with the thirty five dollar call. Normally referred to as a 'long straddle', the position allows us to profit no matter WHICH way the stock moves.

Now, are you ready to adjust your technique 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 conveniently located on the internet by doing a search for: reverse mergers, company going public, or reverse merger shell. Eventually, it will become easier for you to 'go with the flow' too.

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