Q.O.D July 5
Q: I think the market is way overvalued and think it is going to continue down. I trade the SPY ETF and sometimes the QQQ. I took a hit last month but still confident the market will correct. Should I switch to options instead so I don’t have to put as much money at risk?
A: I’ll try to have a little fun with you in providing my answer: don’t think as much! If there is one key change I had made that was the ‘light bulb moment’, it has to be that I started to simplify my trading, not worry about every little tick and indicator on my screen and most importantly; not try to pick where I think the market it heading. I figured if the top economists can’t figure it out, how can I? Besides, remember what our role is as traders. It is not to pick market direction. It is to execute a strategy that takes advantage of market opportunities presented to us.
Sure we all have biases regarding the market but generally those are 50-50 best at best for most of us over the long run and we tend to remember the one time we picked the top or bottom. Just an observation in your question. You mention you sometimes trade the QQQ and may want to consider options. Options are an entirely different game with lots of nuances that need to be understood before getting your feet into the water. Most successful traders specialize in one or two markets and instruments. They become masters of the ebb and flow of price movement that goes way beyond charts and moving averages. Find one or two trading instruments that you eventually get to the level where your internal indicator is as effective as the ones on your chart.
