One Method for Profiting in this Tricky Market
This market reminds me of a few years ago leading up to March 2005, where every bounce was an invitation to short sell (up until the final low was made). That market provided me with one of my better stretches of consistent profits, ironically with somewhat small position sizes.

Back then, the back-and-forth market action was producing sharp pullbacks & bounces much like what we’re seeing now, & I was trading a effective system which was low-stress yet highly profitable. Call it the ‘Pick & Grin’ approach.

What I would do was establish small pilot positions (pick) in stocks on reaction bounces anticipating a move back down once the bounce was sold. This method of starting smaller positions, booking some fast gains, and adding exposure when the stock returned to previous levels was very good to me. If my entry timing was poor, it didn’t matter a lot because I was only in a partial position. Depending on the stock, I’d either add the remaining shares up to my intended size (average down the good way), or cut the trade entirely and look for a better spot to re-enter.

Once the stock start to weaken, I’d place bids to cover at least half of my position, booking profits as the trade developed in my favor. If the move was sharp, I’d take most of it. If the move was slow and steady, I’d scale out on the way down. Then I’d patiently wait for the relief bounce or oversold bounce to arrive so that I could remount the shares that I had covered.

One time the stock began to weaken, I’d place bids to cover at least half of my position, booking profits as the trade developed in my favor. If the move was sharp, I’d take most of it. If the move was slow & steady, I’d scale out on the way down. Then I’d patiently wait for the relief bounce or oversold bounce to arrive so that I could remount the shares that I had covered.

Right now, this market is making it very difficult to hold positions for very long. The sharp spikes upward we’re seeing are being followed by dizzying spirals right back down, making it much tougher to not only locate nice swing trading candidates, but also harder to hold them.

Think about the Pick & Grin approach until things smooth out. With the sharp market moves likely to continue for at least a short time, it won’t hurt to trade a small smaller. And, the add-and-subtract style of the Pick & Grin approach will let this back-and-forth market play to your advantage.

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