The stock markets rallied this week and attentive traders were there, scalping, taking advantage of momentum and high volume as the market moved up. Where were you? As the economy starts to recover the market will correctly, and incorrectly, move up or down. Every market move, up or down, means more volume, better liquidity, and more opportunity to make a profit.

We have talked previously on these pages about how half way through a recession the market typically anticipates and moves. However, the stock market can do things in fits and starts. Thus we will see rallies and retreats as the US and the rest of world work themselves out of the current economic mess.

The stock market moved last week and made up for lost ground since late last fall. The question for the short term trader is where were you when the market made its rally? What was your strategy? Did you scalp, taking advantage of momentum and volume?

If your strategy is only to trade with volume and momentum then you were there, right?

Were you watching the selected stocks that you trade? Did you have a plan for what happened?

If you were shorting the stock market when the rally started did you have an effective stop loss strategy and did you use it?

Tools of the Trade

Whether for a stock market rally or a market retreat the tools of the trade for short term traders come down to a well thought out, practical strategy, sound skills with the trading program you use, and practice, practice, practice.

Money is to be made when things move. You have to be ready and you have to be there. Keeping up with the market is essential, every day. Also it is important to listen to the advice of those with experience in both stock market rallies and retreats.

To avoid mistakes you need experience and the only way you get experience is by making mistakes. We talk about day trading as being a performance art. You are bound to make mistakes and perhaps you made them last week when there was a market rally.

Whether your performance was good, bad, or absent last week it is important to review your trades, the signals you followed as well as the signals that you missed, and learn from mistakes as well as successes. If your personal psychology got in the way of making money last week look at that too.

There is a point to be made about psychology and trading. Trading is a business. There is a romantic aura that attaches to being able trade successfully. One thinks of the “lone gun” or the “knight errant” from poplar fiction. The fact of the matter is that people make money in day trading by honing their skills, learning patience, learning to pull the trigger on time and not flinch. People make money in the stock market by making mistakes and then learning from their mistakes. Even a bad week can profitable if you choose to learn from your mistakes.

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