The other day an Australian stock commentator was touting a local high tech, business support firm in Australia that also does business around the globe. That company’s stock plummeted drastically when the financials in the USA took a beating and/or got bailed out. The commentator’s argument is that said company has cash, won’t go under, has business, and when the recovery is in full swing will be making tidy profits. We suggest that trading the sleepers such as the stock mentioned above is a good strategy.

The same commentator noted that the “Warren Buffets” of the world are betting on a market rebound and are putting their money in stocks that they believe will rebound strongly in a year or two. Herd psychology keeps most long term investors from making these bets until the market starts to move. That is why trading the sleepers works.

Where does this put the day trader? This puts the day trader to work looking into the mind of longer term investors and especially those who bailed on good stocks as the general market collapsed in recent months. It puts the day trader to work looking for sleepers and anticipating when they will make their moves. That is trading the sleepers.

There are sleepers and they will come back. You can trade them in the options market and you can trade them day by day as they gain momentum. Obviously if you can get into the mind of longer term investors at the right time you can make a large part of their long term capital gain but you can make your part in a day.

Market Psychology and the Rebound

Psychology still drives the herd. Fear, more than prudence, keeps investors from putting their money where they truly believe it will grow. Trading the sleepers does not work for these folks. People will wait for a signal. That signal is usually the fact that a stock has greatly increased in value. That is not a signal. That is old news to the day trader. Successfully trading the sleepers takes a fair amount of preparation and only minutes of execution.

Picking your “trading the sleepers” stocks, picking your index, picking your stock market and developing a sound trading plan in advance of market moves will help you win the day.

Options Trading

There are many sophisticated ways to trade in options. In these times for trading the sleepers in this market we suggest the KISS method. For those who do not know this acronym it is “Keep It Simple Stupid” (or silly, if you are politically correct). It works time and again. Markets have dropped for good reason. Markets will recover for good reason. Individual stock prices will jump and recede as news, available capital, and sound reason dictate. Be there with a simple “trading the sleepers” trading plan and cash in on increased volume and the ebb and flow of the market rebound. Look for the sleepers and whether options trading or trading the stock itself timing will be key.

As times get better one thing to keep in mind is what a successful day trader friend of mine says in referring to his trading software and setup, “This not a toy. Don’t play with this at home.”

At lot of people lost their shirts, so to speak, in the market downfall because they got too into the technology of their trade. Trading the sleepers or any other strategy requires patience and the realization deep within that a couple of well timed trades will make you money in your business. Strategies such as trading the sleepers does not work if your self image is something different that that of a business person pursuing a reasonable profit for their work. Sometimes the glitz gets in the way. Don’t be afraid to spend a couple of hours with pad an pencil visualizing your trades, how they will present, how you will feel, and how you will react to changing market circumstances. Keep it all together in good times and bad and you will make money.

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