Doing The Livermore

When Jesse Livermore didn’t feel like the market was right for him to be trading, you know what he did, he went on vacation.  I don’t own a boat, and I’ve got too much in the way of other work to just take off an go surfing in Indonesia, but I am out in San Diego chilling at the beach, watching the market chop swing traders to pieces.  Yes, I’ve got small short positions in retail via $XRT and Spain via $STD, but they just aren’t big enough to make my stomach churn by going against me 3 or 4 percent, which by the way they have not.  In fact I’ve got pretty nice unrealized gains in both, along with a decent realized profit as well as I pared back my positions last Friday.

Are my positions large enough to make me a huge amount of money if the market collapses, not really, but they are big enough to keep me interested while I work on other things.  I don’t believe it’s ever good to completely step away from the market, a week of not looking at the tape at all can throw you off your game.  Even if it’s just taking a glance at the action in a few key ETFs once a day on vacation, it’s a good thing.  Having a few short positions also keeps me from getting involved on the long side when I know it isn’t right to be doing so.  Yes, there are a few stocks that are setting up that I could buy with tight stops, but why screw around with an unstable market.  Those two small short positions keep me sharp and building my lists for when the market is right to jump back in.

Just like many of you, I love to trade, and prying my finger from the buy button is hard, but not trading in a market where you don’t have an edge is just as important as trading vigorously in a market where you do.  Don’t be over eager, this mess could take a while to sort out, I’m talking multiple weeks to months, not a few days.  It’s been what, less than two weeks since we broke down through the head and shoulder topping pattern, give it some time.

As well, if you begin to jump in now and get cut up taking multiple 3, 4, 5 percent losses, you may be more hesitant to jump back in a few weeks later when the market sets up for real.  Preserve your confidence like Joe Fahmy says, it’s very valuable to being able to trade with your instincts instead of on fear.

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