OPENING POSITION
March 2002
Anyone who watches the markets on a regular basis - or reads Technical Analysis of STOCKS & COMMODITIES on a regular basis - knows that market sentiment can change quickly. In January 2002 there were several signs of a turnaround in the markets. This led many to stay on the sidelines and wait for the markets to soar beyond their resistance levels.
That didn't happen. Instead, the markets implied that the rally would not be sustained, and even began to drift down. Not only that, though they may not have been anywhere close to the lows of September 2001, the major indexes showed losses for the first time in 2002.
It's too early in the year for this to have any significance, but it was enough to dampen the market's optimism. The short-term rally we witnessed after the September 2001 lows is a prime example of a traders' market - one that reached overbought levels and then headed south.
As a trader, you will always have to be wary of these short-term swings. In our interview this month, successful swing trader David Landry tells us that he prefers to analyze the markets on a day-to-day basis instead of on a long-term one. He discusses various techniques and the patterns he looks for to identify these short-term swings, as well as some money management strategies he implements.
To successfully trade short-term swings, however, we must build solid systems that can withstand such volatility. Yes, it takes tremendous effort, but it's worth your time to cover all the bases. Make sure you set realistic expectations. In our feature article "Determining Equity Growth Performance," which begins on page 22, John Ehlers and Mike Barna discuss a unique and simple method for determining the equity growth of your system and what you can realistically expect from it.
It's just as important to make your system error-free, which can be a time-consuming task. From the article "If At First You Don't Succeed" by John Clayburg (page 38), you'll learn about some of the processes used to debug programs. Although the article provides the EasyLanguage code, you can apply similar logic to any program.
But in order to achieve the desired results from a system, you need to have the discipline to adhere strictly to it, even when a market movement differs from your expectations. It's not easy: If you don't follow the system, you can keep changing your mind, which can send you down the wrong path.
So watch the markets, try to understand them, and, as Dave Landry would
say, take them one day at a time.
Jayanthi Gopalakrishnan,
Editor
Originally published in the March 2002 issue of Technical Analysis of STOCKS & COMMODITIES magazine. All rights reserved. © Copyright 2002, Technical Analysis, Inc.
Return to March 2002 Contents