Your game revolves around it.
We’re not talking war over here.
Or are we?
The marketplace is a war-zone, come to think of it.
Question is, how do you use you ammo?
Do you fire the bulk right away?
Who are you trying to scare?
This is the marketplace, people, overall, it’s not scared of your few rounds. There are just too many players, with varied interests and ideologies. Your few rounds might cause a mini-spike in the underlying concerned, but that’s about it. That mini-spike is not going to make it to tomorrow’s paper.
So, why bother? You don’t need to attack here. Straight away, that is. You can attack when the time is ripe, and when you are ripe too.
What does being ripe for an attack mean?
It means that your defences are fully in place and on auto-pilot. Your basic income is taken care of and suffices your family’s needs. Actually, let’s go a little further and say that your family is able to live comfortably on income generated by you which is independent from any of your speculative / risky activities. This is the first step. You need to work yourself into such a position, even if it takes you a long time. Without knowing that your family is safe, no matter how you fare in the marketplace, you will not be able to trade freely.
Then comes the second step in setting up your best defence. You need to have access to an emergency fund. Meaning, this kind of a fund needs to be salted away first. It then needs to be made accessible when required, and otherwise, it is to remain unused. Don’t let your emergency fund’s miniscule return bother you. In lieu of that, you are getting safety. Your emergency fund needs to remain safe, sound, and there, when you need it. This way, if and when something happens, and funds are required, a). you won’t have to tap into your family’s basic income, and b). you won’t have to tap into your trading corpus. You’ll access your emergency fund. Your family will remain financially undisturbed, and so will your trading, despite the emergency.
Now comes the final step, before you can get on with your trading, yes, even aggressively. In this step, the focus is on you. While setting up your family’s basic income and your emergency fund, you have struggled. Your health could have taken a knock. Your mind could be in a whirl. Normalize, my friend. Take time off. Stare at the wall. Get your body-chemistry back to equilibrium. Take a vacation. Take many vacations. Finally, when you are in shape, go for it.
Ok, so you’re in shape, and ripe for attack.
Now, the time needs to be ripe for attack too.
Mrs. Market has three basic modes of movement. She trends, moves in a range and then, she just plain goes nowhere, i.e. she’s flat.
Your aggression needs to be implemented only when she’s trending. Period.
That’s when it’ll yield mind-blowing returns.
Fire away when she’s flat or moving in a range, and you’ll keep getting stopped out.
How can you tell when she’s trending?
Through technical analysis.
So, study. Learn to differentiate between her three basic modes of movement.
Then, when she trends, and only then, use your ammo aggressively.