Getting back into the market is an undertaking I never take for granted, no matter how successful I might have been in the past. Respect must be paid to the markets at all times, especially after a long absence. This is the reason that champions of all pursuits go through the process warming up, working on their weaknesses and ‘psyching’ themselves up for weeks following a lay off. They don’t just arrive at an event and waltz on to the arena and expect to perform at their peak. This process requires planning.
So how should we prepare ourselves for a return to the markets?
Start by restating your goals and write them down. Mine are etched indelibly in my mind after years of constant use and I never stray from them.
My goal is to enter a market when I see an Elliott setup that will give me a sustained move of some weeks - at least - so I can build a number of positions over that period. If the move runs for several weeks, I have a much better chance of managing risk in the manner I like. I am familiar with this setup and can manage it with confidence.
I check the markets every day looking for this setup. It is important to maintain a level of discipline, even if the setup is a long way away. I have been out of the markets for the last four-years but I still checked the charts almost every day. I don’t see this is a chore and I am happy to do it. If you find it a chore, reduce your reviews to say, twice a week. The important thing is to have a routine and to stick to it.
When your favourite setup appears on the horizon, you should progressively invest more time to zoom in on the detail - like analysing the relevant sector and stocks within that sector - to see if you can find opportunities. You do not have to take the first opportunities that come along; rather just ‘live with the idea’ for a while. Carry out a paper trade on the setups you like and see how they work out. It is amazing what will come screaming back at you from the past, perhaps cold-sweat experiences, perhaps wonderful memories. This is all part of rebuilding your trading ‘psyche’ - preparing your mindset for when you put your toe back in the water.
You should also brush up on your ‘indicator’ skillset. I use just a few ‘tried and tested’ indicators: Elliott, Oscillator, OBV and Bollinger. When these are few in number, it is easier to re-familiarise yourself with them. As I work with most of them on most days, my skills are always well-honed.
When I think I am ready, I will take a very small number of trades with small licks of capital. I might only take one or two positions on the first day or so. I put myself under no pressure whatsoever. I set my time and price for the positions I take, try not to be too greedy and get out before the next top.
I am currently holding a number of positions and I have a set time horizon. I fully expect to be out after my goals have been met. I remain open-minded and if I am wrong I will leave earlier or if the markets are looking stronger, I will redefine my time and price goals.
Next week I will revisit some stocks that I like. I would like to buy more if there is money to be made without too much risk, as would you I am sure. I expect they will be medium-term positions only; maybe out before the end of the year.
None of this should be too tough to handle, so brush up your skillset and join me!
Enjoy the ride