Market lesson: Planning your trades helps you trade your plans

Davis MartinDavis Martin ·

The story: Like many full-time traders, I swing trade and day trade. There have been maybe two nights year-to-date when I’ve gone to sleep without at least one open position in my portfolio, usually a stock- or index-options trade.

On Tuesday night, in total, I was carrying 14 open positions. I wouldn’t have held them overnight if I hadn’t liked them, of course, but my typical number of open positions held overnight is somewhere in the three-to-seven range. The bigger-than-normal number of holdings meant that when the market opened green on Wednesday, things were going to get crazy, a time crunch made worse because oil-inventory numbers were coming out at 10:30 a.m., meaning I had to manage energy-related trades before then too. It was frantic, but I was able to get good exits and get paid.

That was the good news; the bad news was that I was so busy with those trades that I had no time to day-trade calls or puts on a beautiful cup-and-handle chart pattern that the SPDR S&P 500 ETF (SPY) was building on Wednesday morning, meaning I missed out on what should have been some easy trades.

It was a good reminder that I mostly want to do what works best and do not want to get over-extended; it was a day when it might have been possible for me to not only miss out on trades but to misplay some of those overnight holds.

The moral of the story: If you both swing trade and day trade, have a plan and stick to it. Don’t try to day trade at those times when you have a ton of money tied up in swing trades (and don’t let swing trades distract you when you have great patterns to day trade). You have enough to manage; the difference between having the perfect market exposure and having too much is the point where you are so busy that your trading suffers.

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 Davis Martin is the head trader at Dailyprofitmachine.com. He trades SPY calls and puts and swing trades individual stocks and stock options, and last traded SPY Oct. 4 $250 calls on Sept. 26, moving in and out in 45 seconds for a gross profit of more than 7 percent.

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