The market environment has not been friendly to swing trading lately. This choppy action started in late November and it has continued. When the overall market is going sideways set-ups tend to break out intraday only to fade before the close or early in the next trading day. Winning trades become much harder to come by and when they do come in, they are much smaller.
This is not a good situation from a risk/reward perspective. It’s impossible for your winners to pay for your losers when your R=1:1. When this type of market develops, it’s critical to reduce risk. I do this by trading less, by taking no more than 1/2% risk on any single trade, and by holding a significant cash position. It’s also important to remember to take your winners much sooner.
Patience is key to profitable trading. Right now it’s important to wait for a market environment that provides better risk/reward opportunities for my trading style. Maintaining discipline means I will have the cash to deploy when a better market presents itself.
Below is a chart of the SPY that shows the sideways action since November.
May you also find patience and discipline in your trading!