This is PART FOUR of our series on accessing THE BATTLEFIELD TERRAIN (the current market conditions) before entering a trade.
PREVIOUS POST IN THIS SERIES:
PART THREE: TEMPORIZING GROUND
According to SUN TZU, one of our 5 star generals, ENTANGLING GROUND is defined as ground wherein you will be hard pressed to attack due to the enemy’s ability to quickly defeat any advance. THE CROSSHAIRS TRADER views this type of ground as very volatile with large day to day, even intraday price swings.
THE CROSSHAIRS TRADER considers this the least favorable trading ground best suited for the SNIPER TRADER who trades quickly in and out of the market. The SNIPER TRADER rules are as follows:
- Trades should be entered using small charts (less than a DAILY chart). Due to the day to day and even intraday volatility it is best to use a small intraday chart utilizing the same patterns as those found on the bigger charts.
- Profits are usually smaller and, therefore, should be taken quickly. Holding a position for longer than a day or two is risky at best and disastrous at worst.
- Due to the very nature of SNIPER TRADING it is best to have only a few stocks to watch since entry onto the battlefield is swift and precise with little time to make a decision. The fewer stocks you have to watch the fewer mistakes.
- In the money options should be purchased with at least two months of time value. It is best to buy two strike prices or more in the money since you want to catch a quick move unlike the trending market where you can stay on the battlefield for a much longer period of time.
This is the least favorable trading ground for THE CROSSHAIRS TRADER because of its tendency to wreck havoc on highly probable trading patterns. This is the type of battlefield where wounds do not heal quickly zapping the trader of his energy and taking hard fought money along the way. After trading other terrains, especially the ACCESSIBLE TERRAIN, it can be hard to switch over to the ENTANGLING GROUND where the rules are completely different. Enter this battlefield knowing the rules and the consequences.
“Water shapes its course according to the nature of the ground over which it flows; the soldier works out his victory in relation to the foe whom he is facing. Therefore, just as water retains no constant shape, so in warfare there are no constant conditions.”
- Sun Tzu
