• If you’re trading options (or even stocks) — timing is everything…
• Why patience and discipline are critical for traders…
• How Evolvers can exercise and flex these essential trading muscles…

Hey, Evolver.

On Tuesday, we talked about the importance of not forcing trades. 

This idea goes hand in hand with my mantra of waiting for ideal setups.

Expanding on this, I think patience is the skill that Evolvers should focus on this week.

The Market Dips

When you have all sorts of things going on in your life it’s a great reminder to focus on ideal setups and ignore the rest! $CEI long and $BNTX puts alerted at @EvolvedTrader absolutely ???? start to the week!!

— Mark Croock (@thehonestcroock) September 27, 2021

The S&P 500 was down another 2% on Tuesday. On Wednesday, at the time of this writing, it had made a small attempt at a relief rally, up 0.64%.

Big picture — the S&P 500 is down 3.28% in the past month.

I think it’s fair to say the market is in a short-term downtrend…

As I mentioned on Tuesday, this kind of volatility can lead some traders to get overexuberant.

I get it — trading a broad market dip can be tempting. For a trader with a negative bias like me, these market conditions can be tantalizing.

But we must fight the urge to trade just because the market’s volatile. A volatile market doesn’t turn a subpar setup into an excellent one — but it can certainly fool newbie traders this way.

As soon as the indexes started dipping, I saw a lot of retail traders discussing big wins shorting nearly anything.

Meanwhile, as certain stocks find bottoms, other traders may be having success dip-buying. (That’s one of Tim Sykes’ favorite patterns.)

As all of this was going on last week, I reminded myself to be patient. 

The VIX Rips

Another metric we can’t ignore during downtrends is the volatility index (VIX). 

The VIX spiked 15% overnight from Monday, September 27 to Tuesday, September 28.

Moreover, the VIX is up 44% in the past month — placing the market in a different paradigm than we saw in August.

But why should Evolvers care about the VIX?

Heightened volatility makes buying options more expensive. You’ll need to risk more in upfront premium to put on any options trade.

This doesn’t mean options are untradeable — it just means you need to be selective.

Last week, I was looking at a few setups. But in hindsight, they were subpar. I’m glad I didn’t put on those trades.

Instead, I patiently waited for the perfect setups to come around — and I was eventually rewarded. (More on that next week.)

Follow my lead. Be brutally selective and disciplined. Make your timing count. 

And most of all — be patient.

Lesson Summary

• Patience is a virtue for any trader. Harness it to your advantage.
• Monitor the VIX and how it changes the pricing of options. When options are more expensive, it’s important to be even more selective.
• With every trade, ask yourself this critical question: Is this the ideal setup I’ve been waiting for?

Conclusion

This is a time when you should be conservative, selective, and disciplined.

Solid traders should always embrace these attributes, but it’s even more critical when the market’s dipping.

Stick to your perfect setups, and don’t force them until they’re screaming you in the face.

Be patient,

Mark Croock

Editor, Evolved Trader Daily

P.S.

*All content in this newsletter is intended for educational and informational purposes only.

The material in this newsletter is not to be construed as (i) a recommendation to buy or sell stocks, (ii) investment advice, or (iii) a representation that the investments being discussed are suitable or appropriate for any person.  No representation is being made that following Evolved Trader Daily strategies will guarantee a particular outcome or result in profits.  The price and value of stocks may fluctuate depending upon various market factors, and, as such, the strategies used by Evolved Trader Daily to adjust for those fluctuations may change without notice. 

There are significant risks associated with trading stocks and you must be aware of those risks, and willing to accept them, in order to invest in these markets.  Past performance of any trading system or methodology is not indicative of future results.  You should always conduct your own analysis before making investments.

You should not trade with money you cannot afford to lose and there is a risk that trading stocks will result in a complete loss of your investment.  Trading stocks, particularly penny stocks, is not suitable for everyone and requires hard work, due diligence, capital, and substantial time to monitor the market and timely execute trades.