You’ve seen how volatile the market’s been for the past year or so, and that volatility isn’t going away any time soon. So it’s critical to have a “trader’s mindset,” and be active in managing positions.
Active trading is where investors try to beat the market by finding the right trades, usually holding them for just a short time — but I’m not talking about day trading.
What’s the best active trading strategy? I have my own opinions on that…
First, I want to explain the merits of being an active trader.
Yes, there’s a time and place for buying and holding stocks long term. In fact, I think later this year, we’ll have a “back up the truck” moment for some beaten-down companies trading at bargain-basement prices.
But we’re not there just yet — not by a longshot.
So every trader should have different ways of making money in the market, and not just good ol’ buy-and-hold, long-term investing.
If you’re the type of investor who doesn’t like to trade actively, maybe you should learn how to. It doesn’t have to be nearly as time-consuming or complicated as many might think.
In fact, a couple of minutes here and there each day is often all it takes when it comes to some of the best active trading strategies.
What’s the Best Active Trading Strategy?
We’ve been in an active trader’s market for over a year now, and long-term investors are still getting smashed by the pain train.
Let’s look at my benchmark over the past year, the S&P 500. From about mid-January through Monday’s close, the S&P 500 shed about 16% of its value — and that’s after about a 3% rally the past two weeks.
Taking a big-picture glance at the chart above, does it make you want to buy and hold stocks for the next six months or even longer?
I wouldn’t…
My guy Lance Ippolito and I discussed something crucial during the triumphant return Monday of Crush the Open after a holiday hiatus… In markets like this, we both have an active trader’s mindset — notice I said “trader” and not “investor” — holding positions no more than a few weeks at a time…
Heck, less than 24 hours when possible. And I have a trading strategy crushing 2023 that’s built for that sort of short time frame: Burn Notice Alerts.
Check out this recent performance chart since after the Christmas holiday, when there was next to no volume…
Including two bonus trades for the last day of 2022 and the first day of 2023, through Friday’s close, we had eight trades. We had seven wins on the underlying stock positions, and six wins out of eight options positions.
Including winners and losers, the average gain per option trade was 11%* — and that’s holding the position overnight, or over the weekend in the case of the Friday trades we entered on Dec. 29.
We want you to have all of the information possible at your fingertips, since the strategy’s inception on Dec. 15, 2020, Burn Notice Alerts has a 55.3% win rate with an average weighted return of 1.65% overnight, including winners and losers.
On “2 Star” trades, which are my higher-conviction alerts, Burn Notice has a 60% win rate and an average return of 4.15% on the options.
Being in the market for such a short period of time reduces risk, and four trades a week — on average — add up to about 200 trades a year. This strategy is a marathon, not a sprint.
We do NOT win every trade, as is clear in the info above, but those gains add up throughout the course of a year.
And all it takes is a couple of minutes in the afternoon to enter a simple call or put, and then a couple of minutes the following market open to exit the trade. This trading style isn’t for everyone, of course. Is the best active trading strategy out there? That, I do not know. But I’ll put my active trading chops up against just about anyone out there.
If you think it could be for you, be sure to check out Burn Notice Alerts!
Are there any topics you’d like to see me cover or questions you’d like answered? Send me an email at jeff@joyofthetrade.com with your trading questions and I may cover them in a future video. You can also join my free Telegram channel, where I share market insights real time throughout the week, articles, videos and more!
**Stated results are atypical for given period. Past performance is not indicative of any future results. Trade at your own risk.
**This is for informational and educational purposes only. There is an inherent risk in trading, so trade at your own risk.
P.S. The Only Earnings Announcements to Focus On
Earnings announcements are happening all the time — not just during the few weeks we call “earnings season.”
And with over 17,000 different earnings reports every year, there’s no way you could keep track of all of them.
But what legendary trader Tom Busby recently discovered is there’s a subcategory of earnings reports that open a special window called “earnings drift.”
And for these select stocks, during the 72-hour period after they report, a massive opportunity window can open for investors.
Tom recently sat down with Senior Strategist Roger Scott to share all the details on this incredible breakthrough…
