Fly Fishing the Stock Market: How to Search for, Catch, and Net the Market's Best Trades

TRADE MANAGEMENT

Hooking a trade is the easy part. Safely netting it is a different story. The secret to proper trade management is in acquiring the ability to take nothing more and nothing less than what the market is willing to give.

Retracement

Buy low. Sell high. Buy on pull-backs. Wait for the next leg up. Words of wisdom guaranteed to make you rich, right?

Learning to wait on the back cast in fly fishing is like “rhythmic leverage,” which is a necessity in trading. Whether it is a short or long fly cast (day trade or swing trade), the more line that is out, the longer you have to wait on the back cast for the recoil. Translation: When stocks shoot out of the gate, it is natural for them to recoil on the 5- or 10- or even 30-minute chart. Wait for it, then look for the high of the day to be taken out. If not, reel in the line—you probably have a knot.

During a cast, each two feet of line that is added increases the distance of the recoil. Watch for the final push forward and the line to shoot and follow. This is equivalent to a bull flag or the “next leg up” on a stock chart. It is all about timing, and the timing changes in different time frames. After you discover the ability to sync, it becomes naturally instinctive. This is not something you can buy, borrow, or learn from a book without intensive practice.

Don't be myopic when managing a trade. List the areas of resistance as well as the areas that could propel the move. Then watch the volume to determine the extent of ...