10 Tips for the Remote Trader

This column was originally published on RealMoney on Feb. 28, 2008 at 1:52 p.m. EDT. It's being republished as a bonus for TheStreet.com readers. For more information about subscribing to RealMoney, please click here.

Short-term traders have a distinct edge over investors in this wicked market environment. We can use our timing skills to profit from the few opportunities, while avoiding most of the ugly shakeouts and air pockets. Fortunately, longer-term players can employ similar strategies to improve their returns while all of us wait for better days.

Most human beings have real lives away from the markets and can't watch every twist and turn of the ticker tape. In truth, even the most data-crazy traders need to step back at times and follow the price action from a greater distance. Of course, the challenge is to find a way to stay fully informed, without getting buried in all the daily minutiae.

Remote trading offers a powerful way to play this convoluted market and still have time for family, friends and career. Admittedly, it takes a strong stomach, but you'll be rewarded greatly for your efforts. All that's required is reliable access to your open positions, if and when you need it.

OK, I think we're just about ready to go. Let's take a look at 10 powerful techniques to trade remotely but effectively.

1. Long-term charts: Weekly price patterns work very well for folks unable or unwilling to watch the short-term markets. Just keep in mind that you'll need to focus on trade setups lasting for weeks or months instead of hours or days. The hard part will be in picking the entry point that takes full advantage of the longer-term trends.

2. Trade smaller size: You don't have to be a gunslinger to book long-term profits. Stop using margin, take small positions, and then get out of the way. This lowers risk considerably by letting price jump around without shaking you out of good trades. Even a hundred shares can produce outstanding gains when held for weeks or months.

3. Choose wisely: Pick the right stocks to trade. This means you should forget about Chinese rockets, thinly traded biotechs and secondary agricultural players. Instead, limit your portfolio to slower movers that are less likely to exhibit overnight price shocks. More-lethargic sectors that let you sleep at night include: cleaning products, packaging and beverages.

4. Play the exchange-traded funds: ETFs let you take on measured exposure to entire market groups. This has both benefits and disadvantages for remote traders. On the plus side, you can avoid company news that sends individual issues through the roof, or over a cliff. On the negative side, you have to play against automated programs that dominate these instruments.

5. Loose stop-loss strategies: Remote traders need a quick nightly review to check out the day's progress and readjust their stop losses. Longer-term position stops aren't placed in the same way as a day trader or a swing trader. You keep them loose and out of the way, making sure they'll only get hit if there's an obvious change in trend.

Celgene

Click here for larger image.

Source: eSignal

6. Apply weekly Bollinger Bands: Long-term Bollinger Bands (like the one in the Celgene (CELG - commentary - Cramer's Take) chart at right) show remote traders the most favorable periods to enter and exit positions. It takes patience, though, because many weeks will pass between major trading signals.

Here's a hint: Place a weekly 5-3-3 Stochastics under the price bars and look for convergence with Bollinger Band signals.

7. Let the market come to you: Place deep limit orders and sit on your hands until they get hit. Look at the weekly pattern and find the price where weak hands will get shaken out. That's where you want to place your buy or sell order. You won't get filled every time, but this technique will get you into many great trades at perfect prices.

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At the time of publication, Farley had no positions in the stocks mentioned, although holdings can change at any time.

Farley is also the author of The Daily Swing Trade, a premium product that outlines his charts and analysis. Farley has also been featured in Barron's, SmartMoney, Tech Week, Active Trader, MoneyCentral, Technical Investor, Bridge Trader and Online Investor. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks.

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