The Daily Market Forecast... Lesson Day

Today’s Lesson: Write a check. Well, not exactly (who does that anymore anyway?). This is about a risk management trick I learned from a really great trader. I can’t remember if it was Larry Williams or Jake Bernstein.

First, never risk more than you can afford to lose both financially and psychologically. Be honest with yourself. If you’re not, you will definitely find out when the losing streak happens. So, take that “per trade” risk and multiply by 4 or 5 to get closer to reality.

Second, and this was Larry or Jake’s trick… when you enter the trade visualize you just wrote a check to Mr. Market for the stop loss amount. It’s gone. Out of the account. You spent it.

The beauty of this “re-framing” is that you will never feel emotional about the loss. You didn’t lose anything. You spent it, just like you do every day for all the other things in life.

Now, if you end up getting out at breakeven after trail-stopping then you got a refund! How cool is that? Refunds are great.

Of course, if the trade is a winner, you not only get a refund, but you earn a handsome return. Free money!

For Wed 211006 (Plenty can change by the open, be aware.)

Globex Review: Awesome performance in the Globex last night! 4 takeable trades, a 26-point level-to-level, a 12.75-point runner, and two small winners (or partial losers depending on your exit plan).

Day Session Analysis: Sentiment is FIRMLY bearish. Stats suggest LONGS will perform better. Buying good entries on low outside days like this is preferred. Wednesday (both sessions combined) garnered 24% of all the gains over the past 5 years in dollars. Reversals (74%) crush Breakouts (26%).  Trading ES/CL/GC using BB Rev with MORE new filters (download the new Edge). VERY cautious about credit spreads.

S&P 500 Futures CPL: 4347.50/4350.50. We’re trading BELOW the CPL (short edge below, long edge above) and BELOW the equilibrium 4321.50/4331.50 (open below = short edge, open above = long edge).

The World Index: (+100/-100) PLUMMETS from +25 to -92 with all major world markets very bearish (contrarian alert: longs firmly outperform shorts). China closed for holiday.

Catalysts: ADP Employment Report @ 8:15. EIA Petroleum Status @ 10:30. Inflation fear stemming from soaring energy prices has the world markets spooked.

Trends: 60 min DOWN, daily DOWN (longs outperform shorts).

Low outside day: Win/Stop% about the same, longs CRUSH shorts earning 10X the profit.  Opening around -1.15%. $TRIN XMA 0.87. Long term outlook is “hold” still.

Globex: The range of 65.75 (possibly wider by the open) suggests a day session range around 75 points on a RISING ATR of 63.65. Prior forecast around 55 points, actual 61.25.  

Trade Well,

Mike Siewruk

P.S. For a free “mini-course” packed full of lessons on HOW to trade the Blog… Watch this video. 

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