The Daily Market Forecast... Trade Plan Part 4
Thursday’s Blog Results: The suggested short pegged the top of the day session and ran for 20 points to the next level. Aggressive traders saw this trade run for 70 points and close the day with 50!
Quick Tip: Trade Plan Part 4
You’ve made three decisions so far, time devotion, style, and capital investment. It’s time to pick your primary asset class.
Position Traders (six figure account, several hours available every month): Stocks, Options, Bonds, Forex. The stock market is the familiar to most and there are plenty of research resources available at modest cost to help pick and manage your portfolio.
Dividends are a great benefit. Using options to buy (cash-secured puts) and sell (covered calls) your positions will add to your ROI with no added risk.
Most stocks move with the overall market. The adage “a rising tide floats all boats” applies. This means you may be diversified within the stock market owning different sectors, but you’re not protected against bear markets. The world’s largest market that you can get true diversification in is the Forex market. Another benefit to Forex is it tends to be trend more reliably which is exactly the market condition a Position Trader seeks.
Swing Traders (five-figure account, several hours available every week): Options, Futures, Forex. Your capital constraint points you to these leveraged markets. You need that to earn enough return to justify your time investment. There is added risk with leverage, so you’ll need a rock-solid risk management plan and discipline to avoid ruin (but that’s required in all trading anyway).
Day Traders (four-figure+ account, a few hours available every day or night): Futures. If there was ever a true “match made in heaven” it’s day-trading futures. It’s not that you can’t day trade stocks, options or Forex, the list of benefits in futures outweighs every other asset class. Consider…
- Modest capital requirement… great leverage. Day trading stocks or options requires a minimum account of $25,000, futures can effectively be traded with $5,000. Of course, the more the better.
- Open 23 hours for night trading and less risk relative to stocks that may gap against you overnight.
- Tax benefits if you’re not in a retirement account. Yes, you can trade futures in your IRA.
- True diversification covering stocks, bonds, metals, energy, agricultural, and more.
- Fair pricing. The futures market does not have market makers or payment for order flow like the stock market.
If you’re considering day trading you should first read the white paper “Why Trade Futures.” You’ll learn far more about each of these benefits. Tomorrow we’ll explore the different trading strategies applicable to each asset class.
Today’s Best S&P Futures Turning Points (same as yesterday):
Short Level: Sell 4375.50 stop 4381.25.
Long Level: Buy 4306.50 stop 4299.25 (if stopped out, consider shorting 4300.00 stop 4305.75).
Trade well,
Mike Siewruk
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