Results of Thursday’s Best S&P Futures Turning Points: Shorting 4543.75 stopped out instantly, buying the breakout was the right idea, but spiky price action stopped out the trade.
Today’s Best S&P Futures Turning Points (consider wider stops and less size in fast moving markets):
Buy 4539.50 stop 4535.00. Short 4598.50 stop 4604.25.
The World Index: (+100/-100) inches up from +43 to +50 in a Bullish world on rising volatility.
Catalysts: Empire State MFG Index & Import/Export Prices @ 8:30. Industrial Production @ 9:15. UofM Consumer Sentiment @ 10:00. UAW strikes.
Quick Tip: The Redline
It’s not common to get very fast and big moves in your direction. It sure feels good when you do though. And that’s the rub.
The adrenaline of the win, the ego of being right, and the vision of another wide range candle in your direction all instill greed. You simply don’t want the feeling to end!
But it always does. And usually that means giving up much of your open gain.
I’ve had the privilege of working with dozens of highly skilled trader/instructors in the past. I recall asking several what they did when they experienced a very fast and big positive move. Every one of them said “Take the money.”
This advice deserved a whole chapter in William Eng’s book Trading Rules – Strategies for Success. The title of the chapter says it all – Take Windfall Profits When You Get Them. After years on the trading floor Eng quoted this: “In the case of windfall profits, I’ve seldom seen traders add to their winners, they cash out immediately.”
Think of it as the redline on your tachometer. You floored the accelerator and your car leaped instantly to the point where there simply wasn’t any more momentum available in that gear. Fortunately, in driving you can upshift and continue the momentum. Not nearly as often does that occur in the market.
If you’re confident the move will continue because you’ve documented how often it does, then at least take some profit. The only way you’ll know this is by keeping track of every occurrence of the fast moves.
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