Thursday’s Results: The short @ 3900.75 stopped out. The breakout long was only good for 8 points.
Quick Tip: Trend or Reversal?
You might be thinking that trading the trend sounds safer than picking a turning point. Many strategies focus on trading in the direction of a larger time frame trend. This makes sense and it works.
But it’s not necessarily “safer.” Your initial priority is making sure your trade plan rule set has “edge,” meaning over time it’s profitable. After you have that the idea of “safe” becomes irrelevant. Just trade the strategy that appeals to you psychologically.
Here’s an even better idea: Learn both trend and reversal trading then use the correct strategy for the current market condition. Sounds simple but just like trading in general, not necessarily easy. Given enough research and statistical evidence,...
Wednesday’s Results: The short @ 3860.50 was only good for a 9.50-point move (using the wider stop).
Quick Tip: Fast Price Action
Market conditions are dynamic. Volatility comes and goes. Your trade plan should have rules that are adjustable to these changes.
Yesterday is a good example. Post-FOMC minutes release price became fast and volatile going just a couple of ticks beyond our normal stop (see chart). The level only stalled price and worked for 9.50 points favorable. But that’s better than stopping out by not acknowledging the character change in the market.
Another rule you can use is to scale-in your position as price moves against you. It sounds like you’re adding to a loser but that’s not the case on entry. Price will whip around and saving a few points scaling in not only lessens your risk but adds to your profit targets.
We’ll be covering many more of these “edges” in...
Friday’s Results: Friday’s Results: Neither trade suggestion triggered.
Quick Tip: Volume/Share Bars
Trading can be simplified to the analysis of 3 variables: price, time, and volume. Using time-based charts is most common and important. In them you can see wide and narrow range bars/candles giving you evidence of where big moves started and slowed or stopped. Good to know.
Another view that offers some “hidden” information is the Volume or Share bar. These are time independent. They paint a new bar after “X” number of shares/contracts have traded. If you’re trading an active futures contract like the S&P (or a stock like AAPL) you can have your share bars set to 10,000 (or more) to instantly “see” what volume filled in a move by simply counting the bars. That can be accomplished by adding a volume indicator to the chart, but with the share bars you’ll see the...
Thursday’s Results: The short @ 3817.75 caught the high of the session and ran for 51 points (if you used the wider stop suggestion).
Quick Tip: Decide / Correct
Predictions, forecasts, and feelings. Helpful or not? You could argue that the only thing that matters is what price action is suggesting in present time. Fair argument.
But are you prepared for what price action is suggesting? Are you using the correct strategy for the current market conditions? Will today be a trending or range-bound day? It’s helpful to consider this before you get started. If the market changes character then you can change your outlook. It’s good for your confidence to have an outlook from the start.
I read a quote the other day that pertains. Nina DiSesa, named by Fortune magazine as one of the 50 most powerful women in American business (in 2000) said “You can always correct a poor decision, but if you do nothing, you can never...
Wednesday’s Results: Neither trade suggestion triggered in a relatively narrow-range spiky day.
Quick Tip: Pay Yourself
If you’re like many retail traders you are focused on growing your trading account so you can increase your risk and ultimately your expected reward. Taking a “paycheck” from your trading account seems like taking a step backward.
The trading account is intangible. The figures on the statement don’t mean the same to you as a tangible reward. Psychologically, you NEED to be rewarded for a job well done. Make those wins REAL.
Here’s a simple trick for getting paid, growing your account, and improving your trading skills simultaneously:
1. Determine your payday (weekly, bi-weekly, monthly).
2. Log your trading account balance at the start.
3. On payday calculate your gain/loss in the account.
4. Pay yourself a pre-determined percentage of the gain. Take nothing...
Tuesday’s Results: The buy @ 3891.50 stopped out instantly.
Quick Tip: Artful Exit
Entries for directional trades are easy. You expect price to rise or fall and you have supporting evidence where the entry should be. Not a whole lot to think about.
Exits are another story. While a good entry is important, you make or lose all the money when you exit. If you monitor your open trades you’ll see the open profit or loss moving up and down. Watching money come and go can be an emotional experience, especially for the newer trader. Not good.
You need rules in your trade plan for exits. But rather than have one static rule set you should have multiple exit strategies to use in different market conditions. Once you enter, the market characteristics may change, and your original exit idea is less effective.
Here’s one alternative to consider. If you’re trading multiple strategies (tuned to different...
Friday’s Results: Shorting 3883.25 was only good for a 7.25-point scalp.
Quick Tip: Night Moves
In yesterday’s class “Day Trading for Day Workers” the result of a significant study on market returns done by Haghani, Ragulin & Dewey was shared.
In a nutshell, nearly all the return earned in the S&P over the past 30 years has been made when the market was closed. “Night moves.” The chart above shows the incredible divergence. Even more spectacular, this divergence occurs in many individual stocks, ETFs, even Bitcoin!
Their research concurs with my own, so it was invigorating to find some kindred spirits. For more evidence supporting this phenomenon, and how you can trade it, watch the recording of yesterday’s class. Click here.
Today’s Best S&P Turning Points:
Sell 4015.00 stop 4020.25.
Buy 3891.50 stop 3886.00
P.S. There are several generous memberships offers presented in the recording...
Friday’s Results: The suggested buy @ 3675.50 ran for 36.25 points.
Quick Tip: Visualization
In sports psychology one highly successful technique is positive visualization. In essence, the athlete will vividly imagine and visualize in the mind’s eye the result of what they are about to do.
Golf is an easy example for clarification. Top golfers, coached by sports psychologists are taught an interesting visualization technique. Famous golf coach and psychology professor Dr. Richard Coop instructs this way:
How does this apply to trading? While traders are not in control of the physical outcome like athletes,...
Wednesday’s Results: The suggested buy level at 3648.75 stopped out for a 3.50-point loss (per contract).
Quick Tip: Epictetus
Not being knowledgeable in Greek philosophy I had no idea who Epictetus was. But a famous quote of his is applicable to trading so I’m sharing:
“Men are disturbed, not by the things that happen, but by their opinion of the things that happen.”
What’s your opinion about losing?
Losing is a fact of life. Reacting to it with destructive opinions (beliefs) won’t help. Look at each loser carefully. You either followed the rules precisely or you didn’t. Journal all the trades with the reason why you didn’t. Scan this journal in your morning routine now and then to refresh your memory on what not to do.
Today’s Best S&P Turning Points:
Sell 3755.50 stop 3761.25 (in a fast-moving market consider a stop at 3763.75 and size down).
Buy 3675.50 stop 3679.75.
P.S. Did you know...
Wednesday’s Results: Trading was suspended for FOMC volatility.
Quick Tip: Simple Not Easy
You’ve probably heard the phrase “trading is simple, it’s just not easy.” Indeed, trade plans can be simple to execute but because of our thoughts, emotions, and behaviors we make it hard to follow thus missing the result we want.
Let’s say your “simple” trade rules were based on 1) Determine the big picture trend, 2) Sell rallies in a downtrend on a shorter time interval, 3) Buy dips in an uptrend on a shorter time interval. This is not only simple, but it makes sense. Price moves in waves of impulses and corrections within a trend.
The stock market is in a big picture downtrend. You should have sold yesterday’s rally on the FOMC news. Had you done that you’d be looking at a huge winner as the market is opening down today around 2%! If you didn’t follow your rules, if you didn’t make it “easy,” it was...
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