Monday’s Results: Neither trade idea triggered. 

Quick Tip: How to Predict

Prediction is imperfect. But there is a logical method to framing what action to take based on the likely outcomes. Let’s use a simple two-outcome example, a trade. Your trade plan should have a stop loss and a winning exit rule(s). Simplistically, you’ll either win or lose. 

Before you start your trading session play the “What if…” game. 

What if the trade fails? 

What if the trade wins? 

What are you going to do next? Wait for the next signal? Reverse direction? Take the same signal on a second attempt if available? Quit? 

It doesn’t matter if you win or lose. You should plan for the outcomes and know what to do. If your trade plan already has rules for what you do after each trade, you’re good. If not, you should do the research to determine the best action possible. 

How? Ask “What...

Friday’s Results: Buying 3898.50 stopped out.

Quick Tip: Reversals & Breakouts

The high-volume price levels formed by the accumulation and distribution of big lot traders are simply at “fair value.” Think about it this way: there was a buyer and seller for every contract traded. This means they AGREED the price was fair.

Once price strays OUT of the fair value level it becomes attractive to a trader who is either bullish or bearish. This allows you to trade both reversals and breakouts around the volume levels.

For example, looking at the price chart from Friday the highest volume price level from Thursday was 3895.50/3898.50. That buy failed immediately and the breakout was a monster continuation of the down trend.  

What about legacy high-volume levels? They work the same enough of the time for an edge. Note the temporary reversal at 3838.50.

Keep in mind as you follow the performance of the Blog levels every day they are both reversal and breakout...

Thursday’s Results: The short at 3920.75 ran for 39.50 with only 1.25 points adverse.

Quick Tip: Math Meets Psychology

Much has been said about the similarities between trading and gambling. Much is true. All is not. A fabulous book you should read about this topic is A Man for All Markets by Edward O. Thorp, an accomplished mathematician, author of Beat the Dealer, and acclaimed hedge fund manager.

When Thorp tested his blackjack card counting system in the real world, financed by two wealthy (and greedy) millionaire businessmen, he uncovered a significant “edge” that you can and should apply to your trading.

His backers wanted him to bet big right from the start. Thorp opposed this idea. He was logical and methodical. Betting big before having confidence didn’t make sense to him. He started small and slowly worked his way up to the big bets. His backers were annoyed but Thorp insisted.

The system was a success in the real world. Afterward, Thorp wrote this:...

Wednesday’s Results: The buy at 4008.50 stopped out.

Quick Tip: Bear Market Recoveries

The Nasdaq and Russell 2000 indexes are deep in bear market territory, down 30%. The S&P is flirting with a 20% drop this morning (that being the definition of a bear market). You can learn something from recent history. Going back too far, prior to the computer age, will consider human emotions but not the massive technology change, which affects the speed at which price moves.

2000 Bear: Down 50% in 31 months, 60 months to recover.

2008 Bear: Down 57% in 17 months, 49 months to recover.

2020 Bear: Down 35% in 2 months, 5 months to recover.

2022 Bear: Down 20% (so far) in 5 months, recovery unknown.

It’s obvious that the drops and recoveries are happening faster. This is important to know. Planning how to handle the volatility gets a little easier.

If you’re a buy-and-hold investor you’re probably not worried at all. It will come back and most likely quickly given the...

Tuesday’s Results: The suggested short ran for 17.50 points with only 1.50 points adverse.

Quick Tip: Art in Exits

Dozens of different methods of trading can be profitable. If you doubt this statement you need to read any of Jack Schwager’s “Market Wizards” books.

In each book he interviews top traders from around the world. Dozens of them. What you’ll find is that almost every trader has a different take on how to trade. Some use technical indicators successfully. Others focus on algorithms. Still others use fundamentals and macroeconomics. Some are systems traders. Others are discretionary. The list of differences between them is long.

What they ALL have in common is profitability.

If your belief system has you stuck trading one way because your guru told you it’s the only way then this book series will open your eyes and mind. Enjoy it.

After reading his book series I began to look at my trade setups with a new view. Who will be on the other...

Monday’s Results: Neither suggested trade triggered.

Quick Tip: Focus on This

Novice traders focus on how much they are winning and losing. Every entry, hoping for a winner. Every stopped exit, wishing it didn’t happen. This is incredibly destructive behavior. You’re teasing your emotions, begging them to overrule your common sense.

Here’s how to stop:

1. Get a rule-based trade plan (if you help, take this free mini-course Ultimate Trade Plan).
2. Document every trade opportunity including the trades you didn’t take.
3. Create a rich database of evidence with hundreds of trades, maybe thousands.
4. Calculate the win/loss percentage of your strategy.
5. Calculate the average winning and losing trade in dollars.
6. Calculate the net gain and divide by the total number of trades.

Now you know the amount of money you make every time you click to enter regardless of outcome. That is what your mind should be focused on when a trade setup triggers. Not winning or losing. But...

Tuesday’s Results: Neither suggested level triggered.

Quick Tip: Proactive Waiting

Plenty of time in trading is spent waiting. Waiting for a setup, waiting for an economic release, waiting for a profit target. Lots of waiting.

Here’s how to make this “downtime” productive: Get proactive. Get in the habit of asking “What if…?” questions. Answer them. In doing so you’ll be making decisions in advance and be able to act on the spot. No wondering, guessing, procrastinating or flat-out missing the trade. You’ve committed with foresight.

Here's a simple example: Price is slowly moving sideways. Your entry price to buy is far enough away that you don’t expect to see it trigger soon. Suddenly price plunges. The speed candle down is looking powerful.

Now is the time to anticipate, be proactive. Will it continue or reverse? Do you see any other chart features that could stall it? Accelerate it? What are the likely outcomes?

1. Slam...

Monday’s Results: Buying 4002.00 stopped.

Quick Tip: Reframing

As you review your trades from yesterday you’ll likely pause at the suggested buy at 4002. It was stopped out by only 3 ticks and then ran for more than 40 points.

Was the stop too tight? Was the entry too soon? You’re thinking about how you could have gotten into the trade.

Now if you’re a discretionary trader with no evidence of edge, just intuition and experience, that may be the correct review process.

Our team is rule-based. We work with statistically relevant evidence to make trading decisions. Pondering the reasons how we could have “made” it a winner is a waste of time. Specifically, we know that our entry and stop were correct probability-wise.

The review process then becomes “reframing.” Taking a negative and making it positive. Ask yourself, “More or less, did that volume level work?” Yes! It picked an intraday “V” bottom and triggered a...

Friday’s Results: The suggested long entry stopped out for a 4.75-point loss (per contract).

Quick Tip: Thought Journal

Documenting all your trade setups, taken or not, is critical to improving results. It’s quick and easy to do. With many strategies the information can be downloaded directly from your trading platform. There is no excuse NOT to have this valuable data.

Then there is the more important information most traders ignore… their thoughts and feelings. Trader psychology author and trainer Dr. Woody Johnson suggests that 80% of trading success is based on your personal psychology. If that figure is anywhere near accurate then you should be keeping what he calls a “Thought Journal.”

Start with the trades you take. You want to make this habit easy to acquire. Immediately after you place the trade log your mental condition. Sharp? Alert? Foggy? Fearful? Describe your feelings. Did you follow ALL the rules? Log the results of the trade afterward....

Wednesday’s Results: Neither trade triggered.

Quick Tip: Steps

Without goals people drift through life never achieving their true potential. This is not opinion but documented fact from numerous psychological studies. No goals? No progress.

Small and “reasonable” goals are typical for most people if they bother to set goals at all. Yet, they require the same attention as big and “audacious” goals. Really. But there is a difference in the path. The execution.

You’re reading a trading blog so let’s assume you want to achieve the goal of being a consistent, profitable trader.

1. Ignore the urge to set a small and “reasonable” goal. That may be something like earn $1000 per month from your trading. It’s not enough to keep you trying. You’ll likely quit before you get there because the reward you seek is not compelling enough to you. Why suffer up the learning curve for $1000 per month?
2. Set the big audacious goal first. The...