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How to Lose At Trading Like a Winner
There is no opportunity without risk; thus, learning to truly accept risk is the first step to trading freedom. We teach that once we are in a trade, we employ “trade management” strategies for purposes of taking profits or protective stops. Trading involves speculation, which, by definition, involves risk; therefore, accepting “loss” is a necessary part of trading. Our objective is to help you approach the market in a disciplined, objective manner with a high focus on managing risk (and loss), to help you overcome the tremendous hurdles during your quest to become a profitable self directed trader. A trader refusing to accept loss is as ridiculous as a pilot not accepting turbulence during flight. Any winning strategy necessitates the ability to lose properly. It is the ability to deal with, and “make good” of, one’s losses that enables winning traders to keep a positive mental attitude. It also enables them to progress and effectively maintain their winning ways. Losing properly is not easy and therefore requires great skill. You need to be able to learn from your mistakes. Ask yourself if the trade actually met the criteria of your trading plan. If it did, then could you have averted the loss, or was it a good setup, consistent with your strategies? If it was a trade where an error in judgement was made, make sure you learn from it. The discipline involved with losing properly has to do with taking the loss at the right time. Did you sell at an intelligent time, with your stop placed just beneath support? Or, did you not take your “intelligently” placed stop and sell at a lower price than you should have? Discipline is also necessary when preparing for the potential loss. Make sure that your stop allows for a level of risk that you can stomach, and is compatible with your strategy. This will help you to be comfortable with “losing” properly. Seasoning has a lot to do with maintaining a positive mental attitude. Seasoned traders do not let their losses “get them down.” They understand that the loss may actually be a “friend,” as it creates an opportunity to learn from. They apply the knowledge and use it to improve their trading and maintain a winning attitude while accepting and brushing off the loss.
Continue Reading -->If Trump Wins, I’m Buying Mexico… and 4 Other Thoughts on Today’s Action
Learn to Trade From Our Pros This Week: Tuesday 9/13: Dynamic Short-Term Trading With Dave Green Thursday 9/15: Day and Swing Trading Signals You Need to Know – Part 2 (Click here to watch a replay of Day and Swing Trading Signals You Need to Know – Part 1) ******** 1) Biotech Saves the Day The first clue that the bull was ready to fight back today was the early rebound in biotech (IBB), which was supported by 3 pieces of favorable news: Gilead (GILD) talking its willingness to make more acquisitions The HZNP-for-RPTP acquisition Hillary Clinton’s unfortunate illness. (she is seen as an enemy of biotech, so anything that favors Trump over her supports the sector) 2) Buy Mexico on Trump? Since Trump’s prospects are looking up today, the Mexican peso is selling off, as are Mexican equities. Given that Presidents tend to moderate once they’re in office, a Trump victory could mean a buying opportunity in Mexico once we’re past the initial fallout. The average person may think Trump spells disaster for Mexico. But I imagine that a worst-case scenario would get priced in immediately — courtesy of the same media that sold the Brexit as the end of the world. So if Trump wins — I am going long Mexico through an ETF like EWW or a closed-end fund. I’m not making a political endorsement here — I’m just looking for an opportunity. 3) Strong Oil Crude oil made a beautiful pop off the morning lows after OPEC fractionally increased its global oil demand forecast. However, the OPEC meeting in Algeria is still a total mystery. We are still seeing tons of conflicting headlines regarding production freezes or cuts, and there’s no telling what will actually happen. Maybe some confusion is good, because heading into the June meeting, traders were pretty certain that we’d see a freeze or cut, and they were sorely disappointed. 4) VIX Mix The VIX is slowly grinded lower today as equities penetrates further into the green, which is eating away at my calls. However, I still think the VIX made a major low in August and it’s likely to spike again. The reason? Time. We had 51 days without a real down day, but there’s a very good chance the pendulum is swinging the other way. 5) Watch the Regional Banks XLF started rotten and has made a big turnaround intraday. I’d watch for more upside catch-up in the regional bank ETF (KRE), which is still off -0.5%.
Continue Reading -->Morning Hammer: 40 Days and 40 Nights
Join This Week’s Training Sessions! They’re FREE! Tuesday 9/6: Day and Swing Trading Signals You Need to Know Thursday 9/8: How to Start Trading Forex Like a Pro ********* Labor Day was not a cure for the summer snoozefest. SPX futures are flat as an ironing board as we come off 40 trading days without a 1% move in the S&P 500. And it’s been 48 days since the last 1% down day, which happened on June 27 after the Brexit. Overnight, German factory orders missed, while Swiss GDP and euro-area exports strengthened. Australia’s central bank held steady on interest rates as expected. Europe is slightly green, though it may remain in a holding pattern until the ECB rate decision on Thursday. Crude oil popped yesterday on news that Saudi Arabia would make a “significant” statement on the oil market. However, they did not announce any changes to output. Iran said it will support efforts to stabilize markets, but will not necessarily participate in a coordinated production freeze. Saudi Arabia’s energy minister also said there is no need to freeze output just yet. Gold is extending Friday’s gains on the slightly weaker-than-expected NFP report. Market perception of Fed rate hikes haven’t changed as much — this looks more like a relief rally after a hard decline. Traders are pricing in a 59% chance of a December rate hike, which isn’t much of a chance from Friday’s 60%-ish levels. In deal news, pipeline/storage giant Enbride (ENB) is buying Spectra Energy (SE) in a $28 billion transaction, creating the largest MLP in North America. On today’s economic calendar, we have the Labor Market Conditions Index and ISM Services numbers on tap. The Fed’s Williams (non-voter) will be speaking at 9:15 p.m. ET. Things don’t really pick up until next week, when we have retail sales and CPI. One trend worth watching is the degradation of US economic data starting with the weak GDP report in late July. Check out this chart of the Citi US Economic Surprise Index, which measures economic data strength relative to market expectations: It’s clearly sliding lower. The Fed always calls itself “data dependent,” which gives them a convenient back door. If the data continues to slip, maybe folks will start pricing in a smaller chance of a rate hike, or at least become convinced that the Fed is one and done. P.S. Check out our FREE webinars and learn from our top traders!
Continue Reading -->T3’s Take 3: The Fed Is Dead Ahead
The power of quantified trading… Next Thursday, T3’s Rob Smith is hosting a special strategy session on his unique Quant Edge methodology. Learn more about it. 1) All Eyes on Yellen Traders are eagerly awaiting Fed Chair Janet Yellen’s speech in Jackson Hole at 10:00 a.m. ET tomorrow. Fed officials have been very hawkish as of late, and today, Kansas City Fed President Esther George said on Bloomberg TV that higher rates were warranted since the US is near full employment with rising inflation. Dallas Fed President Robert Kaplan also offered hawkish comments on CNBC,. Traders are now pricing in a 55% chance of a December rate hike, up from 47% 2 weeks ago and just 9% after the June 24 Brexit. However, keep in mind that the Fed has been fairly unpredictable this year. So it will be interesting to see if Yellen gives the hawkish statements everyone is expecting. 2) Flat as an Ironing Board The market once again went nowhere, with the S&P putting in its 34th day without a 1% move. The index finished down -0.01% at 2172.47, and there wasn’t much action in the other indices either. Economic data mostly solid today, with jobless claims and durable goods coming in better-than-expected. The data supports the case for Fed rate hikes. This and all the hawkish chatter sent up regional bank stocks, and pushed gold lower. And in a near-perfect repeat of yesterday, biotech stocks led in the early going before falling hard in the afternoon on pricing controversies. The Nasdaq Biotech ETF (IBB) fell -1.2% to 282.87. 3) Jeff Cooper’s Take on Biotech Here’s what Jeff Cooper had to say about the action in IBB: Yesterday, I mentioned that the fall in the biotechs on the heels of Hilary’s comments reminded me of the pop in the bubble in 2000 on Bill Clinton’s and Tony Blair’s comments on biotech and the genome. A daily IBB chart shows yesterday’s large range outside down day (LROD or Lighting Rod) on a large increase in volume. Yesterday’s lows nominally undercut the prior peaks from the spring and summer and the previous breakout pivot. IBB is in a potentially weak position if today is a Pause Day prior to downside follow-though. P.S. Sign up for one of our FREE trading webinars. US Economics (Time Zone: EDT) 08:30 Advance Goods Trade Balance (Jul): exp. -$63.0b, prior -$63.3b 08:30 Wholesale Inventories MoM (Jul P): exp. 0.10%, prior 0.30% 08:30 GDP Annualized QoQ (2Q S): exp. 1.10%, prior 1.20% 08:30 Personal Consumption (2Q S): exp. 4.20%, prior 4.20% 08:30 GDP Price Index (2Q S): exp. 2.20%, prior 2.20% 08:30 Core PCE QoQ (2Q S): exp. 1.70%, prior 1.70% 10:00 Fed Chair Yellen to Speak at Jackson Hole Policy Symposium 10:00 U. of Mich. Sentiment (Aug F): exp. 90.8, prior 90.4 10:00 U. of Mich. Current Conditions (Aug F): prior 106.1 10:00 U. of Mich. Expectations (Aug F): prior 80.3 10:00 U. of Mich. 1 Yr Inflation (Aug F): prior 2.50% 10:00 U. of Mich. 5-10 Yr Inflation (Aug F): prior 2.60% 13:00 Baker Hughes U.S. Rig Count (8/26): prior 491 13:00 Baker Hughes U.S. Rotary Gas Rigs (8/26): prior 83 13:00 Baker Hughes U.S. Rotary Oil Rigs (8/26): prior 406 Global Economics 04:00 EUR M3 Money Supply y/y 04:30 GBP Second Estimate GDP q/q 04:30 GBP Prelim. Business Investment q/q All Day Jackson Hole Symposium Earnings Before Open: Big Lots (BIG) After Close: None of significance
Continue Reading -->The Morning Hammer: The Broken Record Market
Don’t Fear Forex… Attend my buddy Kurt Capra free webinar tomorrow and learn why so many stock and options traders are embracing the lucrative world of forex. Click here for more info. SPX futures are taking a small hit today as oil pulls back and the dollar keeps rising on Fed rate hike speculation. Morgan Stanley and Barclays both issues notes stating that crude prices would correct. There is also growing doubt that OPEC will institute a production freeze or cut at its September meeting. As I pointed out last week, oil ran up big into the June OPEC meeting on speculation of an output freeze. OPEC did nothing, and oil topped out shortly thereafter. It seems like folks are finally starting to remember that. On Sunday, Fed vice-chairman Stanley Fischer said the US economy was closing to hitting full employment and the Fed’s 2% inflation goal. Right now, traders are pricing in a 51% chance of a December rate hike, so markets are split right down the middle. We may get some clarity with FOMC Chair Janet Yellen’s speech at Jackson Hole on Friday. But I’d like to put an emphasis on the word MAY. Don’t forget that many Fed Heads came out hawkish ahead of the June meeting, only to be surprised by a dovish statement. The US economic calendar is pretty light — we just have the Chicago Fed National Activity Index hitting at 8:30 a.m. ET. At 12:00 p.m., German Chancellor Angela Merkel, French President Francois Hollande, and Italian Prime Minister Matteo Renzi will hold a press conference on the state of the European Union. On the deal front, Pfizer (PFE) is buying cancer drug maker Medivation (MDVN) for $14 billion. Reuters reported that several other players including Gilead (GILD) and Merck (MRK) were interested in Medivation. And a US security panel approved ChemChina’s $43 billion takeover of pesticide/seed giant Syngenta (SYT). The VIX is up 13%, which implies some more tension on the tape, but the bears still need to deliver some real downside follow-through to provide a real scare. We’ve gone 30 trading days without a 1% move in the SPX. I’ve got my fingers crossed that we’re finally passing this stretch of boredom, but I’m not holding my breath. P.S. Don’t forget to sign up for Kurt Capra’s free forex trading event!
Continue Reading -->The Morning Hammer: Another Day, Another Record, Another Yawn
Yesterday, the S&P, Dow, and Nasdaq all made new record highs as the most boring bull market ever just kept on chugging. The S&P has now gone 24 days without a 1% move. Bulls obviously won’t argue with the results. Bears are sweating like crazy because they’re playing the “what goes up must come down” game. But sometimes, what goes up stays up much longer than seems reasonable. It’s been an especially bad month for traders buying puts, because there’s nothing worse than a slow grind up with declining volatility — you just get eaten alive a penny at a time. Getting wiped out in a spike high is actually better because at least you know it’s over and you can move on. That said, I am long VIX calls, which means I’m speculating on a significant volatility spike. I may have gotten into this trade a little early, but I still believe the odds are on my side. Overnight, Euro-area GDP came in as expected, though Italy’s was weak. The UK also reported weaker-than-expected construction spending in June. So while economic data around the Brexit was actually generally decent relative to expectations, it’s now falling off a little bit. This lends some credence to the Bank of England’s massive reduction in its GDP forecasts. And China’s factory output, retail sales, and fixed-asset investment all missed expectations. Today, SPX futures are flat as an ironing board, and there’s not much movement elsewhere. The dollar’s flat, commodities aren’t doing anything dramatic, and European stocks and bonds are roughly flat. There’s some movement in Europe, but overall, the world is falling asleep. Sentiment is still somewhat bullish, as judging by the steep VIX curve, Investors Intelligence Survey, and CBOE equity put-call. Permabears are saying everyone’s complacent, but I wouldn’t go that far. I’d say we’re at about a 7/10 in terms of crowd bullishness. (with 10 out of 10 being psychotically bullish) On today’s calendar, we’ve got retail sales, PPI, U. of Michigan Sentiment, and the Baker Hughes Rig Count. Maybe retail sales can shake things up a little bit. JC Penney (JCP) just reported a small sales miss, which is a little disappointing after the beats from Macy’s (MC) and Kohl’s (KSS) yesterday. I’d watch the usual suspects today — oil, biotech, small caps, and high-yield. These are the key attack areas for the bears if they’re ready to rock. Good luck friends.
Continue Reading -->T3’s Take 3: Strong Oil Means More Bull Action
1) Crude Oil Booms Crude oil surged over $43 today in an extension of the rally off the August 2 lows. Saudi Arabia’s energy minister said that next month’s OPEC meeting in Algiers could include plans to stabilize the oil market. Plus, the International Energy Agency said that demand from refiners will help the global oil market rebalance this year, which quieted fears about record oil production in Saudi Arabia and other OPEC nations. This news had traders forgetting about this week’s bearish US oil inventory reports, and energy stocks rallied with a vengeance today, with oil service names especially strong. The Vaneck Vectors Oil Services ETF (OIH) rose 1.4% to $28.51 today. 2) Stocks Bounce Stocks responded well to the oil price surge, and the S&P 500 rose 0.5% to 2185.79, setting an all-time intraday high at 2188.14 The solid stock action had the VIX continuing its dip from yesterday’s 12.50 intraday high. Retail stocks got a nice bump on strong earnings from Macy’s (M) andKohl’s (KSS), while biotechnology (IBB) rebounded from a weak open to rise 1.1% to $291.91. The US dollar and Treasury yields rose today, putting pressure on bonds, and the real estate and utility stocks. 3) Jeff Cooper on the SPX This morning, my buddy Jeff Cooper issued a report with in-depth analysis of the SPX, saying the following: The SPX is either topping just below 2200 or is going to run to 2290 ish into the end of August/early September. Youse puts up ya money, yousetakes ya chances. Although the market does its diabolical best to misdirect players, it should be easy to see which one once Mr. Market shows its hand –probably over the next 2 to 3 days. We have had two quick downdrafts since last August. I suspect there could be 2 to 3 air pockets between August and October if the above Gann symmetry plays out — despite The Hand unleashing a swarm of V’s since last summer. Click here for the full report Friday’s Trading Calendar US Economics (Time Zone: EDT) 08:30 Retail Sales Advance MoM (Jul): exp. 0.40% , prior 0.60% 08:30 Retail Sales Ex Auto MoM (Jul): exp. 0.10% , prior 0.70% 08:30 Retail Sales Ex Auto and Gas (Jul): exp. 0.30% , prior 0.70% 08:30 Retail Sales Control Group (Jul): exp. 0.30% , prior 0.50% 08:30 PPI Final Demand MoM (Jul): exp. 0.10% , prior 0.50% 08:30 PPI Ex Food and Energy MoM (Jul): exp. 0.20% , prior 0.40% 08:30 PPI Ex Food, Energy, Trade MoM (Jul): exp. 0.20% , prior 0.30% 08:30 PPI Final Demand YoY (Jul): exp. 0.20% , prior 0.30% 08:30 PPI Ex Food and Energy YoY (Jul): exp. 1.20% , prior 1.30% 08:30 PPI Ex Food, Energy, Trade YoY (Jul): exp. , prior 0.90% 10:00 Business Inventories (Jun): exp. 0.10% , prior 0.20% 10:00 U. of Mich. Sentiment (Aug P): exp. 91.5 , prior 90 10:00 U. of Mich. Current Conditions (Aug P): exp. 109.5 , prior 109 10:00 U. of Mich. Expectations (Aug P): exp. 80 , prior 77.8 10:00 U. of Mich. 1 Yr Inflation (Aug P): prior 2.70% 10:00 U. of Mich. 5-10 Yr Inflation (Aug P): prior 2.60% 13:00 Baker Hughes U.S. Rig Count (8/12): prior 464 13:00 Baker Hughes U.S. Rotary Gas Rigs (8/12): prior 81 13:00 Baker Hughes U.S. Rotary Oil Rigs (8/12): prior 381 Global Economics 02:00 EUR German Prelim GDP q/q 05:00 Flash GDP q/q Earnings Before the Open: J C Penny Co. (JCP) After the Close: None of significance
Continue Reading -->21 Days of Nothing: Fun Market Stats to Chew On
We really are getting a big-time summer slowdown. Some stats to chew on: -The SPX has now gone 21 trading days without a 1% move -YTD before this 21 day span, SPX moved more than 1% on nearly 1 out of 3 trading days. -During this 21 day span, SPX has moved an average of 0.3% per day -YTD before this 21 day span, SPX moved an average of 0.7% each day The VIX is now at just 11.32, levels it hasn’t seen since summer 2014’s extended downdraft, and August 2015’s spike lows. However. the VIX is actually still trading at a premium to realized SPX volatility. The premium is currently 5.5 percentage points. According to Bloomberg data, this is higher than it’s been 76% of the time over the past 5 years. Therefore, traders are to some extent already pricing in a modest volatility expansion. It does “feel” like the VIX should go up, but also keep in mind that it can stay stuck at very low levels for extended periods of time — and “should” is a dangerous word in these boring summer months. For reference, I am popping in a daily VIX chart from 2014 since so many folks are making the comparison: As you can see, the VIX traded in the 11-14 range for 4 months from April to July, had a modest spike to 17ish in August, but didn’t break 20 until October. UPDATE: Please read my latest views on the VIX here.
Continue Reading -->The Safety Dance Starts, but You Can’t Argue With Price
The yen is rising this morning on what looks like an advance “sell the news” reaction in advance of the Bank of Japan Meeting on July 28-29. Remember, the yen has been ripping all year: Most economists expect the bank to increase its ETF purchase prices, cut rates, and increase its JGB purchases, which could mean it’s all but priced in. The Nikkei is off -1.4% and most European markets are red. SPX futures are flat, and I’m surprised they’re not down more. Crude oil slumped under $43 and the key biotech sector is getting roughed up in the early going. Gilead (GILD), which is 8.1% off the IBB ETF, is taking a big hit on its disappointing earnings reports, and is off 4.3% in the early going. IBB is indicated down -0.9%. That’s not the end of the world, but we can all agree that things are just plain better when biotech keeps its act together. There have been 4 horsemen leading equities since the 2/11 low — biotech (IBB), oil, high-yield (HYG), and the Russell 2000. Biotech and oil are obviously feeling the heat. High-yield is closely linked to oil (since oil prices drive default rates on energy bonds). Here is a chart of the HYG ETF vs. crude oil over the past year: So we have 3 of the 4 in some kind of trouble. Therefore, keep your eyes on the Russell. If that starts giving up, maybe the bears will score a victory. Post-Brexit, they haven’t been been able to do much. I still see an April-May-style sideways grind for the time being. Markets are a little stretched and sentiment is positive, but you can’t argue with price. Frankly, with the yen up so much and oil now 15%+ from the high , I expected SPX futures to be down at a least a half-percent. But they’re flat. In other earnings news, industrial giant United Technologies (UTX) is up after beating. The economic calendar picks up a little bit today, with S&P Case-Shiller, Markit PMI, Consumer Confidence, Richmond Fed, and New Home Sales numbers coming. However, the big news comes after the close with Apple’s (AAPL) earnings report. Expectations appear to be pretty low, but remember, it takes a lot of money to move Apple, so they really need to deliver. Twitter’s (TWTR) also reporting, and given how much that stock has run since Microsoft (MSFT) bought LinkedIn (LNKD), it will be in close focus. Still not fan of that one. Good luck friends!
Continue Reading -->