I spent the weekend thinking about the current state and the future of our website, and wanted to share my thoughts.
Our members include day traders, individual investors, family offices, brokers, investment advisors and hedge funds — each with different objectives, time horizons, risk tolerances, etc. But, all are keenly aware that it’s a confusing and dangerous world out there. So, it’s nice to be able to make money regardless of whether stocks are rising or falling.
One thing I’ve been working on this past couple of months is trying to get back to swing trading as much as possible. I started out swing trading, and much prefer it to shorter-term transactions. But, it has become very difficult over the past year or two.
For starters, central banks and their minions are incredibly active in the markets. So, it’s not unusual for declines to be abruptly interrupted [HOW?] before they have a chance to become significant. Likewise, it’s become quite common for the market to close at the high for the day, only to gap down overnight — and vice versa.
It can, thus, be quite uncomfortable holding any position overnight or over a weekend, regardless of how strong the current trend appears. This past month, however, I’m finding more and more opportunities to do so.
In October’s fourteen sessions so far, I issued 20 trade alerts. I pulled the plug on 7 of them as they started to move against us, resulting in an aggregate 7.80 point (0.3%) loss. The others were all gains and added up to 176.30 points (+8.14%.)
The six biggest trade alerts produced 141 points (6.53%.) Of course, if I knew in advance which six trades would be allowed to play out, I’d obviously post only those and spend the rest of the day at the beach. Needless to say, I will continue to work towards that end.
I realize there’s another week to go in October, but the results are promising so far. We might not reach our average monthly gain of 16.45% (since Jan 2015), but if we can produce something close to that with less trading, I think it would be a net positive. And, given the degree to which volatility has been suppressed these last few weeks, I’d be very happy with 8-10%.
I get a lot of questions about trading technique and return objectives. It goes without saying that your mileage will vary from what I post on the site [see: Results.]
First, there’s an unavoidable lag between the time I recognize an opportunity, chart it, and post it. I try to keep it to a minimum; but, in very volatile markets, it can be a factor. In order to mitigate it, I try to lay out my expectations for significant turning points at the start of each session. It’s not always possible, but it can be helpful.
Also, some of you have jobs or other activities that prevent you from executing trades within minutes after I post an alert. At times, this might help your numbers. Other times, it won’t. Again, it’s difficult to know in advance which alerts will pan out.
Then there’s the question of how you trade. My numbers are based on the SPX index, on an unleveraged basis, ignoring trading costs and dividends. If you trade e-minis or options, as I know many of you do, you’ll get vastly different numbers.
There is no one best approach. The important thing is to recognize when the market is about to rally or drop and position yourself accordingly and in keeping with your objectives and risk tolerance.
I think there’s greater value in consistently hitting singles than going for the big score. Our biggest day so far this month was 3.53%. An investor who earned only that much every month, would earn over 50% per year compounded. In my book, this beats hitting for the fences any day.
First, let me stress that my expertise is in forecasting markets, not trading. Having said that, I’ll offer some general observations.
For those who can’t sit in front of their computers all day, I recommend focusing on the first 2 1/2 hours and the last hour of each session. We often get big moves on the open, followed by a retracement by 10AM, most of the rest of the initial move by 11AM and a rally into the euro close at 11:30AM.
The next several hours are often a series of head fakes. And, the session typically wraps up with a rally (or, more rarely, a sell off) in the last hour. Even though I post thoughts throughout the day, you needn’t play along on everything I post — particularly if you’re dividing your attention between trading and, say, skydiving or performing brain surgery.
As far as instruments, this should be dictated by your objectives, liquidity and risk tolerance. There’s nothing wrong with ETFs, particularly if you stick to liquid issues and can keep your trading costs down. E-minis are very liquid and cheap to trade, but they can also be quite volatile and are often manipulated in order to achieve particular objectives in cash markets.
Another alternative is options. Like e-minis, these are for experienced traders only. If someone wants to play short-medium term directional moves using options, I think very liquid, in-the-money contracts with relatively short expirations (2-3 weeks) are a good choice. In general, I would stay as deep in the money as possible without sacrificing liquidity and a tight bid-ask spread. The leverage won’t be as high, meaning you can more comfortably ride out the inevitable intraday volatility.
One last recommendation, and I struggle with this myself, is to pay attention to your state of mind. If you’re tired, sick, upset or otherwise not at your best, take the day off. Sure, you could get lucky, but the odds are stacked even more against you.
I’m also making more of an effort to step away when things aren’t going well. It’s normal to make the occasional mistake or two. But, after three or more hiccups in one session, it’s time to gather up your marbles and try again tomorrow. Hit the beach, play some golf, take your significant other out to lunch… Some of my worst mistakes have been the result of stubbornness.
I’ve been blessed these past five years to be able to do something that’s fun, challenging and pays the bills — which, in my experience, is pretty rare. The only part I’m not really crazy about is trying to trade well, provide research and do all the admin work that goes with operating the site at the same time. One or more invariably suffers.
I’m going to try a different approach going forward and see if it doesn’t provide a better balance. Starting next month, I’ll no longer offer longer-term memberships. Those of you with current annual or charter annual membership can keep renewing them for as long as you like. And, of course, current and future consulting clients can continue at the posted rates.
But, beginning next month, I’ll only offer Monthly Subscriptions to new members, initially at the rate of $150 each month (recurring billing through PayPal, cancellable at any time.)
My hope is that this will simplify the administrative side of things and allow me to focus more on research and trading. If it works, great. If it presents problems, we can always revisit it down the road.
Annual Subscriptions will offer significant discounts versus Monthly Subscriptions for this, the last week they’re being offered. Like Charter Annual Subscriptions, the price will be locked in as long as you continue to subscribe.
My goal is simply to streamline operations and offer nice incentives to those who are interested. If you have a question about your specific circumstances, please don’t hesitate to ask. [Contact Me.]
To sign up now, CLICK HERE.
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