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If you didn't fail early in your trading business, then you have probably been around long enough to realize that many of the problems you encounter as a trader are those that derive from your own individuality. Such problems are common among traders and, in fact, common among all human beings. Seeking spiritual help from a power much greater than your own is the area I address in the "Spiritual Side of Trading".
The day the arrow is pointing to was a Friday and it created a very nice Traders Trick Entry to go long on Monday, one tick above Friday’s high. During the Sunday/Monday night prices traded as you see them above. Should you leave the TTE in place, or should you get out? I opted to leave my order in place at 1252.90. My reasons: 1) I anticipated a follow-through of the momentum begun on Friday. 2) The TTE in this instance offers a very low risk trade. I use a tight protective stop in the event I’m wrong.
The chart below shows what happened on Monday. Prices reached 1255.90, or $300 per contract, more than enough for a profitable scalp trade. Since I was scalping, I was all in and all out at 1255.90. Will gold prices move higher? Should I have stayed in the trade to see? Not if I was scalping. When I’m scalping I take what I can get and leave the rest for someone else. There are plenty of trades to be had, you simply have to look for them.
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How should you feel about losses? I once read somewhere that you are supposed to love losses. Does that make sense to you? It doesn't to me.
The worst aspect of losing is that it tends to create pessimism. Traders should feel bad when they lose money only if they fought the market trend, or violated their own trading strategies. The best traders have a healthy "so what, big deal!" attitude that maintains a sense of humor about losses. There is no reason to feel bad about losses if the trading discipline was correctly used. On the other hand, there is no reason to learn to love them either.
Analyze losses, learn from them, and then let them go; move on, that's the best thing to do.
Understanding man's relationship to time is one of life's most important challenges. When man becomes free of time's constraints, he lives life to the fullest and achieves goals on his own terms. Pessimism traps traders in the past, destroys their present, and robs them of the future. Imagine a world without time where the thought of death is not a finality of existence. If money were not the reason for your work-related behavior, then who are you? Where are you and what are you doing? Who shares this existence with you? In the philosophical sense, man creates himself and his existence when he takes responsibility for his actions and his time. Think how any individuals create order, structure, and discipline in their lives. How will you allow a trading loss today affect your life five years from today?
Thinking the wrong way can become self-fulfilling. The trouble with self-fulfillment is that many people have a self-destructive streak. Accident-prone drivers keep destroying their cars, and self-destructive traders keep destroying their accounts. Markets offer unlimited opportunities for self-sabotage, as well as for self-fulfillment. Acting out your internal conflicts in the marketplace is a very expensive proposition.
Traders who are not at peace with themselves often try to fulfill their contradictory wishes in the market. If you do not know where you are going, you will wind up somewhere you never wanted to be.
Every business has losses. I cannot think of any that don't. Shoplifting, embezzlement, internal pilferage, lawsuits, bad debts, spoilage, etc., I'm sure you can think of even more. You name it and businesses have one or more of the many ways to experience losses. Most businesses expect and accept such losses as part of doing business. Why, then, is it such a big deal when you have a loss in trading? If you know the answer to that, please let me know.
The way I handle a loss is this: I examine it, make every attempt to learn from it, and ascertain whether I had the loss by straying from my trading plan. If I have strayed, I reinforce my resolve to stick with my plan. If I have not strayed, then I learn from it what I can, and shrug it off as a cost of business. It is not an expense, it is a cost, and if you don't know the difference you need to take a course or read a book on the basics of accounting.
Philippe Gautier: Administration and New Developments
Developer: Joe Ross
On 8th May 2017, we gave our IIG subscribers the following trade on Garmin Ltd (GRMN). We decided to sell price insurance as follows:
On 9th May 2017, we tried to sell to open GRMN Jun 16 2017 47.5P @ $0.24-$0.26; some subscribers were filled but I decided not to accept less than $0.26 and was not filled on that day.
On 18th May 2017, I sold to open GRMN Jun 16, 2017 47.5P @ $0.32 or $32 per option sold on a Good Till Cancelled order.
On 26th May 2017, we bought to close GRMN Jun 16, 2017 47.5P @ $0.07, after 8 days in the trade (or longer for those who entered on 18th May 2017), for quick premium compounding.
Profit: $25 per option
Margin: $950
Return on Margin Annualized: 120.07%
We have also added new types of trades for our IIG daily guidance since 2016, "no loss" propositions with unlimited upside potential, still using other people's money to trade..
In this video, Marco talks about one of the most common, and also one of the most deadly mistakes traders can make, and that's averaging into a losing position. He also gives you some insights as to why this is so tempting, and shows you why you should avoid it at all costs.
If you should you have any questions, don't hesitate to send me an email, This email address is being protected from spambots. You need JavaScript enabled to view it..
To view previous published Chart Scan newsletters, please log in or click on "Join Us,"
shown above, to subscribe to our free "Members Only" section.
A WEALTH OF INFORMATION & EDUCATION:
Joe Ross-Trading Educators' popular free Chart Scan Newsletter has been published since 2004.
Note: Unless otherwise noted, all charts used in Chart Scan commentary were created
by using Genesis Financial Technologies' Trade Navigator (with permission).
Legal Notice and Copyright 2017 Disclaimer - Published by Trading Educators, Inc.
Chart Scan is a complimentary educational newsletter.
Chart Scan Trading Idea: ZMF18-ZMH18, long January and short March 2018 Soybean Meal
Today I want to have a closer look at a Soybean Meal spread using 2018 contracts. While the spread doesn’t show much volume, you can easily trade 10 or 20 contracts without any problem and bid/ask with only 1-tick away (nevertheless, I recommend the use of limit orders).
So far, the spread has not made its strong seasonal move to the up-side but at least it is showing higher lows for the last few weeks. We are in an up-trend since April as shown by the red line even if the up-trend is not very strong. Personally, I would wait what happens next before entering the trade but keep in mind the seasonal time window will already close in about 4 weeks and this doesn’t give the spread much time to develop. The spread seems promising with 15 winning years out of 15 (seasonally speaking) and because volatility is low, it may also work for the once with small trading accounts.
In this video, Marco talks about another very common trading mistake, and that's trading your P&L instead of the actual market. If you're struggling to become a winning trader, this might be an eye-opener, especially if you're a breakeven trader right now.
If you should you have any questions, don't hesitate to send me an email, This email address is being protected from spambots. You need JavaScript enabled to view it..
Taking a second look at potential trades at times results in “why didn’t I see this before?”
For instance, what if you are looking at a market as it approaches a support area? Isn’t it reasonable to ask yourself, “If this market breaks through and I am long, what will I do?” Ask yourself how such an event would change the picture. If you have a position, will you still want to hold it? If you have no position, will this cause you to take a position opposite what was the trend? If it will, then why not place an order entry just the other side of that support area? Very often, when prices approach support from what has been a trading range, they are already in a counter trend within the confines of the trading range. That means a breakout of the trading range would be a continuation of a newly formed minor trend.
After a second look, I will put my work aside before looking at my charts again. Then I make a plan for the orders I want to place.
I make sure my trading platform is working. To do this, I issue an order I know will come back as “unable.” I also check to see if my phone line is working by making a call to my cell phone. In the event of an emergency, I want to be able to call my broker.
Another thing I do is to quickly check the news to see if there is anything that has come out or is reported to come out that might affect my trades. I want to know if any reports are due or any speeches scheduled that might affect the market in which I intend to trade.
I do all this before I enter a trade. But do you know what most traders do? They do their analysis after the trade is made. Too often, they do it when the trade is already going against them.
How many times have you entered a trade, and then said to yourself, “Oh no, why didn’t I see that before?” How could you have seen it if you hadn’t looked, and looked again, and thought about it, and then perhaps looked one more time?
Also, many traders do their analysis after entering the trade in search of a justification for having entered. “Now I’m in the trade, let’s see if I can find out a couple of good reasons as to why!”
If you want to be a successful trader, you have to be hard: Hard on yourself. I don’t mean that you have to be browbeat yourself, or tell yourself you are a loser and can’t win. I don’t mean you have to blame yourself for everything that happens to you when you are trading. Some problems and situations are unavoidable. You just have to be firm with yourself in all that you do. You can’t afford to be a mouse about the way you do things. You need strong self-discipline and self-control. This is a business; you must be businesslike in conducting your affairs.
As a business person, you must manage your business. One of the main functions of management is planning. You have to plan your trades. Other things to look for as you go through your charts are: Tradable formations and setups. Look for reversal bars that indicate a move may be ending. Look for a drop in volume that may indicate illiquidity, or perhaps a coming change of direction. Watch all the things that you can that reveal to you the kinds of information that are needed for the way you trade. These should all be part of your plan.
Some people give more thought to choosing which flavor ice cream to eat than to which market to enter and how and when to do it.
By not taking the time for preparation, you end up not having enough time to weigh the pros and cons or really familiarize yourself with what you are getting into.
You don’t have time to realize that prices have supported two ticks away from your entry about forty times in the past. You don’t have time to see that you are trading right into overhead selling. You don’t have time to notice that if prices break out of a consolidation area just ahead of yesterday’s high or low, they will also probably violate yesterday’s high or low. You don’t have time to see where prices are in relation to the trend line. You don’t have time to really grasp the overall trend, or the correction that is going counter trend. You don’t have time to really consider where you will place your stop. You don’t have time to read the market and to see what it might be telling you.
All of these things can be done ahead of time. If you do not do your homework, you will end up chasing markets in a desperate attempt to get into “the big move.”
Philippe Gautier: Administration and New Developments
Developer: Joe Ross
On 25th April 2017 we gave our IIG subscribers the following trade on Kansas City Southern (KSU). We decided to sell price insurance as follows:
On 26th April 2017, we sold to open KSU Jun 16 2017 80P @ $0.75, i.e. $75 per option sold, with 50 days to expiration, and our short strike below a major support zone about 11% below price action, making the trade pretty safe in spite of a low implied volatility environment.
On 15th May 2017, we bought to close KSU Jun 16, 2017 80P @ $0.30, after 19 days in the trade, for quick premium compounding.
Profit: $45 per option
Margin: $1,600
Return on Margin Annualized: 54.03%
We have also added new types of trades for our IIG daily guidance since 2016, "no loss" propositions with unlimited upside potential, still using other people's money to trade.
To view previous published Chart Scan newsletters, please log in or click on "Join Us,"
shown above, to subscribe to our free "Members Only" section.
A WEALTH OF INFORMATION & EDUCATION:
Joe Ross-Trading Educators' popular free Chart Scan Newsletter has been published since 2004.
Note: Unless otherwise noted, all charts used in Chart Scan commentary were created
by using Genesis Financial Technologies' Trade Navigator (with permission).
Legal Notice and Copyright 2017 Disclaimer - Published by Trading Educators, Inc.
Chart Scan is a complimentary educational newsletter.
Ambush just made new all time equity highs all over the place for the first time in 2017!
As you might know, there are three sample Portfolios I came up with a couple of years ago to show the power of diversified trading with Ambush. It simply doesn't make sense to trade just one market and to hope that one is going to be the big winner of the year. That's why trading multiple markets is so important and one of the key principles to successful trading in the long-term.
You can learn more about the details of these portfolios and see the updated long-term performance here.
Now all of the Futures portfolios just hit new all-time equity highs! As you can see all of them had a slow start in 2017, going more or less nowhere for two months. But then the fun started and during the last month they really took off!
Here's an overview of how Ambush performed in each of the Futures markets (trading one contract) so far in 2017. And as you can see the performance is widely spread across the markets. The only two markets that didn't come out ahead yet are GC (Gold) and FGBM (Euro Bobl).
Join the Ambush success story and become an Ambush Trader!
The easiest way to follow Ambush is, of course, Ambush Signals. It does all the work for you, allows you to customize what markets you want to see and has a position sizing tool implemented to automatically adjust the positions to your risk preferences.
Each day around 18:30 NY Time (yes, it's ready much earlier now than before) the Signals are available for you on the Dashboard. You can then place your orders and literally walk away until the markets close! Remember that all Ambush trades are day trades, can you imagine a more comfortable way to day trade?
I look forward to welcoming you as an Ambush Trader! Here's something for you to celebrate with us right from the beginning:
Sign up now and on the check-out (credit card payment only) use one of these:
If you’d prefer to generate the signals on your own and want to know the exact trading rules of Ambush, we also have a special offer for the Ambush eBook:
Coupon Code:
Ambush eBook: use "ambush200" to get $200 off the Ambush eBook
This is the first Ambush Signals Promo ever and all Coupon codes are valid only until Sunday. Hurry up and don’t miss out on this rare opportunity!
If you should you have any questions, don't hesitate to send me an email, This email address is being protected from spambots. You need JavaScript enabled to view it..
I often receive the question: "Hey Joe! How do I choose a good trade?" Traders write, "How can I tell if the trade will be a good one?" My answer is that I don't know how you can tell, but there is a way I can tell, and I'll share it with you.
I look for both probability and momentum. When dealing with futures, I look for a trend in any market and in one or more time frames that is producing sufficient movement for me to make some money. When dealing with stocks, it is much easier to find momentum. There are numerous sources of data telling you about stocks making new highs or stocks having the most movement.
It seem obvious that a stock moving to new highs, or one being among the most active, is experiencing something in its fundamentals to cause it to move. So my first filter, that of momentum, is already screened for me.
Next, I want to look at probability. What I want to know is: "What kind of a pattern follows the making of a new high?" Does the stock correct on profit taking and, if so, how much does it correct? Does it correct as far as the previous support area? If so, how often does it do that?
Last week I was looking at a stock. Did I know anything about that company? No, I didn't, and I didn't care to know. The stock was making a new 52 week high. That's all I needed to know.
If you look at the chart below you can see that following the making of a new high, it never, as far as we can see on the chart, corrected below a previous support area (arrows). So the probabilities are in my favor if I buy that stock. Also, I know where to place my stop - below the last support!
Okay, so when should I consider buying this stock? Well, it usually corrects for 3-4 days, and I want to grab it when it begins to move toward the new high. So I will place a buy order just above each bar of the correction (Traders Trick). When filled, I will hold that stock until it reaches my objective, which, by the way, is never very great. I will definitely sell part of my position as soon as possible so that I am paid to trade and am no longer under pressure or stress. From there I will trail a stop until I'm stopped out. I let the market show me where to put my stop. It is always under the most recent support unless I see something that shows me clearly that the move is over.
Are there any other filters I use? Yes! I use volume as a filter. I want to see at least 500,000 shares trading every day. I also use price as a filter. I recommend that you stay with stocks that fit within your capitalization. You simply can't afford to over trade your capital. If you do, it's gambling, not trading. As your account grows, realize this: higher priced stocks move more than lower priced stocks. It is much easier to get a $1 move on a $60 stock than it is on a $20 stock.
I was asked the following question: “Joe, is it important to be creative in your trading?”
I’m not sure I can describe it in terms of importance. The creative process is somewhat of a mystery, even to scientists who study it, but that is only because scientists do not recognize the spiritual factors of our lives and consequently in our trading.
The Bible says: “There is a spirit in man.” Man is made up of body, soul, and spirit. In a moment we will look at how the spirit in man affects the soul of man and ultimately the body, but first we must understand what constitutes the soul!
The soul consists of three components: 1. the mind; 2. the heart, and 3. the will.
There are a few common characteristics that all creative persons possess, but for the most part, exactly how the creative mind makes earthshaking discoveries is through the impulse of the spirit. Those impulses come as “inspiration.”
A few prerequisites are necessary. The mind should be focused. New ideas need to flow freely through the mind, and there needs to be a wide range of ideas, so that they can be combined and re-combined in new ways.
New and creative trading ideas are important for a trader to be able to stay ahead of the crowd, so doing whatever you can to prepare your mind to consider new ideas will help to develop creative trading strategies that are essential to profitable trading.
Many great discoveries were made by what may appear to have been lucky observations. However, there is nothing having to do with luck about such discoveries. Those great discoveries are inspired; inspired is what we call the impulse that comes from the spiritual component of man. The word inspired itself means in-breathed. That breath derives from the spirit in man. Without a trained eye the observation might have been missed, but because the mind of the discoverer was continuously mulling over ideas, he or she saw something new in what might be termed an ordinary event. The discovery derives from inspiration, and inspiration comes from the spirit.
Discovering new trading ideas is the end result of creativity. You must get your creative impulses flowing in order to see a new idea. To get your creative impulses flowing you prepare your thinking processes, getting your mind ready to make a creative observation. But it is from your spirit that you get the impulse, i.e., the impetus that stirs your mind to creativity.
The spirit in man is what gives man intellect. It is the spirit in man that makes him vastly different from every other species on earth. No other creature reasons as man does; no other creature philosophizes. No other creature creates music, art, or literature. Man is the only earthly creature who can truly invent, plan, and organize anything he can imagine to do.
Animals operate on instinct. All spiders of a kind weave the same web. All bears of a kind hibernate. All animals mate by instinct, but man reproduces willfully and with pleasure. I could go on and on about the differences between man and the other creatures that inhabit this planet, but surely by now you can see that the difference is vast.
In some ways, your mind is like a water pump. You prime a pump to get the water flowing, and once it's started, it flows continuously. You must similarly prime your mind to get ideas flowing. It is your spirit that primes the pump of your mind. Various ideas in your mind are stored in a hierarchical structure. Information is stored together in various sectors of your mind, depending on its meaning. When you aren't thinking of a particular topic, it's hard to bring information about that topic into consciousness; it lies there dormant and hidden. However, when you make a definite effort to think carefully about a specific topic, or a closely related topic, and start running through the possibilities, new possibilities become apparent. Your mind scans various concepts and ideas, almost unconsciously. Suddenly this wealth of information combines and you see something new. For example, suppose you develop a trading idea about how you might make profitable trades by taking the breakout of reversal price bars. Once you get the basic idea in your mind, you unconsciously use your spirit to prime your mind to get your creativity flowing. For example, you begin looking at reversal bars in various markets and in different time frames to find support for your idea. As you look through the charts, the information you see will prime other related information. Other ideas will then come together, and you'll make an unplanned discovery that can serve as a basis for yet another trading strategy.
The main point is that you must set your thinking processes in motion to come up with a creative new idea. The more your mind is active, the more likely you'll make creative new discoveries. Knowing about the creative process and how your spirit sets it in motion gives you power. Some people feel dejected because they can't seem to think creatively. But with understanding of the spirit and with effort they can think creatively. They just need to know how to do it. Here are the steps:
Be physically relaxed and get into a meditative mood.
Be free of anxiety; allow your mind to wander, but do not empty your mind.
Allow the thought processes to flow, that way you can allow your spirit to prime your mind in order to start the process. If you’re looking at a chart, ask yourself: “What do I really see here? What is this chart telling me?”
It takes a bit of practice, but soon you will see that the spiritual component of who you are will begin to inspire ideas into your mind. As your mind grasps the potential of the ideas, your emotions (your heart) will reflect those ideas. You will become excited and your body will find the energy and your mind will find the will to pursue your new discovery. You may even find yourself saying: “Why didn’t I see this before?”
Philippe Gautier: Administration and New Developments
Developer: Joe Ross
On 24th April 2017, we gave our IIG subscribers the following trade on Hasbro Inc (HAS). We decided to sell price insurance as follows:
On 25th April 2017, we sold to open HAS Jun 16 2017 90P @ $0.45, i.e. $45 per option sold, with 51 days to expiration, and our short strike below a major support zone and 12% below price action.
On 10th May 2017, we bought to close HAS Jun 16 2017 90P @ $0.10, after 15 days in the trade, for quick premium compounding.
Profit: $35 per option
Margin: $1,800
Return on Margin Annualized: 47.31%
This trade was safe and had a decent return in a pretty low volatility environment ($VIX around 10).
We have also added new types of trades for our IIG daily guidance since 2016, "no loss" propositions with unlimited upside potential, still using other people's money to trade.
To view previous published Chart Scan newsletters, please log in or click on "Join Us,"
shown above, to subscribe to our free "Members Only" section.
A WEALTH OF INFORMATION & EDUCATION:
Joe Ross-Trading Educators' popular free Chart Scan Newsletter has been published since 2004.
Note: Unless otherwise noted, all charts used in Chart Scan commentary were created
by using Genesis Financial Technologies' Trade Navigator (with permission).
Legal Notice and Copyright 2017 Disclaimer - Published by Trading Educators, Inc.
Chart Scan is a complimentary educational newsletter.
A couple of times this past week, people have asked me to explain how two points can possibly be on one bar using the Law of Charts. Since this question invariably comes up from time to time, I decided to show you how it can happen. First we will look at a chart sent to me by one of our students in Brazil. The chart shows a #1 and a #2 point existing on a single bar. Next you will see a hand drawn chart I made to answer a question, in which you will see a #2 and #3 point existing on the same bar.
The Law of Charts dictates that the #1 point of a 1-2-3 high formation must be equal to or in itself be the highest high. Following the bar labeled 1-2, we see first a higher low followed by a higher high, thus creating the 1-2 on the same bar.
In the chart below, we note that the Law of Charts dictates that the #2 point must be equal to or in itself be the lowest low following the #1 point. Following the bar labeled 2-3, we have first a higher low followed by a higher high, thus creating the 2-3 on the same bar.
In my last article, I wrote about why it is so important to stay as open-minded as possible as a trader.
But that is easier said than done, so here are 8 tips you can actively follow on how to be more open-minded:
Question everything and never stop doing so. There’s only one way to continue improving and that’s to constantly question your beliefs about trading and yourself. If you think you figured something out forever, you’re probably in trouble! That strategy that has been working for years might have stopped doing so. Maybe a market you’re trading in has changed in a significant way and you need to adopt.
Doing so you have to be completely honest with yourself and your trading and scrutinize everything to make sure your trading and your beliefs about the markets are as close to reality as possible. You do want to know when you’re wrong or have made a mistake right away. Even if that truth might hurt. If you’ve been working on a trading strategy for weeks you want it to work, you want that edge to be true. But the fact is that if it’s not, you do want to know that, otherwise the markets will take it apart for you!
Never stop learning. The markets, it’s participants and the trading technology evolves quickly. To stay ahead of the game you have to know what’s going on. Read new books that come out, watch videos, read articles and blog posts. There might even be some interesting posts on Twitter, Facebook, and other social media sites.
But while doing so never believe any "truth" you hear or read about the markets before you have verified it for yourself. Doesn’t matter if it’s on TV, a trading book, a forum or from Paul Tudor Jones himself. In my experience, most of the information you can get for free or for significant amounts of money is absolutely worthless in terms of potential real trading profits. That’s why you need to scrutinize all of it.
Workout, meditate or do whatever helps you to reset your brain on a daily basis. Find some method that works for you and make it into a routine. This will create the space in your head that’s required to come up with unique ideas.
Try to get completely away from the markets for longer periods at least twice a year. After trying to crack the markets for months we all tend to get stuck and stop seeing the simple solutions. This is when you need a break so you can start from scratch again. You’ll find that very often you’ll solve the problem you’ve been working on right away after the break. Go on vacation, visit your parents, travel! Whatever helps you to free your thoughts from the markets for a while. For me, hiking does the job.
Relax. This might be the best and the hardest to follow advice. Of course, it’s necessary to think through everything in a logical way when it comes to trading. And this works fine, but the best trading ideas/ideas for a new system usually come by themselves and as a surprise. You can not force these and thinking hard will take you only to a certain point. At some point, you have to relax and trust in your subconscious (or whatever you want to call it) to work this out for you. That’s when the magic can happen and an idea/solution you never thought about before is suddenly there. Eureka!
Get in touch with other traders. Talking to someone else about trading who understands what you’re talking about can be very helpful. You can exchange ideas, get completely new perspectives and if you’re talking with someone honest get your ideas and views challenged. This can be very helpful as it forces you to clarify your trading thoughts that can be quite vague. Just having someone ask you "why?" and "how?" a couple of times might save you from wasting weeks of time. And of course, it’s fun to meet other traders!
As always, should you have any questions or feedback, don't hesitate to send me an email, This email address is being protected from spambots. You need JavaScript enabled to view it..
To view previous published Chart Scan newsletters, please log in or click on "Join Us,"
shown above, to subscribe to our free "Members Only" section.
A WEALTH OF INFORMATION & EDUCATION:
Joe Ross-Trading Educators' popular free Chart Scan Newsletter has been published since 2004.
Note: Unless otherwise noted, all charts used in Chart Scan commentary were created
by using Genesis Financial Technologies' Trade Navigator (with permission).
Legal Notice and Copyright 2017 Disclaimer - Published by Trading Educators, Inc.
Chart Scan is a complimentary educational newsletter.
Another month passed by and as there have been some exciting changes happening at AlgoStrats:FX I wanted to give you a quick update.
First of all, we are offering you a Free Trial starting now until May 10th. Go ahead and join us for free! If you already have an account, you can simply login with your existing account. If you don’t have one yet, register here. And if you forgot your password, you can go here to reset it.
I've been quite excited about the month of April as I have been working on some major changes to AlgoStrats:FX during the last couple of months which have finally all been implemented in March.
To learn more about what changed in AlgoStrats:FX 2.0 and how it actually performed in April, check out this video:
That's it! As always, should you have any questions or feedback, don't hesitate to send me an email, This email address is being protected from spambots. You need JavaScript enabled to view it..
It took a while until the July Soybean Oil broke out of the range, but with the break and close above 32.30 Soybean Oil might move higher. Also the Implied Volatility is high in Soybean Oil compared to other markets. I would not want to touch Currencies or Financial markets until the French Presidential Election on May 5, but I don’t see any high risk for the Soybean Oil market.
In Traders Notebook we have started to sell July puts with a strike price at 30.00.
Do you want to see how we manage this trade and do you want to get detailed trading instructions every day?
Please visit our website for additional information: Traders Notebook
Blog Post - Kramer (from the Seinfeld show) on the Swiss Franc
I don't know where the term "stop-gap" originated, but I do know that it certainly applies to the markets. It seems that when traders see a gap, they are not sure of where to place their protective stop, so many of them place it at one end or in the middle of the gap. Remember, if you will, that it is the job of the market to fill orders; prices almost surely will move to fill the gap. I once read somewhere that gaps are always filled. The use of the word "always" usually gives me the chills. Virtually nothing in the markets is "always."
I'm looking at a March 2017 Dollar Index chart on February 21, 2017, and I see prices having just made a gap. Will that gap be filled? I really don't know. There is nothing in my notes that states that "gaps must be filled!" However, to state that gaps are usually filled would be true, and that is what I see as possibly happening.
Gaps on daily charts are less frequent now that more and more markets are becoming fully electronic and trading pretty much around the clock. This means that when you do see a gap, it has more significance than in the past. The question we receive most often is, "What should I do about gap openings?" "Should I trade the back-fill?" In the past, it was true that trading the back-filling of a gap was right 50% of the time and wrong 50% of the time.
However, you always have to pay the commission, so it did not pay to trade on the back-fill unless you could prove by testing that it paid you to do so in any one individual market.
Now that gaps occur less frequently, it is crucial to test what happens in a particular market when a gap occurs, especially as trading continues to increasingly trade 24-hours.
One question you will want to ask, market-by-market, is "Does this market usually move in the direction of the gap following the back-fill, or does it move in the opposite direction from the gap following the back-fill?"
For the most part, trader’s stops are based on money, ticks, pips or some percentage of their trading account. All of these are money management stops. In this respect, the level selected for the stop should take into consideration your risk tolerance.
However, very few traders use time stops in addition to money management stops. Time stops are trade management stops.
Using a time stop is quite simple. You apply a stop to your intraday positions which has nothing whatsoever to do with price. With a time stop, you decide how much time since entry is enough for your position to have moved in the direction you anticipated.
When you are trading there are two ways to be wrong:
You can be wrong about direction
You can be wrong in your timing.
Think about how many times you have entered a position, then saw your money management protective stop get hit for a loss, only to see the market turn around, and go in your desired direction; a most discouraging situation. You were right about the direction it was your timing that was wrong!
The idea behind the use of a time stop is that it has been proven that the longer an intraday trade remains suspended between a profit and a loss the more likely it is that the position will produce a loss.
The use of a time stop goes hand-in-hand with having a defined trading plan. You should have a well-defined setup or entry signal, a definite profit objective, and a money management stop loss. The stop loss can be fixed or trailing, as you prefer.
The question almost always comes up: “How long should I give the trade to materialize before I simply exit?”
The answer is that you make that determination through study and testing of your chosen market and time frame. If you trade in more than one market, then you make the determination for each market and time frame in which you actually trade.
Experience has shown that the best time to get out—win or lose—is when trading slows down while you are still in the position.
What we want to gain by using a time stop is a reason to exit those trades which are hanging around break even, but have are not really going anywhere—doing nothing to encourage us to stay in the trade. Profits are made when there is momentum in the direction of our profit objective. If momentum decreases, simply get out. You will find that some of the time you will exit with a profit and other times with a loss. Either one will be small and inconsequential in the long run.
When a market becomes volatile a time stop may be as little as 1 minute. If volatility is low, you may choose 5 or 10 minutes for the trade to go your way.
Even when using a time frame as long as 60 minutes in a less volatile environment, your time stop is not likely to be more than 30 minutes.
The major objection to the use of time stops is that they can involve a lot of in-and-out trading. It is true that positions are exited even when they are not actually losing money, simply because they have run out of time to materialize. I have no argument against that point, it is valid.
However, experience dictates that sitting in front of a screen hoping that a position reaches your profit objective, more often turns into a loss than into a profit. You certainly don’t want to be holding a position when liquidity dries up, the market suddenly becomes volatile, or you see an entry signal for a trade in the direction adverse, to your current position.
You should become aware of those times when liquidity dries up. Typically, it will be around the lunch hours of the major trading centers. Also be aware of when reports or news releases are scheduled to come out. Ten to fifteen minutes before a report or news release is due to come out, liquidity will dry up as traders wait to see what is in the report.
Keep in mind that although electronic markets are open for extended hours, traders are not willing to trade during all those hours, so liquidity tends to dry up during the hours when a lot of traders are simply asleep. Traders are creatures of habit. They still tend to trade the most during the hours they traded during the years prior to electronic trading.
The use of time stops adds a dimension to your trading that few traders ever employ. If you use them wisely they can definitely improve your trading. Time stops quickly dispatch non-performing positions and reduce the burden carrying a position that is going nowhere.
Philippe Gautier: Administration and New Developments
Developer: Joe Ross
Underlying stocks don't always go straight up or sideways after our entry. So it is of utmost importance to choose our short put strikes carefully.
On 19th March 2017, we gave our IIG subscribers the following trade on Tesoro Petroleum Corporation (TSO). We decided to sell price insurance as follows:
On 20th March 2017, we sold to open TSO Apr 28 2017 75P @ $0.40, i.e. $40 per option sold, with 38 days to expiration, and our short strike below a major support zone and 12% below price action.
On 24th April 2017, we bought to close TSO Apr 28 2017 75P @ $0.10, after 35 days in the trade.
Our short strike was never violated during the life of the trade (lowest daily low 11 ticks above $75 put strike).
Profit: $30 per option
Margin: $1,500
Return on Margin Annualized: 20.86%
We have also added new types of trades for our IIG daily guidance since 2016, "no loss" propositions with unlimited upside potential, still using other people's money to trade.
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