The Daily Market Forecast... Lesson Day

Today’s Lesson: Should you trade multiple strategies?

Given enough money diversification becomes mandatory. You’ve never heard of a hedge fund that ran “one” strategy. But what about those of us with relatively smaller trading accounts? There are pros and cons.

Pros:

1. More trading opportunities. When one strategy is waiting for entry, another may be active. This means more efficient use of your capital AND TIME.
2. Smoother equity curve. No guarantees, but you’re likely to have less severe drawdowns in your account if the strategies you trade are not correlated. This means you’ll FEEL better about your performance and trade with more confidence.
3. “Sunset” protection. If you haven’t already noticed, trading strategies don’t always work forever. The markets are a technology business now. And we know technology advances at lightning speed. You need to constantly learn and apply newness to your strategies. Measure it and establish new rules.

Cons:

1. Capital required. You MAY not have enough capital to run multiple strategies but given the small contract size and leverage in the options, FX and futures markets a capital constraint is unlikely.
2. You need to learn. It’s tough to call this a “con” but some people get in that “fur-lined rut” and don’t want to grow their trading IQ. Reach out and learn something new… it’s fun!
3. Conflict. This is probably the only true “con” to running multiple strategies. You’ll get a buy signal from one and a sell signal from another. The fix is easy though. Think confluence. If both are in harmony, that’s GOOD. If there is conflict, then maybe that’s a trade to pass on.

For Tue 210928 (Plenty can change by the open, be aware.)

Globex Review: On fire. Two takeable trades both winners with the second trade still open after buying the 4388.50 level and making the bottom (for now).

Day Session Analysis: Sentiment is bearish. Stats are mixed. Energy “crisis” is the catalyst. Careful picking bottoms but willing to try. Tuesday (both sessions combined) garnered 20% of all the gains over the past 5 years in dollars. Reversals and Breakouts are about even. Trading ES/CL/GC using BB Rev with new filters. Yesterday’s credit spreads were easy, today’s ladder may not be.

S&P 500 Futures CPL: 4431/4434.25. We’re trading BELOW the CPL (short edge below, long edge above) and BELOW the equilibrium 4434/4432 (open below = short edge, open above = long edge).

The World Index: (+100/-100) DROPS from +21 to -29 in a world of very mixed sentiment. Western more bearish (longs outperform shorts).

Catalysts: International Trade @ 8:30. Consumer Confidence @ 10:00. Energy “crisis” emerging with eyes on OPEC’s “World Oil Outlook” being released today. There is wide “fear” in the markets. 

Trends: 60 min DOWN, daily UP (longs outperform shorts).

Low outside day: Win/Stop% about the same, longs CRUSH shorts earning 10X the profit. Opening around -0.90% (long edge). $TRIN XMA dips to 0.85 (long term outlook: stay long, but the “go to cash” or “short” trigger is 0.80 so watch during the day).

Globex: The range of 54 (possibly wider by the open) suggests a day session range around 66 points on a FALLING ATR of 49.47. Prior forecast around 50 points, actual 21.50 (big miss).

Trade Well,

Mike Siewruk

P.S. For a free “mini-course” packed full of lessons on HOW to trade the Blog… Watch this video.