The Daily Market Forecast... Lesson Day
Today’s Lesson: “All in” or “scale in”?
The highest risk moment of any trade is the entry. That’s the only time you can immediately lose money. “Order filled… order filled!” just that quick. As the trade progresses in either direction you have time to adjust your risk if your rules allow. The risk gets smaller every minute from your entry.
Knowing this you would think that scaling in, buying more as price goes in your direction, would be the wise choice. “Dip your toe in” to start, at that highest risk moment, and press your bet as it works in your direction. Makes good sense.
The opposite choice, entering full position size all at once, has more risk but also more flexibility in exiting. For example, if you knew an asset had movement of X points almost 70% of the time from your entry, wouldn’t you want to grab that quick scalp?
Not a good way to make money overall but not bad as a component of your exit rules. Call it a “risk management” profit target. You’re taking a high probability low dollar win most of the time and leaving some units to get to the real profit.
Here’s how to decide for yourself which to use: Scaling in works fabulous with trending assets and conditions. All-in works great with ranging conditions and assets. Maybe you need both in your toolbox and the rules to determine which condition you’re facing.
For Fri 211015 (Plenty can change by the open, be aware.)
Globex Review: Price respected the volume levels with a 15.25-point level-to-level (2.65 R/R) and a 8.75 MFE winner (still open, depending on exit rules).
Day Session Analysis: World sentiment is bullish. Risk-on mood (buying the breakouts). Stats mostly lean short (take profits). Retail Sales will shed more light, but Wall Street earnings are killing it. Willing to trade either direction for now. Friday (both sessions combined) garnered 25% of all the gains over the past 5 years in dollars. Reversals (78%) crush Breakouts (22%). Trading ES/CL/GC using BB Rev with filters (download the new Edge). Looking for credit spread candidates both ITM and OTM.
S&P 500 Futures CPL: 4424/4429.75. We’re trading ABOVE the CPL (short edge below, long edge above) and ABOVE the equilibrium 4399.25/4418.25 (open below = short edge, open above = long edge).
Long levels: 4448.75/4445 (SCPL if from above currently within), 4429.75/4424 (CPL new), 4416.50/4410 (new), 4396.25/4393.25 (new), 4371.50/4368 (FCPL), 4355/4352.50 (FCPL), 4335.50/4331.75.
Short Levels: 4445/4448.75 (SCPL if from below currently within), 4463/4469.25 (FCPL), 4481.50/4485.25 (FCPL), 4490.75/4495 (SCPL, 4509/4512, 4520.75/4525.50.
The World Index: (+100/-100) JUMPS from +21 to +64 with all major world markets bullish (shorts should outperform longs).
Catalysts: Retail Sales, Empire State MFG Index & Import/Export Prices @ 8:30. Consumer Sentiment @ 10:00. Big banks earnings are fueling bullish continuation bets. Bitcoin surging.
Trends: 60 min RANGE, daily UP (shorts should outperform longs).
High outside day: Win/Stop% about the same, shorts delivered 20% more profit. Opening around +0.35%. $TRIN XMA stable at 1.03. Long term outlook stays long.
Globex: The range of 22.75 (likely higher after Retail Sales data) suggests a day session range around 39 points on a RISING ATR of 58.87. Prior forecast around 50 points, actual 42.50.
Trade Well,
Mike Siewruk
P.S. For a free “mini-course” packed full of lessons on HOW to trade the Blog… Watch this video.