Trade Aptitude

Monday’s Best S&P Turning Points Results: The buy @ 4047.75 stopped out (barely). Those that gave extra room on the tight stop placement were rewarded. 

Today’s Best S&P Turning Points (consider wider stops and less size in fast moving markets): 

Short 4044.50 stop 4048.75. Buy 3963.00 stop 3958.25. 

Globex View: Very narrow range oscillating around yesterday’s close. Looking for price to break either way after the open but just as likely to be a range-bound day. 

The World Sentiment Index: (+100/-100) DIPS from +21 to -14 in a world of mixed sentiment and lower volatility. Historically price closes HIGHER than the open 74% of the time.   

Catalysts: International Trade @ 8:30. Goldman research reports smart money is betting on soft landing. 

Quick Tip: Stops, Wide or Tight? 

Day trading small timeframes is challenging due to price “noise” (random appearing ups and downs). Higher timeframe traders argue that using lower timeframe charts is difficult due to this noise. Can’t disagree with them. This is one aspect of smaller timeframes that requires attention to be successful. 

Noise is most annoying with stop placement. Yesterday’s buy level had a tight stop, it filled, and price reversed to offer a small run of 7.75 points. The suggested breakout stopped out also, then reversed to deliver a whopping 42.75-point winner at the close. 

Studying this afterward your reaction might be to accept wider stops. You’ll catch more winners and lose more on losers. The solution is to reduce your position size with the wider stop, keeping the dollar loss around the same amount. Alternatively, you can keep the tighter stop and allow for re-entries. 

Which is better? The answer lies within your style of trading. You need to be comfortable and confident in trading. There are probably just as many traders who will argue for both styles. This is one of those trading decisions where there is no right or wrong, just what is “right” for you. 

If you’re unsure which style fits, practice in simulation mode. Eventually you’ll feel the difference and make your choice, but don’t forget to document the results of both. The “feeling” may well be different if one is more profitable than the other for your entry and profit target rules.  

Trade Fearlessly,

Mike Siewruk 

P.S. Feel free to share this blog with all your trading buddies.