Trade Aptitude

Today’s Best S&P Futures Turning Points: This strategy remains on hold but is improving.

The World Index: (+100/-100) jumps from +29 to +64 with all major world markets solidly Bullish. 

Catalysts: PCE Price Index @ 8:30. Chicago PMI @ 9:45. UofM Revised Consumer Sentiment @ 10:00. 

Welcome back to Poker Week! If you haven’t read the last four blog posts now is a great time to do so. All week we’re exploring poker lessons that are also invaluable for traders. Enjoy!

Lesson #5: Maximizing Wins

In poker, as in trading, one universally agreed upon tenet is “minimize your losses and maximize your gains.” But what is the proper way to achieve that outcome?

Imagine you’re playing poker, and you get a powerful hand. Your reaction should be to raise the bet. Novice players make the mistake of slow betting the hand instead of raising. They want to keep players in the hand to maximize the pot and their winnings.

The problem is more cards are coming and your powerful hand might end up in second place. Statistics prove it’s better in the long run to raise and only on occasion vary your style to keep your opponent guessing. 

In trading, the analogy to a powerful poker hand would be a trade that immediately goes in your direction. You’re not concerned about the loss any longer. Your stop loss order can be moved to entry for a breakeven outcome at worst. 

Your attention should now be on maximizing the gain. You could manage out of the trade by looking for likely reversal points. You could scale out if you’re trading multiple contracts/shares. 

Or you could raise the bet. Add more size. Join the momentum. Pro traders do this in “units.” If your starting unit is one contract you should be prepared to add two more units one at a time. 

Unlike your trade, the poker hand has a natural ending. No more cards will be dealt. How do you end the trade? Targets and trailing stops. Before entry, set an ultimate target based on your strategy rules and chart patterns. Make it a big win but acknowledge the present time volatility and likely range. The ultimate target should be a logical expectation. 

Clearly this method requires practice in simulation mode. If your strategy doesn’t have plenty of setups, you should learn and trade multiple strategies, like our team does. You’ll get more practice, quicker. 

Our trading teams focus on day trading futures and swing trading options. Maybe you'll fit right in. You can try either or both risk-free. 

Trade Fearlessly,

Mike Siewruk

P.S.  Feel free to pass this along to your trading buddies. Share in the wealth!