Trade Aptitude
Friday’s Best S&P Turning Points Results: The suggested short level was only good for a 7.25-point scalp.
Today’s Best S&P Turning Points (consider wider stops and less size in fast moving markets):
Short 3966.50 stop 3971.25. Buy 3849.50 stop 3843.75.
The World Sentiment Index: (+100/-100) SOARS from -64 to zero in a world of mixed sentiment. Historically it’s coin toss where we’ll end up. No edge to report.
Catalysts: Chicago PMI @ 9:45. Waiting on FOMC Wednesday.
Quick Tip: Exit Art
In teaching over 4000 traders in the past 13 years I’ve found the most common goal is finding better trade setups. It seems we naturally want to know when, where and with what are we going to get started. Entry rules.
The fact is that entries are easy to find. Investing much of your research time on finding better entries is not nearly as productive as finding better exits.
Why? Because you win or lose on the exit you choose. It is the most important rule set in your plan. You should be testing many exit strategies. Keep your entries simple.
Here’s an example: A common trend entry is to determine trend, wait for a pullback, enter in the direction of the trend. This is not rocket science. Look at charts all day long and you’ll see that trends in either direction are seldom smooth. They have impulses and corrections. It makes sense to enter on a correction, a dip in price, with the expectation the trend will continue.
How you exit is critical to your success. Get out too early and your risk/reward profile will be poor. Wait too long and you’ll give up acceptable profit, breakeven, or even lose.
There is art and science to exiting. The science is relatively easy. Scale out, use fixed dollar amounts, chart features like double tops, volume levels, support, resistance, Fibonacci extensions, etc.
The “art” comes from experience. You learn the art of the exit by trading in various market conditions. This takes time so the practice is invaluable. Use sim mode. Choose different market conditions (choppy, trending, volatile, quiet). Document the kinds of exits that work best.
In our trading room we run several strategies (entry rules) and have multiple exit rules that attempt to match the current market conditions. Having documented thousands of trades for the various rules, we know the probabilities, the edge.
Trade Fearlessly,
Mike Siewruk
P.S. Multiple strategies, software tools, teammates, and coaching. Learn why you should join our team here. For a personal consultation to assess fit (without selling) email me for an appointment: mike@thedailymarketforecast.