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Today’s Best S&P Futures Turning Points: Buy 5065.00 stop 5059.25. Short 5142.00 stop 5146.50.
Thursday’s results: The buy at 5054.25 stopped out.
The World Index: (+100/-100) soars from +8 to +60 with the all open major markets Bullish.
Catalysts: Non-Farm Payrolls @ 8:30. Final Services PMI @ 9:45. ISM Services PMI @ 10:00.
Quick Tip: Trading Styles
Yesterday you chose your primary asset class to be trained in, stocks, options, futures, or Forex. During that training you’ll be learning a rule-based trading strategy. (If you missed the prior blogs click here to read them).
The best way to get started trading is to have specific rules to follow. Entries and exits. Position size. Risk management. All these rules combined are your strategy. Eventually you’ll have more than one strategy but to start it’s best to focus on mastering one.
Strategies can be lumped into basic styles. Trend Following, Mean Reversion (reversal), and Breakout (momentum). There are many variations of these styles and even more styles, but these are the most common.
The purpose here is not to describe in detail all the strategies, it’s to give you a high-level view of what trading them is like.
Trend Following is popular and highly effective. As the name implies, you’ll be looking to enter a trend and remain in the trade until it ends. There are some issues that may not resonate with your personality though. First, price doesn’t trend most of the time, it moves in ranges more often. This means you’ll likely have around 30% of your trades win and 70% lose. The winners will be large enough to cover the losers and earn you a profit. Because the losing streaks can last a while, it’s best to trade multiple uncorrelated assets so that your combined results are tolerable. If that frequency of losing doesn’t bother you and you have the capital to trade multiple assets (stocks, contracts) simultaneously then Trend Following is a good choice.
Mean Reversion, or reversal trading, attempts to locate turning points where the price move is exhausted and will likely return to the mean (average) of its history. This too is popular and highly effective. Since price bounces back and forth in ranges more often than trending, you’ll see a higher win percentage. However, you’ll need that because your wins will not be as large as trending wins. If you feel better to win more often even though they’re smaller than reversal trading is a good choice.
Breakout, or momentum trading is like Trend Following in that you’re expecting price to trend for a while but differs in its exit. While Trend Following waits for the end of the trend and therefore gives back substantial open profit, momentum traders will use chart patterns and technical indicators to exit when the momentum weakens. If you like to follow and analyze your open trades this is a good choice.
For a thorough understanding of all the styles of trading you’re encouraged to read any of Jack Schwager’s Market Wizards series of books. He interviews top traders and discusses with them how they trade. You’re certain to find a style that resonates with you.
Tired of day trading alone and guessing what to do next? Join our team. You can learn the strategies and trade live with us daily for 30 days. Money back if you’re not blown away! Take advantage of the final days of this promotional price.
Trade Fearlessly,
Mike Siewruk
P.S. Feel free to pass this along to your trading buddies. Share in the wealth!
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