Trade Aptitude
Results of Tuesday’s Best S&P Futures Turning Points: Neither suggested trade triggered in a relatively narrow range session.
Today’s Best S&P Futures Turning Points (consider wider stops and less size in fast moving markets):
Buy 4577.75 stop 4573.50. Short 4602.50 stop 4606.25.
The World Sentiment Index: (+100/-100) falls from +29 to -14 in a world of mixed sentiment and low volatility.
Catalysts: Jobless Claims & Philly Fed MFG @ 8:30. Existing Home Sales @ 10:00. Tech earnings start weak.
Quick Tip: Newbies Only Part 4
This is a multi-part process. If you didn’t read the prior three newsletters you can find them here.
Yesterday you determined your starting and subsequent risk capital contributions. Along with your prior choice of time horizon (day, swing, or position) you’re ready to find the perfect asset to trade.
Best choices…
Position Traders: Stocks (high capital requirement) and Forex (low capital).
Swing Traders: Stocks (moderate capital), options, Forex, and futures (all low capital).
Day Traders: Stocks (moderate capital) and futures (low capital).
You can see now that finding the market you’re best suited to is a combination of your time commitment and your risk capital.
You’ll also notice that trading stocks requires more capital. The reason is leverage, or lack thereof. Disciplined use of leverage is critical for trading success.
The stock market offers you 2:1 leverage and you’ll pay interest on the borrowed amount. Not as attractive as options, Forex, and futures which offer significantly more leverage with no interest charge.
Here’s an example: If you’re buying a position of 100 shares of Apple at $195 today your choices are a cash purchase of $19,500, a margin purchase of $9,750 (plus interest) or a one-year option purchase of $1,950 (no interest). Your percentage return on the option selection blows away the other choices and frees up more of your capital for other trades.
For short-term traders the leverage becomes even more important. If you want to day trade the “market” using the S&P 500 index (100 shares of SPY), your choices are a margin purchase of $11,375, an option purchase of $500, or a futures purchase of as low as $123.
Obviously, you will not start trading based on just this information. It’s intended to point you to the market that you need to get trained in. They each have their own unique “personalities.” Before you start your simulated trading and eventual real money trading, get educated by a reputable source.
Tomorrow we’ll dive into strategies. These are the rules that you’ll follow to become a winning trader.
if you want help getting through the process from a team of skilled traders, join ours, learn several strategies, and watch us trade live daily. Money back if you’re not blown away! Click here for details.
Trade Fearlessly,
Mike Siewruk