Today’s Lesson: “All in” or “scale in”?

The highest risk moment of any trade is the entry. That’s the only time you can immediately lose money. “Order filled… order filled!” just that quick. As the trade progresses in either direction you have time to adjust your risk if your rules allow. The risk gets smaller every minute from your entry.

Knowing this you would think that scaling in, buying more as price goes in your direction, would be the wise choice. “Dip your toe in” to start, at that highest risk moment, and press your bet as it works in your direction. Makes good sense.

The opposite choice, entering full position size all at once, has more risk but also more flexibility in exiting. For example, if you knew an asset had movement of X points almost 70% of the time from your entry, wouldn’t you want to grab that quick scalp?

Not a good way to make money overall but not bad as a component of your exit rules....

Today’s Lesson: Keep an open mind.

I read an article from Bloomberg the other day: “Five Traders Tell Us How to Survive a World of Disrupted Markets.” There were plenty of differences between them including chosen asset class, style, strategy, all the typical things.

There was one huge commonality, though. They all stressed keeping an open mind. Be willing to change. Markets change. Technologies change. Laws change.

Change is not always easy, though. We can get into a comfort zone and not want to leave. But we must if we’re going to grow our trading skills.

Here’s an example of why it’s so important. Sixteen months ago, I launched The Daily Market Forecast. We started trading the S&P futures using one strategy with a fixed rule set.

We’re fortunate to have many very skilled traders in our room. Everyone is encouraged to share ideas, successes, failures, anything that might help us improve. We call it Team Trading.

Because of that...

Today’s Lesson: Reframing

This is critical for your success at anything. Do you think about the positive outcome or the negative outcome? It makes a difference. You have a choice.

Looking at yesterday’s long suggestion on the chart above you’ll see…

1. The trade triggered entry.
2. The stop was touched (probably filled).
3. Price moved in your direction for 15 points, but you sold at the precise bottom of the market.

What were you thinking?

“This strategy STINKS, the stops are too tight!”

OR

“This strategy is AMAZING, we picked the bottom of the market!”

Reframing is the act of taking a negative situation and finding good in it. You change your thoughts about it, which changes your beliefs and your emotions, your actions and ultimately your RESULTS. Really.

If you want to turbocharge your trading, you need to solve your biggest challenge… YOU.  Focus on trader psychology and learn dozens of other nifty tricks like this, enroll in...

Today’s Lesson: Lethal Biases. 

Have you ever looked at your trade result and said to yourself “If I had a bigger stop it would have been a winner” or “If I don’t use a stop I’ll see more winners because this market just swings back and forth"?

What you’re experiencing is hindsight bias. It is our tendency to look back at an unpredictable event and think it was easily predictable. It is also called the ‘knew-it-all-along’ effect.

Yesterday’s short suggestion stopped out for a 5.75-point loss. Eventually, it went all the way to the next level for a 22.25-win. However, the adverse move was huge at 19.25 points against. This may be a bit exaggerated to alert you to hindsight bias but it happened yesterday and that’s what we’re reviewing.

It's not uncommon to feel this bias. When you combine it with small sample size the pair become lethal. You see something unpredictable happen a few times and now you think...

Today’s Lesson: Documentation & Review are key.

Rather than wax-on about today’s subject I’ll point you to a Zoom recording from Saturday on this subject. Lots of lessons were shared in a new format I’m testing… reviewing all the prior week trades from our trading room. Go to https://www.thedailymarketforecast.com/video-lessons.

For Mon 211011 (Plenty can change by the open, be aware.)

Globex Review: Missed filling a fabulous 35+ point short by one tick. The opposing level was suggested for exits only saving two losers.

Day Session Analysis: Sentiment is mildly BULLISH elsewhere. We are down. Stats are mixed so taking trades in either direction mindful that the holiday range may be tighter than forecast.   Monday (both sessions combined) garnered 27% of all the gains over the past 5 years in dollars. Reversals and Breakouts are about even. Trading ES/CL/GC using BB Rev with filters (download the new Edge). Thinking credit spreads might be...

Today’s Lesson: Prepare yourself more.

There are countless ways to beat the market. Your first challenge is finding a method that is in harmony with your personality, time commitment, finances, and goals. Once you find that, trading should be easy, right? Nope.

The second (and more difficult) challenge you’ll face is yourself. Impulsivity, impatience, need to be “right”, etc. There are countless ways to beat yourself, too!

One trick I’ve found very useful is mental preparation. Instead of getting up, brushing my teeth, downing a coffee and looking for trades, I’ve developed a morning routine that leaves me energized and focused. Mental preparation increases your confidence as well. Confident traders are good traders.

Find your own routine but to give you some ideas, here’s mine:

1. Up at 5:30 am.
2. Lights on in every room I’ll enter.
3. Music on.
4. Tidy up (make the bed, empty the sink, etc.)
5. Drink 16 oz. of lemon infused water.
6. 15 minutes of...

For Thu 211007 (Plenty can change by the open, be aware.)

Globex Review: Thursday blues may be back. Two takeable trades, one loser and one small winner (which was the start of a great move up, but shaken out by our stop )

Day Session Analysis: Sentiment is BULLISH. Stats suggest SHORTS will perform SLIGHTLY better. Looking for quality trades in either direction. Thursday (both sessions combined) garnered ONLY 4% of all the gains over the past 5 years in dollars. Breakouts (95%) crush Reversals (5%). Consider not trading Volume Profile. Trading ES/CL/GC using BB Rev with MORE new filters (download the new Edge). VERY cautious about credit spreads.

S&P 500 Futures CPL: 4309/4315. We’re trading ABOVE the CPL (short edge below, long edge above) and ABOVE the equilibrium 4328.75/4330.75 (open below = short edge, open above = long edge).

The World Index: (+100/-100) SOARS from -92 to +83 with all major world markets very bullish (remember our contrarian alert yesterday?) Today:...

Today’s Lesson: Write a check. Well, not exactly (who does that anymore anyway?). This is about a risk management trick I learned from a really great trader. I can’t remember if it was Larry Williams or Jake Bernstein.

First, never risk more than you can afford to lose both financially and psychologically. Be honest with yourself. If you’re not, you will definitely find out when the losing streak happens. So, take that “per trade” risk and multiply by 4 or 5 to get closer to reality.

Second, and this was Larry or Jake’s trick… when you enter the trade visualize you just wrote a check to Mr. Market for the stop loss amount. It’s gone. Out of the account. You spent it.

The beauty of this “re-framing” is that you will never feel emotional about the loss. You didn’t lose anything. You spent it, just like you do every day for all the other things in life.

Now, if you end up getting out at breakeven after trail-stopping...

Today’s Lesson: Why volume levels work.

Normally when you insert a volume indicator/study on your price chart it appears on the bottom in histogram format. This shows you the volume during the time interval of your chart (5-minute, 60-minute, daily, etc.). This can be useful as dramatic changes in volume may affect price.

If you’re day-trading futures contracts the volume you’re better off using is volume at price (see the chart above). Notice that the majority of transactions occurred at very specific price ranges. These tend to be fantastic reversal and breakout levels.

The key to any trading strategy is to get the “math” in your favor. In other words, the combination of your win/loss percentages (trades) and your average win/loss (dollars) needs to be in your favor. This means you need to manage the risk very well. By using a fine-tuned volume-at-price tool you can laser-focus on great setups with smaller risk. We use tick data for the ultimate...

Today’s Lesson: Sequel to yesterday’s “Get a night job.” Normally I wouldn’t write about the same topic two days in a row, but this was too coincidental to pass up. 

The levels on the chart above were distributed to our team of traders yesterday at 5:15 PM ET. As you can see, price opened the session (light green vertical line) below our desired short level. This gives us the perfect Globex trading opportunity: Set/Forget. Go have dinner. Go to a movie. Go to bed early. Whatever you like!

At 8:15 the trade filled, went only 1 tick against and ran for 50+ points. You can’t get it all, but there is plenty to grab in a run that fast. For Thu 210930 (Plenty can change by the open, be aware.)

For Fri 211001 (Plenty can change by the open, be aware.)

Day Session Analysis: Sentiment is firmly bearish, yet the S&P has bounced back to positive after a 50-point drop. Stats are mixed. Taking trades in either direction. Friday (both sessions...