$SPY Chart: 10 Fast Facts 11/23/14

23 Nov
November 23, 2014

 

  1.  The long and short term up trends in the market are both in place.
  2. This market has gone parabolic on a break above the 70 RSI. This is a rare outlier event to run so far with no pullback.
  3. This is currently a market for trend followers and momentum traders. Short signals have failed since the recent low was estabablished in October.
  4. The risk/reward is skewed strongly against longs at these lofty levels. This is a let profits run kind of market and not a great time to initiate new longs at these overbought price  levels. Much better odds on waiting for a pullback to get long if not already long here.
  5. The gap open and then close lower on Friday is the first sign of a possible reversal. The second would be a close under the low of day on the gap day.
  6. There are zero signs of a correction here, the bears have to battle for even a pullback with the buying pressure that is being exerted on every small dip.
  7. The low of the day on the gap up is the 1st level of short term support.
  8. The 5 day ema is the second level of support that lines up with the recent $206 break out resistance. 
  9. It is highly likely that selling deep out of the money puts is the highest probability trade here.
  10. I will be back on the dip buying side next week given the right opportunity at the 5 day ema or 10 day sma.

5 Great Trading Articles 11/22/14

22 Nov
November 22, 2014

 

Scientist Discovered Why Most Traders Lose Money – 24 Surprising Statistics

The Theory Of Reflexivity: A Primer For Today’s Market

The Secret to Momentum is the 52-Week High??

Top Trading Tweets: Week of 11/21/14

21 Nov
November 21, 2014

Capital Preservation: 10 Trading Tips

21 Nov
November 21, 2014

 

As a trader, your #1 goal is to keep your current trading capital safe and secure. Your goal as a a trader is to make money and not lose money. Many new traders lose their trading capital in the first year, but these ten tips will help you keep your capital intact so you can make it grow.

  1. Do not start trading until you have fully educated yourself. Trading tuition is expensive when you trade first and learn later.
  2. Do not trade an account so small that commissions will end up being a big drag on your returns.
  3. Do not trade until you have a well developed trading plan.
  4. Trade a position size that does not cause your emotions to become so loud you can’t hear your trading plan.
  5. Only trade in markets you fully understand.
  6. Only take valid entry signals and do not chase. Let your entry point trigger first.
  7. Only trade in liquid markets so bid/ask spreads do not devour your account.
  8. Never risk losing more than 1% of your total trading capital on any one trade through proper position sizing, and by placing stop losses at the correct price levels.
  9. Never expose your total trading account to more than a 3% loss of total trading capital at any one time, on one day.
  10. Never move a stop loss. Take the exit the first time it is triggered.

Starting a Trading Business

20 Nov
November 20, 2014

 

If a new trader wants to be a successful, they will need to treat their trading like they would operate a profitable business. Many traders lose a lot of money by approaching trading like it is a hobby. In trading, making money is the goal, and must be kept at the forefront of a trader’s mind if they are to be successful. Fun and excitement in trading can be expensive entertainment. The reality is that most of the time, trading is boring. A trader must treat the market like they would any other business, utilizing discipline and great care to grow their capital and be successful.

  1. You can’t open your trading business until you have a full business plan.
  2. Your inventory is your current positions; you have to buy them for less than you intend to sell them.
  3. Your customers are who you sell to; they have to be willing to pay more than you bought your positions for.
  4. Your mind is the manager of your business; you can’t let pride, fear, or greed lead to an unprofitable mistake.
  5. Your business must have insurance to manage risk. Stop losses and hedges are your insurance against big losses.
  6. Location is everything. You must conduct your business where there are ample buyers and sellers so you don’t get stuck with positions that no one wants.
  7. Your current positions are your employees. You have to keep the ones that produce gains, and fire the ones that lose. 
  8. Expansion of your business can only happen after your first location is successful. Once you have mastered a system of entries and exits you can add new markets and systems.
  9. Your trading capital and your positions are your inventory. Lose that and you are out of business.
  10. The only reason to be in business is to make money. If you don’t make money, you need a new business plan.
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