Trading Evolution

Markets are never wrong - opinions often are

Worst-ever four-day start to a year

S&P 500 dropped by 4.9% since Monday. This is the worst start of the year for the markets and all FED had to do is raise rates 0.25%. Just imagine what would happen if they continue raising rates as they are promising now. The market is clearly hinting to the Federal Reserve that it is not a good idea and they usually listen so I would not expect any rate hikes soon.

Buy Low, Sell High

How many times did you hear to be successful trader all you need to do is “Buy Low and Sell High”? I heard it thousands of times. Unfortunately, this phrase misses few important words. Let me give you an example on below chart. When you ask ordinarily person or a new trader where is the low and where is the high? Close to 99.9% will say Point 1 is the low and Point 2 is the high and they will be right except one small key word. Point 1 is past low and Point 2 is past high. Unfortunately, when you trade and invest you do it in a future and not in the past.

Let’s look at the chart below which looks at the same data as above but few weeks forward. It turns out Point 2 was past high but it is at the same time is future low. So next time people say “Buy low, sell high” they mean “Buy at the price that will be future low, sell at the price that will be future high” or “Buy future low, sell future high”

Bear market in US stocks now became more likely

According to Mark Hulbert if the first trading day of the year is negative bear market is more likely this year:

So what does it mean for S&P 500? Based on high of 2,134.72 in May of 2015 the S&P 500 should close below 1,707.77 sometime in 2016.

Organizing your trading day

A typical day for a trader consists of analyzing different trade setup or scenarios as they come up during the day. I have about 40 different scenarios or trade setups that I watch daily. So how do I keep it all in my head without letting it explode? The answer is I don’t. I have a piece of software that helps me manage my attention during trading hours and focus on what is coming. On top it displays trader clock which shows me current time, countdown and time until coming events such as economic releases, international market open and close times, FED speeches etc. Next it shows my weekly mental and monetary goals and progress bar based on my current account balance. And finally list of only relevant at that particular time trade setups. For example, I monitor some setups during US open hours so the application shows me setups for US open, my past notes and stats ahead of US open and hides them later so I can stay focused on next trades. After trade is done I make notes for next time, update results and forget about it until the next time so my head stays clear for a next trade.

PS I am not selling or giving this piece of software because it does much more than that and I am only writing this post so it might help other trades develop their own methods of organizing their trading days. If you are penny stock trader, Forex trader or just day trader please share your own methods on staying organized and prepared.