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Trader Fatigue
Long-distance runners get it, people that don’t sleep well get it, people in the military get it, doctors and nurses get it, people that do not eat right get it, people with depression get it (Covid19), people that drink too much caffeine get it, and people that trade for a living get it! It’s called fatigue, and if you are a trader, you know what it feels like.
I am sure the list of fatigues is way longer than my list but as the Covid19 pandemic moves into its second year and places are locking down for another 3 to 4 weeks I think the fatigue has really hit people, especially those that already had existing problems. I know this is not a normal MrTopStep trading topic but I see this every day; people are tired, they want their lives back. I know so many people that have not seen their kids or grandkids for over a year. This type of separation affects entire families and that is why I have made myself available to as many possible as I can to just… talk. Many answers to their questions are right in front of their noses. Simple things like getting out of your house or apartment for a walk around the block, exercising, even if it’s just 5 to 10 minutes a day, taking your dog to the dog park, going to meet a friend you have not seen at a coffee shop that has outdoor seating or set up some chairs in your back yard and invite some friends over. I even told a friend that lives in Malibu to ask her daughter to take her for a ride around in the car.
I have always taken Covid19 seriously and despite having the vaccine I still wear a mask when I go out in public. It makes me feel better that I am still doing my part. But that all said, I really think it’s important to push friends and family to make positive changes as the summer rolls in and DON’T LET UP.
Most traders do not think about ‘fatigue’ but I know for a fact that there is a lot of that out there. For many, it started in February of last year when the China virus was breaking out all over the world. Over the course of the year, we have watched the S&P crash and rally to new all-time contract highs but recently the volumes have dropped and the VIX has dropped down into the 17 handle. Retail traders that invest in stocks have had a great year trading but with less money going into stocks the big brokerage firms are seeing less trade and traffic to their websites has fallen. This is a big reversal from just a few months ago when investors were piling money into no-name companies like GameStop. You have to understand when trading volume drops the ‘feeless’ brokerage firms make less money. Since February 12th when the Nasdaq hit its record high AAPL, TSLA and NIO have fallen nearly 10%. On the other side of the coin, the S&P 500 continued its march to new all-time highs last week and is now up 7% YTD thanks to shares in the energy, industrial and financial sectors which is a good indicator that the economy is rebounding. Vanda Research’s flow tracker estimates that since mid-February, the average nonprofessional investor has underperformed the S&P 500 by about 10% which the firm believes has contributed to the retreat. To try to offset their losses, individual investors in March rotated into more economically sensitive companies including Boeing Co., Starbucks Corp. and JPMorgan Chase & Co. So far all the news about the $1,400 stimulus helping cause another buying spree has not come and individual investor net purchases for US ETFs have fallen to the lowest of the year.
I am not sure why this is happening but I think it has to do with the risk reward of owning stocks at such high levels. The other part is the slowdown has come at the same time people went on spring break. Robinhood has seen a 35% drop in traffic which tells me some retail traders have gotten chopped up.
Our view, I am bullish but I do not think the next 50 points will come as quickly as the last 50. Our lean is to sell the open or the early rallies and buy the pullbacks. The S&P has run a lot of buy stops recently and sell stops are building up under the 4018 level down to the 3995 level.
Danny Riley is a 39-year veteran of the CME trading floor. He ran one of the largest S&P desks on the floor of the CME Group since 1985.
As always, please use protective buy and sell stops when trading futures and options.
Disclaimer: Trading Futures, Options on Futures, and retail off-exchange foreign currency transactions involves substantial risk of loss and is not suitable for all investors. You should carefully consider whether trading is suitable for you in light of your circumstances, knowledge, and financial resources. Decisions to purchase or sell as a result of the opinions expressed in the forum will be the full responsibility of the person(s) authorizing such transaction(s). BE ADVISED TO ALWAYS USE PROTECTIVE STOP LOSSES AND ALLOW FOR SLIPPAGE TO MANAGE YOUR TRADE(S) AS AN INVESTOR COULD LOSE ALL OR MORE THAN THEIR INITIAL INVESTMENT. PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS
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