Traders can’t be good traders if they do not speak the truth. That’s just the way it works. You can’t be long and short the S&P futures at the same time unless you are trading a spread, so at some point, choices must be made. One of the things I have learned about trading since I left the trading floor almost two years ago is that, unlike the open outcry style of trading with your hands, the only mistake a trader can make is buying or selling at the wrong time. Also, like the ‘old days’, there was a lot less zigging and zagging like the futures do today. Who do we blame this for? The exchanges? The high level of HFT and Algorithmic trading? The credit crisis? It’s all been rolled into one big mess where the machines rule the casino and the only way to play is by putting up more money.
Honesty Is The Best Policy
I have to say it like it is, trading has become harder. It’s not just me, there are a lot of small traders out there that are getting ping ponged to death. When last years uptick in volatility rolled into the new year, there were hundreds of profitable trade set ups, but after the 1805 retest and subsequent rally not only are people still short from way lower prices, they continue to sell. January, February, March and the beginning of April were profitable, but I went on an ‘S&P 500 futures cold streak’ that not only wiped out the money I made in April, it also put me down for the month. What did I do to get out the rut? First, I had to be honest, I was on the wrong side of the markets, and second, when I finally figured out that I was fighting the trend I stopped trading for a few days. When I started back up I want back to trading small. I can’t speak for all traders, but I know from playing cards that you can only double down for so long until you blow up, or have to put more money in the account. Something none of us want to go through.
Sometimes Simple Rules Apply
In the high flying world of High Frequency trading there are no rules. The machines are designed to pick up on human mistakes. In the ‘old days’ I would trade a lot more size and more frequently, but now I think picking your spots, trading less and learning to be extremely patient is the ONLY way to make money in the futures markets. It doesn’t have to be that you run your account down and have to add more money into the account to stay in the game. It’s about learning how the algos think, and either going with them or fighting them at the correct time, which is not always an easy thing to do. Personally, I like buying the falling knives, entering after the algos or programs have run their course. The other part of trading is knowing who you are and what your limitations are. This is where risk management comes into play. Some traders take on less risk while others take on much more than they should. I am a risk taker in a lot of other areas but I limit my losses which keeps me in the game. Sure I do not make the big cash like other trades, but I also don’t have my house or my bank account on the line.
It all comes down to knowing your limitations and expanding your knowledge of yourself and the market place. The PitBull taught me a lot about self preservation and I have tooled the way i live and the way I trade around it. He taught me that you should never lose more than your best winning day and I can tell you for sure I have never come close to those types of losses. I keep it tight and right!
In Asia, 7out of 11 markets closed lower (Shanghai Comp -2.31%), and In Europe, 8 out of 12 markets are trading lower this morning (DAX -0.14%). Today’s economic calendar includes the MBA Mortgage Applications, Existing Home Sales, EIA Petroleum Status Report and earnings from AXP, KO, RJF, YUM & more.
ESM16 2100 Is Knocking
Our View: The ESM16 made a low at 2085.75 on Globex overnight. Around 5:00 am the futures started to rally and traded up to a new high at 2098.00. I know the Nasdaq futures have closed down 3 out of the last 4 sessions, but that doesn’t seem to be effecting the path of the S&P right now. Had the futures opened lower, we could have been calling to buy the early weakness and sell the rallies, but now I want to get a look at how the ES acts after the first 30 minutes of trade. My gut tells me the S&P is going higher today.
As always, please use protective buy and sell stops when trading futures and options.
- In Asia 7 out of 11 markets closed lower: Shanghai Comp -2.31%, Hang Seng -0.93%, Nikkei +0.19%
- In Europe 8 out of 12 markets are trading lower: CAC -0.01%, DAX -0.01%, FTSE -0.34% at 6:30am CT
- Fair Value: S&P -6.32, NASDAQ -8.33, Dow -86.08
- Total Volume: 1.5 mil ESM and 4.6k SPM traded
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