The Truth About Emini Trading
November 7, 2015 at 2:37 PM (QQQ)(DIA)(SPY)(AMZN)(VRX)
The Truth About Emini Trading and the Hard Stop
Are you allowing your Emini trading mistakes of the past to determine, deter or prevent a successful future? 90 out of 10 Traders will. Write these words on the tablet of your heart, weave these ideas of not fearing the Stop Out, but embracing the Stop, permeate your Business Plan and your Emini Trading Plan.
Not only can it help you build a more robust Emini Trading Business, it can prevent your Emini Trading Busness from going bust. Sometimes, that makes all the difference in the world. The only thing you can't lose by using a Hard Stop is your livelihood.
(click the headphones above for the audio version)
THE TRUTH ABOUT TRADING!
Tuesday 10/27/15, our Free Trade was stopped out on the Short side. Since we began giving out Free Trades again on October 12, 2015, we've had a string of profitable trades. No matter how long a streak is, be it Profitable, or Unprofitable, we must never lose sight of the the fact, this is a business built on probabilities.
We talk daily on the Live Broadcast about "The Best Trader in the Business". The man or woman who will be profitable 7 out of 10 trades. Let that sink in. 3 times out of 10 you can let your shoulders slump, your head hang low, scream at a loved one, or kick the dog. Warning: It will only make you feel worse.
Or, it can serve as a reminder that you've built, (or are currently building), a real business. A business that has expenses just like any other business. Whether you're a home builder or a pizza maker, there are costs of goods, cost of services, cost of labor, administrative overhead, capital expenses... the list goes on.
As Traders, based on how we build and scale our business, our expenses can be as minimal as electricity and internet (something most of us already have) and a dedicated computer, which we must have, or get. Whether you go it alone or take over the 9th floor of the Chrysler building, our single greatest expense will be the Trades that get stopped out.
WHERE DID I GO WRONG?
This question is akin to Judas kissing Jesus in the Garden of Gethsemane. Now in the beginning we do want to make sure that we did not err in the mechanics,, methodology, or psychology required to put together a successful trade. As we gain experience over months and years in the business, we become more certain that the list above, was not at fault. However, our Business Plan should dictate that our Trading Plan, will come up periodically for review.
We don't wait until our car won't start to have it serviced or put oil in it. Do we? Truth is, some of us do. Treat the automobile God blessed you with as well as the Trading Business you've built, with more respect than that. We also must be conscious of not allowing the pendulum to swing too far in the other direction. Determine ahead of time, how often your Trading Plan will be evaluated. You should have a short 5 point checklist that you can hold each and every trade up to and see clearly if you have failed to follow your carefully crafted plan.
TRADING'S NOT EASY, BUT IT CAN BE SIMPLE.
Our methodology is simple. A trade should require no more than a 3-5 minute review to determine if you in fact got out of step with the music (market), or if the market simply moved contrary to the trade you took. Don't forget, "Old #7". Put a picture of him (re: mirror) on the wall if you need to. Remember, he's "The Best Trader on Planet Earth". The day you think you can outperform him, you've moved from realistic expectations to a doomsday path that leads straight to the infamous "Line of 9". Where perfectly good Traders (9 out of 10) go to lick their wounds (not hygenic), and continue their Google for the Holy Grail.
PEPPERONI OR STOP OUTS?
Just as the Chief Purchasing Agent at Dominos will attempt to source the highest quality pepperoni at the lowest possible cost, we will attempt to place only those trades which give us the highest possible statistical edge based on our understanding of the markets. No matter how deep his connections run, or how savvy a FSI negotiator he is, the PA at Dominos realizes he will have to pay "something", if Pepperoni Pies are to remain on the menu.
Likewise, through the use of our technical indicators, proprietary strategy and analysis, plus whatever experience we have in the markets, we will attempt to minimize the number of times we are "stopped out" and also the price we pay for each stop. In the equation we call Trading, the Stop is one of the integers we actually have control over. There are more variables at work in even the simplest of trades, than you can realistically put on a chart, though some do try.
CHARTS ON STEROIDS
We've all seen, or used (or are still using) the beefed up chart with so many things churning and turning, streaming and dreaming, we can barely make out price way back there... See it? If you look real hard, you can still see it (sometimes, on a clear day). It's no wonder we end up with Roid Rage when we get stopped out.
WHAT REALLY MATTERS?
As Mark Douglas wrote in "Trading in the Zone" and shared as the answer to a question when he was on our program, the analysis which leads up to the entry, is not the most important part of a trade. Again, it's why we freak when we turn up "wrong" (a word we don't use). We have 19 things on our chart telling us to get long or short, rarely at a specific price (some of it is stuff we paid dearly for), so when the trade goes south and our stuff pointed north... run Rover run.
Our humble indicators do give you a specific price at which to get long or short. However, we teach our Partners that the entry should be looked at as merely a clerical task. Because our Traders do have the benefit of our Indicators which do nail the entry price, long or short to the tick... without you lifting a hand I might add, then if trading really isn't easy, it must be what comes next that is the most difficult. Follow me?
You could literally have 8 clerks (we only do 8 markets) sitting in an office each one watching a different market. Since the indicators tell the clerk when to get it in and at what price, you can sit with your feet on your desk reading the sports page until someone rings the bell. "Boss, got a long on Crude here". The clerk stands up as you plop yourself down and take the controls (it's just a mouse) in your own skilled hands... let the trading begin. This is where the rubber meets the road.
Since the Stop is one of only 3 things we can control, we owe it our undivided attention. It's also not a battlefield decision. This was already ironed out long before the day began. You're either trading it by the book (our book), or you're using traditional technical analysis which is somewhat ambiguous and nebulous, but it still works and sure beats nothing at all.
If you set up shop with us, you'll be taught everything you could ever want to know about Stops, Stop Placement, Trailing the Stop and we'll even cover scaling out of a position.
NEVER BLOW UP OR BLOW OUT AGAIN!
The bottom line however, if we are to remain in this trading business, we must develop a deep and abiding understanding that this "Stop", is our insurance policy. It prevents both temporary insanity and catastrophic loss. In fact, it's typically the former which leads to the latter.
For the price of the premium, it's the best deal on Wall Street.
Now, we simply do the next right thing... we take the next trade!
Update 10/29/15 1:36am EDT
The Next Right Thing
So for 24 hours (give or take) I have let you sit with the best advice I could muster.
A) Don't freak out
B) Do the next right thing
C) What happens when you do the right thing
As you know our Alerts are never a 1 Trick Pony. On Wednesday afternoon, prior to the Fed announcement (we specifically broadcast on live radio "As always, flat on the Fed"), price tripped the long side of the equation. You have to remember (hard to forget as I always remind you), I give you 2 trades per market for a reason (in case my best work does not agree with the markets performance), you're not stuck with an analyst who can't see beyond his own ego.
Along with telling you to consider being short below 2052 (the stop out), we also said if that isn't profitable be long above 2076. At 13:57 (3 minutes to Fed) we climbed above 2706 and put in a high at 2079.00 @ 13:59. Too close to count. It would be disobeying a direct order not to "stand down". So we watched, sighed and the clock ticked on...
INQUIRING MINDS WANT TO KNOW
Just curious, how long does one need to stand down? Well... on something the size of the Fed i like to give it at least 30 minutes. 30 minutes came and went. We put in a double bottom on the 1 minute chart down at 2055.50. Leg, retrace, leg and by 3pm EDT, 1 hour post Fed, we found ourselves back up at 2067 and still climbing. At 3:30 we tag 2076 again and there's no way I can hold my Traders back.
They played by the rules, they stood down on the opportunity in front of the announcement, but 90 minutes after? I got nothing in the rule book to keep 'em on a leash at this point. By 16:07, 8 minutes before Futures and Chicago grind to a halt, we put in a Swing High on the day of 2085. Sweet Deliverance!
That's a clean as a whistle 9 point rally on the S&P 500 Emini Futures, and guess what... not a single car was burned, not a shop was looted, nor brick thrown. No riot gear, no tear gas, just a few well deserved virtual high 5's and it was "just another day at the office". In a world gone mad, thank God for the ladies and gentleman who carry the mantle of CFRN Trader. Knowing you, is a high point in my life.
...and that's the Truth Abot Trading!
We have Tomorrow's ANSWER for Emini trading - TODAY!
It's not easy or obvious, but it will work.
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