Secret Trading Tips - page 6
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Thanks Larry Levin to capture our attention on this important point. I never thought about Buyers or Sellers factor while it is an important part of forex strategies.
I was in that case too, thanks Larry Levin.
We're Nowhere
We're Nowhere
boehner
Over the weekend talk continued on the fiscal cliff negotiations. The Sunday political programs, like “This Week” led with it.
The best part of the prior video is the end when we’re reminded that Tax-Cheatin-Timmy will no longer be Treasury Secretary in 2013.
Last Friday, Speaker Boehner held another press conference in which he said about the negotiations “we’re nowhere.”
This coming Friday we’ll get the latest monthly jobs report, which should make for an interesting end of the week. Before that, however, we could get a few more press conferences on this fiscal cliff issue. If any are scheduled, be prepared for good moves.
Trade well and follow the trend, not the perma-bull OR perma-bear “experts.”
Behold the age of infinite moral hazard! On April 2nd, 2009 CONgress forced FASB to suspend rule 157 in favor of deceitful accounting for the TBTF banking mafia.
Value Areas:
ES 1415.00 / 1411.50
POC… 1414.00
YM 13023 / 12985
NQ 2678.00 / 2671.50
Best Trades to you,
Larry Levin
Founder & President- Trading Advantage
TradingAdvantageCom
Secret Trading Tip #17
Secret Trading Tip #17
Good News and Bad News
One of the biggest moments for the markets can come when there is a key news release or fresh fundamental data. Buyers and sellers seem to wrestle with the potential outcome, and in the case of larger announcements, volatility goes through the roof. The problem that I see some traders struggle with is knowing what news to look for, and how to trade it.
Finding news that you can actually use.
The thing that often comes up when you talk about announcements is that a lot of traders don’t understand the market reactions. A report will come out and it will appear as though it is good news, but the market will go down. The thing is that some people still try to trade on the news itself, when in reality they should be looking at what the market thinks the news will be. More than likely, those days when there was a “good” piece of data but the market went down, forecasts were calling for a better number.
The other explanation is that the report just might not have been as important to the market as it was to the observer trying to trade it. Reports and news events are lobbed into a general basket of analysis called fundamentals. Fundamental analysis focuses on the things that have the potential to impact the supply or the demand in a particular market, thus affecting the prices.
Reports that come out with some regularity, like initial unemployment claims, are unlikely to rock the S&P unless they are really, really shocking. Federal Reserve meetings, which are a rarer occurrence, tend to hold a bit more zest for traders. Monthly employment readings are also big. Producer Price Index (PPI) and Consumer Price Index (CPI) readings are key figures for inflation, which in times of economic troubles might get more attention than a decade or so ago.
Perhaps one of the best ways to weigh what kind of news is valuable to traders is to keep your eye on the stories daily.
Traders shouldn’t keep their head in the sand.
If you know what is happening in the market that week, that day, and that hour, it is better all around. You can line up the market’s movements with fundamental events. Of course, there will be big news that comes out of nowhere that can still catch you and the market off guard. However, there are plenty of economic report calendars, Federal Reserve meeting notices, and other lists that show you key data points. Most news outlets will also report results of a general survey of economists showing what the basic expectations might be. Knowing what the expectations are ahead of the report is just as important as the report itself. Good news can quickly become bad news if it falls short of what people were looking for.
A great example of this in recent news is the build-up ahead of the debt ceiling deal. In any other situation, finding a compromise or agreement would be considered a good thing and good news. The opposite was true in this case as investors and traders weighed the potential impact of continuing debt and a tarnish on the credit rating for the US. The highlighted area in the following chart shows the reaction leading up to and following the news:
Past Performance is not necessarily indicative of future results. Chart courtesy of Gecko Software.
Focus on the bigger picture, not just the headlines.
One of the best favors a trader can do for themselves is stay appraised of the bigger picture. There are plenty of places where you can get calendars online, and check for the stories that might impact the market. The longer you watch these fundamentals, the more likely you are to be able to distinguish which ones might bring higher volatility and potential trading opportunities. Avoid developing tunnel vision and focusing only on the things you think could be important. Watch for forecasts and estimates on reports – these are just as important as the actual news release and can be key in trying to gauge possible market direction. Good news and bad news are relative to expectations.
Best Trades to you,
Larry Levin
Founder & President- Trading Advantage
TradingAdvantageCom
Worm in the Apple
Worm in the Apple
apple worm
The financial wheel of misfortune landed on the Apple stock space Friday, even though the broad market ended up okay. Has the once sacred AAPL suddenly become the forbidden fruit?
After flirting with a closely watched area on the charts that analysts refer to as the "death cross," APPL has fallen from the tree as the stock's 50 day moving average is now below its 200 day moving average, and is off more than 23 percent since scaling to a record high in September at $705.Apple has traded lower nine out of the past 11 weeks, erasing approximately $150 billion in market capitalization. Investors who once saw no shortage of reasons to buy the stock now seem to find any and every excuse to bail out of it.
Why the exodus from the Garden of Eden? Even god himself was rumored to have the iphone 5, but earlier this week, a seemingly innocuous change in margin requirements for holding the stock triggered a huge sell off.
While margin changes are normally administrative in nature, they can signal a change in how risky investors perceive a security to be. Last year, a European clearinghouse changed its margin requirements on Italian debt -- which sparked a brutal nose dive in the country's government debt that drove yields to unsustainable levels above 7 percent.
Of course, like most stories, Apple’s demise is more hype than reality. The stock is still up 66 % since the beginning of last year and up 33 percent year to date. And Apple was still $100 billion bigger than the No. 2 company in terms of market cap.
And one stock does not make a market, or does it define the global economy. A consumer electronics company can’t prevent an entire nation from going over a fiscal cliff.
Trade well and follow the trend, not the perma-bull OR perma-bear “experts.”
Behold the age of infinite moral hazard! On April 2nd, 2009 CONgress forced FASB to suspend rule 157 in favor of deceitful accounting for the TBTF banking mafia.
Best Trades to you,
Larry Levin
Founder & President- Trading Advantage
TradingAdvantageCom
Value Areas:
ES 1412.25 / 1407.25
POC… 1410.75
YM 13056 / 13022
NQ 2656.50 / 2638.00
Secret Trading Tip #22
Secret Trading Tip #22
What is day trading?
Day trading is probably one of the most misunderstood labels in the industry. Some people might picture a random trader acting like a cowboy just buying and selling with pure abandon. Others might imagine a seasoned vet pouring over charts and analysis, looking for a chance to try to scoop up a few points here or there. Let’s set the record straight on what day trading does – and doesn’t – entail.
Day trading is definitely not for the faint of heart.
Day trading is possible because of the great amount of leverage there is in the markets. The ability to buy or sell contracts that represent exponentially greater values than what is held in deposit in a trading account can mean the chance for big gains or even bigger losses. That is why a lot of day trading is thought of as gambling or a Wild West show.
There are a lot of traders out there who exclusively day-trade.
The mechanics to day trading are straightforward. You are in a trade and out of it in the same trading session. There is no “holding” the position overnight or through to the next session, looking for more potential profits. That is position trading. Why open a trading position and close it in the same session? There are a bunch of reasons that someone might cite, but the most obvious is that there is a different kind of exposure between trading sessions.
For a day trader, there is an inherent risk that the market may gap up or down and against an open position when trading begins in a new session. Picture some of the overnight or over the weekend financial bombshells that could be dropped. A couple of good examples are those nights when Asian markets have tumbled on their fundamentals and North American markets open much, much lower the next day. This would be a gap to the downside that would be a big negative to an open long position.
Closing things out before the session ends is a way that some traders try to avoid that kind of exposure.
So how do day trades work?
Most markets are a constant flux between buy orders and sell orders, and it is unlikely that a highly liquid market (one that has many buyers and sellers, making it relatively fluid to open and close positions) would stay at a constant price through a whole session. Day traders look to buy low, sell high and scoop up a few points to their benefit.
Trades can be based on:
- Identifying and trying to follow a trend
- Looking for technical signals that suggest a coming reversal and try to play a breakout
- Playing market movement off identified support or resistance
- Quick in-and-out trading strategies like scalping, where the trader tries to identify arbitrage opportunities where there is a price imbalance
- Any personal system a trader might use to try to identify trade opportunities
The last one on this list is becoming more common as trading moves into the electronic world. Programs on computers look for specific algorithms and other identifiers that may signal price action that a day trader can use to try to gain an advantage.
The one thing that people need to remember is that this style of trading can also quickly accumulate fees and commissions for each round-turn on a trade. Since you are not approaching the market with a single buy-and-hold approach, you have to factor these extra costs into the 2-3 points you are trying to gain on every trade. Make sure that there is enough room to make the risk-to-reward ratio worthwhile.
Day trading is fast, and risky, and not for everyone.
The quick pull-the-trigger style trading that is synonymous with day trading is not for everyone. There are great disadvantages and heavy risks. I think the big trick is to find and stick to a trading plan. Having a pre-determined approach to the market – a place to get in and a place to get out for profit OR for loss – should help you keep your head on straight. Trading with a plan instead of raw emotions is what separates the cocky cowboy image most people might have from the actual serious day trading reality.
Best Trades to you,
Larry Levin
Founder & President- Trading Advantage
TradingAdvantageCom
No Deal
No Deal
argument-cartoon
After the markets had closed last Friday, reports surfaced that House Speaker John Boehner went to the White House for a special meeting with president Obama. Would a “fiscal cliff” deal be reached as Congress left for its Christmas break?
Over the weekend Congressional aides told reporters of the weekend meetings and what was said. Mr. Boehner once again inched closer to what president Obama wants – tax hikes on the wealthy – but the president refused the deal. Specifically, Boehner offered to raise income tax rates on households earning more than $1 million a year in exchange for spending cuts.
Dec 15 (Reuters) - U.S. House Speaker John Boehner has offered to raise tax rates on high earners to break the "fiscal cliff" deadlock in exchange for major cuts in entitlement programs, but President Barack Obama is not ready to accept, a source said late Saturday.
While the White House considers Boehner's offer "progress," the source said more remained to be worked out between the two.
The president refused the proposal because he wants tax hikes on anyone making more than $250,000 per year, but he also does not want to cut spending.
And this may be what John Boehner wanted from the meeting: proof that the president is not willing to make a deal. Now the Speaker will use this as evidence that he shouldn’t be blamed when both sides drive us over the cliff.
The pending Thelma & Louise moment, however, is just what both sides want. After all, they can blame each other forever over this issue and at the same time brag about how they cut taxes after they raised taxes via the fiscal cliff ramifications. It’s pathetic, but that’s politics.
Trade well and follow the trend, not the perma-bull OR perma-bear “experts.”
Behold the age of infinite moral hazard! On April 2nd, 2009 CONgress forced FASB to suspend rule 157 in favor of deceitful accounting for the TBTF banking mafia.
Best Trades to you,
Larry Levin
Founder & President- Trading Advantage
TradingAdvantageCom
Futures Data
Value Areas:
ES 1411.25 / 1407.75
POC… 1410.00
YM 13115 / 13077
NQ 2633.25 / 2622.25
Secret Trading Tip #30
Secret Trading Tip #30
Advanced Technical Indicators - Bollinger Bands
Let's take another look at a more advanced technical tool - Bollinger Bands. These were developed by John Bollinger in the 1980s. In simple terms, they use a simple moving average and standard deviations to give a different perspective on potential highs and lows.
Bollinger Bands have a middle band and two outer bands.
The middle band shown on this indicator is a moving average, usually a simple moving average (see Tip #29 for more on those) although some traders do use the exponential moving averages. The standard deviation formulas for the outside bands might be calculated like this example:
* Middle Band = 20-day simple moving average (SMA)
* Upper Band = 20-day SMA + (20-day standard deviation of price x 2)
* Lower Band = 20-day SMA - (20-day standard deviation of price x 2)
The actual values used may depend on user preference. Use and interpretation may also vary.
This technical tool is a way some traders try to define and observe potential patterns. I don't claim to be an expert on these, but there are some common basics that analysts agree on. Volatility is the name of the game for the upper and lower band. Since they are based on standard deviations from the middle band they move closer to the middle when volatility contracts, and further out when volatility expands. Based on this level of volatility, the relationship between those lines and prices can be used to signal potential market conditions. Some analysts might see an overbought market where prices touch the upper band. Conversely, an oversold market might exist when prices are edging towards the lower band.
Past performance is not necessarily indicative of future results.
courtesy of Barchart.com
Other subtle patterns can be seen with Bollinger Bands on a chart.
The way the prices interact with the bands can lead to different kinds of patterns that technical analysts might interpret for trade designs. They have names like W-bottom or M-top or walking the bands. If you like playing with these statistical measures, you might enjoy reading more about them. Generally speaking, the visual cues regarding volatility are the main feature for this kind of chart overlay. They can also be used in conjunction with other analysis or observations as a way of complementing other signals or patterns. Play with Bollinger Bands and see how they might work with your trading tools to confirm or sharpen your market observations.
Best Trades to you,
Larry Levin
Founder & President- Trading Advantage
TradingAdvantage.com
Merry Cliffmas
Merry Cliffmas
boy-disappointed-with-gift
With Friday’s down market, the reality has sunk it that it may very well be left to Santa to find a few trillion in spending cuts. Volume was high with triple witching expiration, but the markets headed south after Boehner’s failed plan B Thursday night and then Congress’ departure for the holiday.
They will return on December 27th but this means that they have four days after the Christmas holiday to strike a deal.
What now seems likely is that we may get a “mini deal”. A “mini-deal’ is likely to include an extension of the Bush tax cuts for the majority of the American households and indexing the alternative minimum tax cut for inflation. It is also possible that it will include an extension of the emergency unemployment benefits, and a ‘doc-fix’ but not an extension of the payrolls tax cut or changes to the Budget Control Act’s sequestration. Such a deal is likely to be drafted by the Senate Democratic majority and pass the House with unanimous votes from the Democrats and support from the part of the House Republicans that would like to avert tax hikes for all Americans.
But this wasn’t really what was on our Christmas list. It’s like the kid who wanted an XBOX but got a dollar store video game.
Yes, a mini deal could ease the immediate blow until legislations on these issues is delayed until next year, when politicians will start a new round of negotiations ahead of the late February/early March deadline, when the debt ceiling becomes binding. Hence political uncertainty is set to remain high next year.
Merry Cliffmas too all!
Trade well and follow the trend, not the perma-bull OR perma-bear “experts.”
Behold the age of infinite moral hazard! On April 2nd, 2009 CONgress forced FASB to suspend rule 157 in favor of deceitful accounting for the TBTF banking mafia.
Best Trades to you,
Larry Levin
Founder & President- Trading Advantage
TradingAdvantage.com
Futures Data
Value Areas:
ES 1426.00 / 1419.00
POC… 1423.50
YM 13134 / 13080
NQ 2658.00 / 2644.00
Secret Trading Tip #7
Secret Trading Tip #7
Five Ways to Stay Focused In Scary Markets
In the fallout from the 2008 global financial crisis, there have been moments that have been driven by pure fear. These are the moments when it can be hard to maintain your composure and trade your plan. Unfortunately, these big days are the times when you need that composure the most. Here is a quick lesson in why it is important to keep focused in a scary market and how to achieve that focus.
Market Basics
First let us understand some market basics. Markets exist to facilitate trade. From moment to moment the market offers traders the opportunity to profit from price movement. It's an environment where every trader has the freedom to create his own results, i.e. all the choices and the power to exercise those choices reside with the trader.
'Scary' implies fear, anxiety, or insecurity.
In his book, The Disciplined Trader, Mark Douglas addresses these issues in a no-nonsense, no holds barred way.
Let me give you an example of his views on this subject:
"It was only the lack of trust I had in myself to do what was needed to be done that I was really afraid of."
"The market is never wrong in what it does; it just is."
"The market cannot take anything away from you that you don't allow."
"In the trading environment the outcome of your decisions is immediate, and you are powerless to change anything except your mind. You have to learn to flow with the markets; you are either in harmony with them or you are not."
It becomes self evident that your trading success will be dependent on your ability to correctly perceive opportunity, to execute a trade arising from that perception and your ability to allow your profits to accumulate.
Are You Consumed by Fear?
Markets are inherently scary. If you are a trader consumed by fear, then the market will always be scary, and the only variable is how scary it is at any given time. When consumed by fear a trader is doomed to failure. Fear will twist your perceptions and blind you to the opportunities available. Fear will almost always drive us to make the wrong action, and it will without question make us totally incapable of accumulating profits that might be made. Even for disciplined and proven successful traders, the markets can be scary. Objectively scary markets can be quantified by the Volatility index, the VIX - the ticker symbol for the Chicago Board Options Exchange (CBOE) Volatility Index. It is constructed using the implied volatilities of a wide range of S&P 500 index options. This volatility is meant to be forward looking and is calculated from both calls and puts. The VIX is a widely used measure of market risk and is often referred to as the "investor fear gauge." Levels below twenty are associated with market complacency and over thirty with increasing market anxiety. Extremes are often excellent contrarian indicators.
Past performance is not necessarily indicative of future results.
courtesy of BarchartCom
Trading should be considered a business, and your rules should reflect good business practices. These would include adequate capitalization. Conservation of capital is your primary job. If you are under-capitalized, you are half way to the losers stall before you even start.
Over-Trading & You
Do not over-trade. This too will drain your energy, your attention to detail, your perception of price changes and the efficiency of your trade execution. Over-trading will inevitably drain your capital from your account to the guy on the other side of your trades, who you can be sure does not have his/her perceptions blunted. If you have this as your guiding star, chances are you will eventually succeed in this business. Preserving capital is closely associated with risk management, and I will address this in the five things you can do when there is evidence of market anxiety.
5 Rules to Trade By
1) Stick to a Trading System that has proved itself over time to be profitable despite losing trades. No system is 100% correct. It only needs to be correct 50% of the time if profits are substantially greater than losses.
2) Never Anticipate Your System. Let your system fully play out so that its various criteria are fulfilled before entering your trade. When in doubt keep out or if already in a trade, get out!
3) Always Use Stops; NEVER trade without them. Make it your practice to enter your stop loss trade before you enter your trade.
4) Never Let a Winning Trade Become a Losing Trade; use a trailing stop once your trade is showing a profit. Once a trade is showing a two-point profit, consider bringing in your stop to the entry price. Should the market unexpectedly reverse, it would be a scratch trade. After that trail your stop two points for every two point prices move in your favor.
5) Trade with the Trend. Do not attempt to pick tops and bottoms to trade against the trend. Following these principles and spending the time necessary to create the psychological stability necessary to succeed is the most difficult part of this profession. Your goal should be to have the self knowledge and confidence that you unquestionably believe in your trades. Identify with Mark Douglas' dictum, "markets can't do anything to any trader who completely trusts himself to act appropriately, in his best interests, under all market conditions."
Best Trades to you,
Larry Levin
Founder & President- Trading Advantage
TradingAdvantage.com
Slam
Slam
smashed-car
At the end of my last newsletter I said, “In the end, the markets recouped all of their losses thereby giving the microcephalic clown-posse in D.C. another reason to argue like children rather than working on their sickening spending problem.”
At the close of Friday’s market a friend of mine asked “Why would the market fall so hard and so quickly?” This question reminded me of the Thursday rally into the close and the aforementioned quote, which was essentially another move by the market to ignore the reality that was right in front of it. My answer was “Because the market will ignore anything that is bad…until it can’t ignore it any longer.”
Not only did the market wait until the Friday before the so-called fiscal cliff was upon us, it even waited until the close. And then, when the market couldn’t ignore reality any longer it was slammed – falling a jaw-dropping 20.00+ points in the closing minutes.
Sunday evening the Senate was in session trying to - get this - come up with a plan…ON SUNDAY NIGHT! Senator Dick Durbin, of one the most financially screwed up States in the country, said they couldn’t get a deal done.
Shortly thereafter, Senator Reid agreed and dismissed the Senate for the evening. It will reconvene Monday morning at 11am ET, which should make for rumor-trading on New Year’s Eve.
Trade well and follow the trend, not the perma-bull OR perma-bear “experts.”
Behold the age of infinite moral hazard! On April 2nd, 2009 CONgress forced FASB to suspend rule 157 in favor of deceitful accounting for the TBTF banking mafia.
Best Trades to you,
Larry Levin
Founder & President- Trading Advantage
TradingAdvantage.com