Weekly Perspectives: Trade Less, Profit More.

Weekly Market Outlook For January 13-17, 2020 – Short Term Weakness – Long Term Strength
January 11, 2020
Weekly Market Outlook For January 20 – 24, 2020 – The Payout and Payback Cycle
January 18, 2020
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Weekly Perspectives:  Trade Less, Profit More.

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Here is your weekly newsletter — perspectives on trading and financial markets.

Click here for last week’s edition.


 

Weather Forecasting

This weekend weather forecasters were predicting that Montreal would get hit by the ice storm of ice storms reminiscent of the Great ice storm of 1998.   

Unfortunately for doomsayers, the big freeze that so many were worried about instead delivered a beautiful winter wonderland.  

Why people choose to get so worked up about the weather is beyond me.  One person’s winter snowstorm is another person’s perfect day on the ski slopes. 

So here’s a small resolution for the year – this will serve you both inside and outside of your trading. 

Stop assigning significance and assigning arbitrary judgments to events that are outside of your control. 

Start by not complaining about the weather for the next month.  

Practice on the small what you want with the large. 

If the small things in life cause you anxiety how will you deal with the large things?  

 

Short Term Weakness – Long Term Strength –

This week the Dow hit 29000 and the sellers were there to welcome them.

Some say the soft employment # was the catalyst but from a technical perspective, we see a market that is over-extended in the short term yet continues to see longer-term momentum indicated by “momentum and up” condition on the monthly charts.

So in the short-term, we may see some selling/profit-taking but this may end up being – once again – another one of those buyable dips.

In this week’s video, I examine the major US indices to see what it would take for us to see a larger reversal of price and why the January Effect is still in effect.

Also this week, the cryptocurrency markets had a major reversal – tune in near the end of the video where I discuss how I traded it.

Watch this week’s Weekly Outlook video to see the setups and levels we’ll be watching as well as the technical outlook for the VXX SPY QQQ IWM DIA EEM TSX TLT GLD BTCUSD ETHUSD EEM and more for the week of Weekly Market Outlook For – January 13 – 17, 2020.

 

Trade less, profit more. – 

Here are 3 issues I often see with struggling traders:

Most struggling traders –

  1. trade too often,
  2. trade with too much leverage,
  3. and trade too low a timeframe.

I often council the traders that I coach that most of their results would improve if they traded less.

In practice, this means shifting from the lower timeframes to focus on trading higher timeframes and to maintain that focus until the way they see markets clears up. 

The result is that they trade less, the quality of their trade ideas improves, and paradoxically they profit and enjoy trading more. 

So why does trading less infer such benefits? 

The most prevalent reason has to do the fact that if you are trading a method with a negative expectancy then increasing the number of transactions will increase the speed of your drawdown that creates a downward spiral in both mental and financial capital.  

At the heart of the issue, is that many traders feel the need to do something

Trading is a profession unlike most professions in that at the end of a workday a trader has usually nothing to show for his work (other than some lines on a chart, commission statements, and his PnL balance). 

A painter would have his canvas, a bricklayer – the bricks laid, a software developer – the lines of code.

Traders don’t create anything and leave no evidence of our work unless we trade.    So sometimes traders, who lack a focus on process, take this to the extreme and overtrade and overtrade.  

Dr. Steenbarger writes in a recent article thatpeople who identify themselves as traders feel a need to trade.

So here are some prompts from Dr. Steenbarger to think about – 

  • What if the greatest edge in a particular market is buying and holding for a few weeks? 
  • What if the greatest edges in the market come from playing a game that few traders want to or are able to play?
  • What if most of the psychological frustrations and emotional upheavals that traders face come from trading crowded time frames and strategies with limited edge?
  • What if success comes from trading the time frames that objectively present edge and not the time frames we’re most comfortable with?
  • What if the path to success isn’t sizing up shorter-term trades with fleeting edge, but staying modestly sized to participate in longer-term edges? 

Weekly Perspectives: Trade Less, Profit More.

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