The past few weeks in the market have been rough and tough on many traders. So if you’re in that camp – you’re not alone. I’ve received calls and emails from traders trying to figure out how to navigate the murky waters. Here at Tackle Trading, we recommend learning how to use many strategies but it’s most important to learn how to control risk.
There are times you make money and feel like a rock star, and there are other times that you feel like the walls are cracking around you. As a veteran trader, I can tell you that this is a chance to learn from these times. Markets go up, they go down and they go sideways. But there’s more to the story than that. When they go up, it feels easy. When they go sideways, it can feel boring. When they go down, it can feel overwhelming. That is why you have to be able to adjust quickly and make portfolio decisions that put you in a position to profit from these environments instead of becoming a victim to them.
The last two weeks have had some learning opportunities built into them. If you’ve made money recently – congratulations. That’s a great sign that you’re using the scouting report, strategies and your own judgment in a way to take advantage of the volatility. If you’ve lost money, try to take the day and figure out what you’re going to do next. Trading is no different than life, you can’t go backward. You have to move forward. Learn from the past, think of the future, but focus on the present.
Next week, one of our Tackle Trading team members, Steve Huang, will be inducted into the Rich Dad Education Hall of Fame. This is a tremendous accomplishment and all congratulations should go to Steve for his hard work and effort that he has put in over the last 5 years to make himself a better trader.
As Steve’s mentor, I’ve been able to witness him grow, get better, deal with challenges and learn to navigate through many market conditions. If you haven’t listened to it yet, go back and hear the podcast with Steve where he talks about his journey. We’re going to have him back on the Trading Justice podcast soon to talk about this experience being inducted into the Hall of Fame and receiving the award.
As a teacher, I have a deep sense of pride that I feel when I see one of my students become a great trader. But as any teacher will tell you, it wasn’t all smooth sailing. Steve had 2 mentorships with me. The first time he came out, I taught him some strategies, how to build a portfolio and navigate the market. But then, there was some market volatility (like now for example) that Steve wasn’t prepared for. So he took the 2nd mentorship to fine-tune his system.
This is an important lesson. Your education will never stop. I have had the good fortune of having many mentors over the years. Even now, after 10 years of trading, I’m learning new systems and strategies this year. I’ve gone through the experience recently of having to install new trading software and finding ways to use it, implement it into my business and make it work. It does get easier than the first time you do it. But it doesn’t stop.
I have changed brokers over the years at least 10 times. So if you’re overwhelmed by learning your new broker software or how to input orders, guess what? You’ll probably have to do it again at some point.
There are countless examples of moments in my trading career where something happened that I wasn’t prepared for. Flash crashes, volatility gaps, order execution snafu’s, you name it. This is part of your journey. And it’s one of the main reasons that risk control and money management are the most important thing you can do.
I had one of my students talk to me on Friday who had a 10% draw-down this last month. It was emotionally difficult for this particular student. My advice? Learn to embrace it. You will win and lose. You will experience highs and lows. The exact amount of $ that changes hands between you and the market will greatly depend on how your position size, choose strategies and hedge. But regardless of how good you are at this, there will be ups and downs. That’s part of the business. The sooner we all embrace it, the easier it will be to deal with it, make adjustments and avoid those risks in the future.
Trading is an exciting business and one that I recommend everyone learns. I walked into my office on Friday and met one of our other mentors there. He was teaching a father and son team how to trade forex. The father had to be about 50 and the son about 15 years old. It was very cool to see them both there learning.
Last week in the market was light in terms of economic data but heavy in terms of volatility. The highlight of the week was the FOMC meeting minutes that came out on Wednesday, October 8th at 2 pm Eastern Time. The FOMC releases these minutes 3 weeks after the FOMC meeting where they decide on interest rate policies. In the blog, on Twitter and on our Tackle Trading Facebook page, we alerted you of the release when it happened. If you’re on any of the social media outlets, look us up and follow us. The coach’s stay connected there as well as on the website www.tackletrading.com
Next week’s economic data gets busy around Wednesday with Retail Sales and the PPI report. Thursday the Philly Fed Manufacturing Index will be reported. And Friday, Building permits, the UoM Consumer Sentiment report and a speech from Fed Chair Yellen will all pose potential volatility risks to the market. But the story of the week will be from individual companies releasing their results from the most recent quarter in their earnings reports.
Last week, there were only 10 companies with over 2 Billion in Market Cap that reported Earnings. Global Payments, Constellation brands, and Walgreens were a few on the list. Next week there are 82 companies of that size or larger that report earnings. Google, Johnson and Johnson, Wells Fargo, Bank of America, JPMorgan, Intel, Citigroup, and many others will have their quarterly earnings releases. From now until about the 10th of November, corporate earnings will be in the headlines nearly every day. It’s very important that you learn how to navigate the earnings season.
You have one of two basic approaches to earnings season. Either 1: avoid all earnings releases and simply exit your trades or 2: embrace earnings reports and learn how to trade them. Here at Tackle Trading, we recommend the second choice. In our most recent weekly Coaches Show with Coach Noah, Coach Tim and Coach Matt we discussed some earnings strategies. If you haven’t watched the video or listened to the podcast, spend an hour and go back and review them. There are many ways that you can tackle earnings. As a trader, I like to sell volatility. But you’ll need the ability to take each situation on a case-by-case basis and apply the appropriate strategy for the situation you read in front of you.
Long term charts on the Dow, S&P 500, NASDAQ and Russell all show weakness. The selling pressure has been attributed to everything from international concerns about regional conflicts, a sense of an upcoming world recession, season volatility and algorithmic-based trading creating volatility. Whatever the reason for the selling, what you should remember is that volatility begets volatility. When markets start to increase ACTUAL volatility (or what you’ll hear referred to as historical volatility) you need to make note of it and adjust your trades accordingly.
Balancing your portfolio Greeks, taking profits quicker, using more diverse strategies and hedging are all techniques you should learn to use. But, if you don’t know how to do that yet, here’s some advice. Stick to your trading plan. The worst thing you can do is stick your head in the sand when markets get ugly. Stick to your plan, take a loss if you need to and try to find a new opportunity. There’s always another chance to succeed in your future.
Next week at Tackle Trading, look forward to more releases of our highly rated Trading Justice Podcast, a new Weekly Coaches show on Tuesday, a Monthly Coaches Expiration Party on Thursday and daily updates. Be sure to take advantage of our forum in the Club House and as always email us if you have any questions at team@tackletrading.com
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