I recently was given the opportunity to teach a webinar to a global audience about trading, markets, and the recent European Central Bank policy decisions made over the last few months as its Asset Purchasing Program rolls out. The webinar drew over 150 attendees and was a fantastic opportunity to get my message and voice out across several continents. These webinars teach me several lessons. First, it’s amazing that after growing up in a small town where the most advanced technology we had was Ms. Pac-Man down at 7-11, I can now be a part of a global network of entrepreneurs and traders. Through the power of technology, we all have access to trading networks that we didn’t have even as recently as a decade ago. Second, I was impressed with the knowledge that people had about global banking policy and how it affects them. Most didn’t claim to be an expert, but as I asked questions to the group about what was happening and how it impacted the economy, I came away thinking that there are informed individuals out there. Lastly, it reminded me that even though people are informed, most don’t know what to do with the information.
In 2009, the Federal Reserve started a quantitative easing program that had a huge impact on the direction of the market over the following six years. 72 months later, we’re at a market top (the back-end of a cycle as traders say), and many investors find themselves in the same position they were in back in 2007 before the crash. If you ask an average investor with a retirement account how to hedge the risk in their portfolio, they wouldn’t know how to do it. Ask them about the oil crash in 2014 and they will give you facts and opinion about what’s happening. Do they know how to trade bearish strategies to profit from it? Not likely. Do they know that the market is most likely going to experience volatility in the next year or two? Yes they do; but even after 10 years as an educator, I don’t see people taking action or preparing themselves with the right education or information so that they don’t become a victim.
In the webinar, I had one student ask a question that I’ve gotten a few times over the years. She piped up after 75 minutes of the presentation: “If the mentors and coaches are so successful, why do they teach instead of just trade and invest?” The question screams of skepticism, but is a fair question. Have you thought about that? Why does Robert Kiyosaki write books? Why does Tony Robbins write books to educate people? Why do the coaches at Tackle Trading put on their shows and teach their classes? The answer is simple. The same motivation that made me a successful entrepreneur to begin with continues to drive me to want to educate and inform people.
Consider this: there are lots of people who have enough money that they wouldn’t ever have to work again. Yet, they do. They wake up and spend their time on their passions. Bill Gates still spends lots of time running his charities. Billionaires still show up to board rooms and develop ideas and businesses. Why? Because people who have success are driven by a different mind-set. The goal is not always to simply hit the lottery and retire to a cabin in the woods. Many individuals want to build a legacy, and for many educators, writers, motivational speakers, mentors, and coaches, that legacy involves building a team.
Imagine that you hit every goal you’ve ever had. You make it to ‘easy street’. What will you do? Will you kick your feet up and relax? Sure, some people would. Not me. I don’t have a real desire to kick back and slow down. I do love a good Sunday afternoon nap. But, I enjoy building things. I enjoy creating things. I enjoy team-building. I enjoy educating. I believe part of my journey in this life is to help other people learn how to escape their mental cell they’ve been locked into.
Frankly, money doesn’t motivate me that much. I’m more motivated by freedom, creativity, control, self-awareness, and relationships. Don’t get me wrong; I do like money. I write a goal down every day for my profit goal if I’m trading Forex, Futures, or Options. Money is a big part of my trading business, but it’s not the only part. You see, I’ve been trading so long and so many hours that if I had to start with $0 tomorrow I would be able to build from there. Why? Because I have knowledge. I have built a skillset that can’t be taken from me. No matter what happens, I can identify what is happening in the market and make a confident decision with my capital. That’s one of the most important parts of my trading business: context; and I have it. You should aim to develop it. With context, you don’t let your emotions run rampant. With proper context, you can switch from theta trading to hedging quickly when you see the right signals. The only way to build it is to experience the market and to be around the right people to help you understand it.
That’s one of the main reasons we built Tackle Trading. I know that we have some of the brightest and best trading minds in the business, and as new traders, you also have information that you can share, questions you can ask, and answers you can give to other traders to help the entire team grow. I’m very proud of those of you who are participating in the Club House, posting in the forums, and showing up to the Coaches Shows. If you haven’t done so yet, jump in. Be a part of the team. You’ll grow faster, learn more, and develop the proper mindset to become a great trader.
Last week in the market, we saw mostly selling on the S&P 500. Above this paragraph is a heat map. I did a video recently on how to use the heat maps. If you have’t watched it, go search for it in the video blog so you can learn how to use the tool in the Trade Center tab. Selling pressure wasn’t too strong, but it was consistent across the board. A few stocks did end the week up, but by and large we saw the markets hit their tops and turn downward.
We saw the same kind of pressure globally, as well. Chinese equity markets sold off; as did Europe, South America, and most of the globe. We’re in a global economic contraction. Some would even say recession. Many global indexes are still near all-time highs, but that doesn’t mean the economies are being driven based on fundamentals. In fact, the opposite seems to be true: central banks are printing, and they’re committed to printing for a while. If you’re an investor, you should keep an eye on the situation in Europe; specifically, Greece, its economy, and its relationship to the European Union and Central Bank. On the Trading Justice podcast, we interviewed Solon Stephanou in episode #72 about the situation in Greece. It’s thought-provoking to say the least.
While the Dow Jones Industrial Average, S&P 500, Nasdaq 100, and Russell 2000 all have a very similar chart pattern, one interesting note could be taken from watching the Volatility Index (VIX) last week. With the selling, a trader would have expected more upward pressure in the VIX. When we don’t see the VIX spike, its a sign that the institutions aren’t as concerned about the technicals or market conditions as we might think they are.
Crude Oil remains stuck in the mud. There are many opinions about the future of the commodities price, where the bottom is, and what is driving the price. Whether you believe Crude Oil has bottomed, or if you believe that a Dollar Rally can drive the price lower, the one thing is certain: it’s going to be one to watch. Crude Oil had a massive crash in 2014, and just because its at a low point from a charting perspective does not mean it cannot go lower. Watch for key support levels and consider that if you’re going to trade it, you need to know how to control and manage the risk behind whatever position you take.
The price of Gold (and most commodities) is so tied to the value of the US Dollar that with the recent rally in the World’s Reserve Currency, we saw Gold take a hit. Gold and Silver are generally held as hedges against inflation and risk in the overall market by investors. Gold’s price has been under pressure recently, but watch for support to come in and at least provide some temporary relief.
The European Central Bank had a policy decision on Thursday morning that drove volatility in the Currency markets. The US Dollar broke out and rallied and the Euro sold off in what is presumably an endless fade until it trades at parity with the US Dollar. If you trade FOREX, keep an eye out for any major economic report as a potential catalyst to trade off. If you’re more of a position or swing trader in FOREX, consider setting a trailing stop from an hourly or daily chart and letting the trades work with your trends. If you don’t trade FOREX, you still need to watch the currency values as they have a direct and immediate impact on every other part of the market. Many times, the reason stock or commodities prices are up or down is because something is happening in the currency markets.
Next week’s economic calendar is pretty light. The focus will be Retail Sales in the US later in the week and a speech from President Draghi of the ECB early in the week. It’s a good week to build your watch-lists, develop your cash-flow techniques, and consider adding a news based trade or two so that you can learn to trade FOREX. Remember: if you don’t know how to do something, that’s okay, but you should still try to practice it in your virtual account so that you can build skills, develop good questions and take a step forward.
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