Tackle Today: Tragedy in three acts
August 15, 2018
Act I
You’re expecting bad news to hit the market pretty soon. You build your portfolio like Noah built his ark. In your mind, after reading from “specialists”, you are 100% sure that a huge market correction is lurking around the corner.
Act II
The day of the flood comes and you are prepared. Bad news hit. You saw it coming. You were right all the time. You close your eyes. Mission accomplished.
Act III
The market rallies. You start losing money like there is a hole in the ship. Your portfolio is the Titanic and you are Jack Dawson.
A market that has a bullish reaction to bad news is a bull market. Our natural and linear train of thoughts can’t accept this as a true statement. Obviously, after the bad event hits everything becomes explainable, both the event and the market reaction. That’s the hindsight bias, a.k.a. “I-knew-it-all-along”. Yeah, you knew it all along but you lost money, right?
As stated by Nassim Taleb, “understanding is a poor substitute for convexity”. We will never fully understand the world we live in and that’s OK as long as we shoot for convexity, that is, design a portfolio that makes money when things go well and lose a manageable amount when things go wrong so you can stay in the game to play another round.
As traders, we are not in the being-right-business but in the money-making business.
Chart of the Day
US presidential election, 2016
— “The market doesn’t like him. If he wins, the market will crash because it is priced for Hilary.”
Here’s the S&P 500 Index chart, from the moment Trump wins, November 2016, until November 2017. You’ve loaded your portfolio with bearish trades expecting to profit from a major correction.
Do you want to be right or to make money?
Video of the day
Swipe Right or Left – Intel 08/14
Trading Justice Podcast –
Ep. 282: It Must be the Shoes An Interview With Jabon Wilson
Today on the Trading Justice podcast we have a sit down with a great futures trader. Jabon Wilson was once a mentor-student of Coach Matt justice and is now a veteran trader.
Today’s Lineup
Coaches Lounge – 11:00am EST
Join the coaches in this live lounge, ask questions, discuss ideas or just sit back and listen to veteran traders discuss market conditions.
Cash Flow Condors MMG – 8:00pm EST
Join and learn how to manage your Condors live with Coach Tyler.
Halftime Report – 12:30pm EST
The Halftime Report starts at 12:30 EST and covers what news is driving the market, chart analysis from the movers and shakers of the day and fun in a way that only Matt and Tim can deliver.
Coaches Show – Replay
If you missed last night’s episode where Coach Tim & Coach Cody talked about How To Place Stop Losses or would like to watch it again, check it out here.
Market Recap – 4:30pm EST
The Market Recap is designed to give you a quick overview of the day that was. While brief, this report is designed to cover all of the major events that drove the markets that day and help you plan for the trading day ahead.
