Hi Coaches,

“Daily Routines”

In all of the classes the instructor have stressed the importance of “Things to do and check every day”in order to get a feel for the Market that day. I keep getting more Tid Bits here and there of things to add to that checklist, but it just seems to be getting more confusing. Is the confusion just due to the crazy times we are in right now? Or am I not clear on what the correlations are between the information and what may / should happen in the Market?

Here are a bunch of questions I have on the topic:

Recently you guys talked about looking Late Night at the Asian Close and European Open. If the Asian Markets Close up, is Europe going to have an up day? Are we going to have an up day? If the Asian Close Down, will Europe be down? Will we be down?

I thought that when I looked at our Pre-Market Futures in the early moring that if they were up we would most likely be having an up day once the market opened. Was this thought correct? It dosen’t seem to be holding water any more?

I thought that if Gold & Silver in Pre-Market Futures goes Up, the US Dollar goes down, and if the Dollar goes Up, Gold & Silver go down. Is this still true? Or is the US Dollar loosing its correlation with the metals?

If there are New Events scheduled for the day, are there any correlations between the type of event and the direction the market might take? i.e. IPO’s; Market up or down? FOMC Report; Market up or down? Or is all that we might determine is that there will be Volitility?

Any comments on these or any other Daily Routine Information Correlations would be appreciated!

Robert Thompson

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Hi Robert,

It sounds like information overload!  Your confusion will dissipate with time and your confidence will grow as you trade and build experience.  Let me address some of your questions about daily routine and daily activity that’s important for a new trader to understand.

The market moves through a 24 hour cycle that starts on Sunday night and works through Friday afternoon.  Each day during that cycle has different markets, banking centers and exchanges opening and closing.  Most traders don’t trade 24 hours a day though – and most traders shouldn’t want to build a business that requires 24 hour a day monitoring.  So my first bit of advice is this: select a time of day to trade and stick to it.  If you’re best suited for mornings, with fresh coffee and the birds chirping, then trade in the morning.  If you’re a night-owl, then trade at night.  The nature of the news, the inter-market relationships and the way you enter orders will all be determined by when you trade.

Consider this, if you’re a night time trader that trades around 10 pm EST, you have to make your decisions and then go to bed.  While you’re sleeping The Asian markets will close, the European markets will open and then close, the US markets will open and close and all of the news that effects those markets will happen while you’re away from your computer and account.  If you are a night time trader – you’ll want to set up spreads and systems that compensate for short term news risk.  You probably won’t do a lot of gamma scalping on weeklies for example.

If you’re a morning trader, when you wake up you can read the news of the morning, identify what happened overnight, how the futures markets are opening, put your trades out there based on the US market open and then move on.  Of course this all depends on exactly when you trade.  If you leave your house at 8 am EST each day, you’re probably walking out the door right before most of the economic data comes out, the futures market opens and then the stock market open.  There’s risk there.

Can it be navigated?   Yes.  And there’s a system out there for everyone that can work and be profitable.  One of your first decisions to make is this: when will you trade?  That will affect your daily routine and what you need to look at when you trade.

As far as the correlation between the futures market and the stock market let me say this: it all depends.  Let me explain: if the futures are up in the morning but only up a few points, it may not mean anything.  You have to gauge the strength of the signal and the reason for the move.  It requires judgment and interpretation each day.  A few points can be moved on a whim from an institution.  And if the futures are up before economic data has been released, then that data release can impact the market more than any overnight action.

The correlation between the dollar and commodities is still there.  In fact, there have been some really strong trades over the last few months selling Metals or Oil in relation to the US Dollar strength.  Again, on any given day you may see those correlations disconnect, but the correlation is still very strong and alive.

And you’re right on with your last thought – when assessing the impact of news events, many traders consider the volatility impact first and the directional reaction second.  It’s very difficult for a trader to know if the market will move up or down relative to the FOMC statement or the Unemployment report, but we do have a good idea on how volatility will behave and that means we can trade based on volatility alone.  More on this in a future blog.

Great questions, and thanks for staying active in the Club House.  If anyone else has questions please post them in the Club House or email us at team@tackletrading.com  You can also tweet us @tackletrading or comment on our Facebook page.

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