MBO Issue 49 (Jan 2016) Special Update 2
By Lawrence
Jan 17, 2016 Special Update on S&P and Euro
My predictions made at the end of year 2015 on the stock market has now materialized.
Further changes in the market breadth conditions is giving us more clues on what to expect from the stock markets and currencies. The bounce forecasted last week worked out. Premium members were updated on Thursday that the bounce has limited life span and another flush was in the making. Now that we have the worst performance of first two weeks ever in the history of the US stock markets, what should we expect from here?
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Comments
The biggest challenge this year so far is with making the proper adjustments to the increased volatility. The market is moving, but the moves have not been as smooth and as decisive as they often are when the market is making a big move. I see this in the tails on many of the bars. It is as if even in this bear market, people are still buying (someone is still holding up the market). Just when you think the market is going to really accelerate into some target, it stops, and hangs around, just teasing you.
In terms of adjustments I have made since the beginning of the year to handle the current situation, I have made adjustments that I thought were working but on second thought are not.
I now regret making them.
Trading five minute bars in this market requires larger stops. The size of the stops were starting to get to me (even with smaller positions), so I foolishly decided to open up a one-minute screen right next to my five-minute screen (both are on at the same time). I would trade off of the 5 minute, and then micromanage on the one-minute. It worked extremely well one Friday afternoon (18 points per contract over two hours), so I thought I have figured it out. But what happened instead is that my focus was slipping. My timing was off. I started looking for trades on the one-minute and managing on the five minute. I saw myself getting into trades later than I usually would.
On one day, I could not do anything right. I had the direction of the market nailed down perfectly, and should have done well. But my timing was abysmal. I cannot recall ever having as bad of a day. It was as if I could do nothing right. Five losing trades in a row. Getting in a move after it had already moved, and then getting stopped out. It was a nightmare. Absolutely surreal.
I prefer to trade in more stable markets. Yes, there is less volatility, but I am a creature of habit. But I cannot assume that we will get stability any time soon. I don’t blame the market for my mistakes. I blame myself.
How much has my trading style changed much last year? Until the start of this year, it hadn’t. I follow a very predictable, if not dull, routine. I regret making changes.
I have been trading futures since 2003. I have traded stocks since the mid-90’s, when MU was the stock of choice. I have made mistakes before, and I learned from them to get better. I will make the most of my mistakes made (so far) in 2016.
I hope sharing my comments with others helps others trade better. I hope others can learn from my mistakes.
Thanks!