Today's session was extremely quiet. Quiet appears to be the new normal. Our friend Ben from TradersAudio.com is live on the floor of the exchange every day. He is firmly convinced that both volatility and volume will eventually return to the markets.
Currently volume in the S&P averages about 50% of what it was before the dot com melt down. What do you think has changed? Do you agree with Ben? What about the HFT machines? Should that create more volume or less? Use the Comment section below to share your thoughts, ideas, rants, raves and reasons.
Euro Currency Futures
Sunday night on the Twitter feed we posed a question -
Euro 6EH3 - Is the rally over? Let's find out. Consider being long above 1.3435 or short below 1.3350, whichever presents first. $6J_F #yen— DeWayne Reeves (@CFRN) February 10, 2013
The question while somewhat esoteric, was followed by a set of very clear cut instructions. I got the hashtags wrong but the Tweet was solid. If you went long your rather immediate gratification was 35 pips. If you rolled 'em again as price moved up through 1.3435 the reward was both sweeter and swifter. This time the move was for 45 pips, or was it? Turns out, if you stayed with it, the second move was worth 88 pips. If you add the first move to the second move that becomes 133 Pips. At $12.50 per pip the market (not me / not CFRN / not an indicator / not a forecast) made available $1,662.50 per contract. Let's look at the chart -
Euro Currency Futures Tweet
The fact that the market made a total of $1,662.50 per contract available is just dandy. Right? I think so, but here's the real question - "How much of that money were you able to move from the market's column in your ledger to your column in your ledger?"
That's not an esoteric or rhetorical question. That question is exactly where the rubber meets the road. We talked about that last week on the radio program and we even wrote about it here on the blog. The knowledge that the market is making some money available all the time should be very comforting. It's right there, it's real, it's available, you just have to figure out how to get it to move columns. If you're a day laborer showing up at Home Depot every morning and milling about smartly hoping for work, you have no idea if the market is going to make anything available today. If you're a small businessman the same might be said for you. You're literally sitting there waiting for the phone to ring. Some days it does, some days it rings a lot, and we know that some days it's oddly silent.
So the beauty of the market is that it is always making money available somewhere. In fact, I'll go out on a limb and say that it's always making money available in every instrument traded. Yes in different directions and to varying degrees but if you think about it, I'm right. I did say that's the beauty of the market, let me say it's also the beast. Let's look at the facts of the case at hand:
- There really was a call made on Sunday morning @ 1:05AM when the market was still hours away from opening. This is factual.
- Price really did penetrate 1.3435 on Tuesday morning @ 5:55AM CST. Another fact.
- In the next 20 minutes the market made 35 pips or $437.50 available per contract. Fact.
- The market then drew down to 134.13. 22 pips below your entry if you were still long.
- After the "pain", price proceeded to run up 1.3480 over the next 90 minutes.
So where am I headed and what's my point? Great question. Having a good call is only a small part of the equation, perhaps the smallest part because we've already established the fact that the market is always making something available, somewhere, if not everywhere. Right?
The beast I refer to, is the "what to do" with the information you have. In this example the entry point was clearly defined, beyond that, you had to actually go to work and "trade". When someone gives us an entry, an exit and a stop loss, we become order takers. Now there's nothing wrong with that as long as you recognize it for what it is. I see too many people fall into the trap of following a set of instructions and then calling themselves a Trader. The proper term is "order entry clerk". The fact that you know enough about yourself to ask for help until you no longer need it, is admirable. It shows that you know where you are and recognize where you want to be. Keep asking!
Our goal is to help you learn to become a Trader. We want you to use the tools provided to learn to spot your own entry, calculate your own target, and manage your own trade to minimize risk while maximizing profit. This will not happen overnight. Therefore, we do give you all the ingredients each day in the Live Trading Room to get you going in the right direction. However, our goal is that in very short order, you will no longer need us. We hope to be friends forever and we do plan on spending eternity with you, but due to the simplified method we now use in the Live Trading Room, the amount of time it takes you to get up to speed, should be drastically reduced. It's a 4 step process and I'll cover those steps in the next post.
As opportunities unfold we'll keep you posted.