Emini Futures | Fear The Irrational Emotion
May 8, 2012 at 6:49 PM (QQQ)(DIA)(SPY)(GLD)(SLV)
Wall Street truly climbed the proverbial wall of worry today. After a 198-point drop, the Dow Jones Industrial Average closed down only 76 points while the S&P 500 Index lost just under 6 points. Gold futures fell nearly $35 an ounce and Crude slid for a fifth session, with the June contract losing 1% to settle at $97.01 a barrel.
And then came Asia.......
Tonight the wall of worry is looking like a Slip 'N Slide in early going. A pattern that seems to be emerging of late is one where US Markets rally after Europe closes only to reverse on the Globex session. How long will this dog chase his tail before he catches it and how painful will it be when he does? Great question! Thanks for asking...
Fear The Irrational Emotion
fear/fi(ə)r/
| Noun: |
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I failed my way to success.
Thomas Edison
Fear not...
Jesus Christ
In trading, each trade is simply an edge with a probable outcome, and statistically independent of every other trade you have ever taken, or ever will take. If you believe otherwise, then I can see why you're afraid; but I can assure you that your fears are completely unfounded. Mark Douglas
Before you can rightfully expect to succeed as a trader you must be willing to accept that quite often your very best thinking will not result in a profitable trade. In fact, you must accept that your finest analysis even when properly applied will quite often become the polar opposite of whatever truth the market ultimately expresses in that moment.
There is however, a secret to trading and I'm about to let you in on it. It's not an indicator, a magical time frame or a mystical number. That's right, I am about to teach you how to NEVER BE WRONG AGAIN!
- Define a statistical edge. A specific set of conditions that when met and traded over a large enough sample size, puts the odds of success in your favor.
- Know your entry price, your stop loss price, and your minimum acceptable target.
- Execute according to plan without emotion.
Those are fine words but they are just that, words on a page. You can read them, believe them, agree with them, but until you paint the barn.......... Get the picture?
So how does that enable you to NEVER BE WRONG AGAIN?
Easily! Here's an example:
If you decide to buy 1340 on the S&P 500 Emini Futures (just an example) based on your well defined, well designed, well tested statistical edge and then wrap it in a 2 point bracket (just an example) you now know the following 3 Market Truths.
- You are long the market at 1340.
- Price MUST move to your target at 1342 or your stop loss at 1338.
- No matter which direction it travels, you were right.
I wish I could make this easy but I can't. The best I can do is attempt to make it simple. You can come back with any argument in the world and it will not defeat the 3 Market Truths I just outlined. Bad fill? Adjust the target and stop by a tick and carry on. Easy is when it just glides to your target, anyone can do that. Simple is when you are stopped out 3 times in a row and still put on the next trade. What?
Why would any sane individual put on a 4th trade after being stopped out thrice? Trust me, if it were easy, everybody would live on Wall Street and Main Street would be a ghost town. The insanity of the 4th trade comes from the knowledge that you really do have a statistical edge. Do you know that? If you don't, step away from the mouse. You want someone to tell you to do this or do that. If it blows up, at least you have someone to blame. Sound familiar?
What if you tested it yourself? I don't mean a stroll down a side street. I'm talking about taking it out on the highway and really blowing out the pipes. You know why most traders don't or won't do that?
It might fall apart. This fragile little illusion of an edge that you've created in your head might get blown away and then where would you be? Ahead of the game, that's where. If you settle for any other solution then it's only a matter of time until your doors are blown off. Get it out of the garage, get it on the big road, put the pedal to the metal and once you have it on cruise control... start scanning the horizon for the next edge.
Remember, don't try to catch the knife, be the knife. (a friend once said)
ps./ the following video is a bit edgy so watch with caution
S&P 500 Emini Futures
Emini Price Action Recap
S&P 500 (ES) Tweet 05/07/12
WANT TO LEARN EMINI FUTURES TRADING?
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