Are You a Method Man? Read This First
Each evening we focus on the most interesting aspects for the upcoming trading day. The comments are based on observations of the nightly updates of the Futures and Market Bias pages. They are provided for educational purposes only and are not intended to be direct trading advice. Also, keep in mind that these remarks are made up to 12 hours in advance of the markets opening. Therefore, overnight events may alter the outcome of these observations.
At the time this is being published, the S&P Globex Futures are trading .60 points lower and the Bond Market Futures are trading up 1 tick.
Today, I received a phone call from a friend, who for purposes of this writing, I will call “Method Manâ€. Method Man is a very intelligent gentleman who’s always seeking out the latest and greatest trading techniques. After he complained about his inconsistent and poor performance in the markets, we got on the subject of his current positions. He told me that he was long a certain futures contract.
I looked at the chart and saw that it was in an obvious downtrend. Puzzled, I inquired as to why he was going against the trend. He explained that last night he was up late reading the latest trading book and it said that when a certain ratio is hit you buy. Now this method may or may not work but that’s not why I’m writing about Method Man. I’m writing about him because he committed his hard earned dollars to trading a pattern just a few hours after reading about it.
I suggested to Method Man that if he wanted to improve his performance, he should stop jumping from method to method and to strive to become more consistent as a trader. Find a few patterns that work and stick to them. For potentially new methods, find at least 200 examples (some good, some bad and some indifferent) of the pattern on historical charts. If after all this, you still believe in the pattern, then paper trade it in real time for a few months and then, commit your hard earned cash to actual markets.
The December Swiss Franc [SFZ9>SFZ9], on the Implosion 5 List, is consolidating within last Thursday’s wide range day down (a). Look for a possible resumption of trend and shorting opportunity here.
Volatility Watch
December Corn [CZ9>CZ9] remains on all three Volatility Explosions Lists. Continue to watch for a larger-than-normal move (in either direction) as volatility reverts to its mean.
January Soybeans [SF9>SF9], are now on the Volatility Explosions-Multiple Days List. Watch for a larger-than-normal move (in either direction) as volatility reverts to its mean.
Best of luck with your trading on Tuesday!
Dave Landry
PS-Reminder: Protective stops on every trade!