I’m expecting more upside Friday, here’s why
Stock index futures opened Thursday’s session underwater again
on more fears due to Hurricane Rita.
News that the hurricane had been downgraded sparked a turnaround in crude oil
and brought more buyers into the equities markets.
Friday is free of economic reports, so the focus
will continue to be on the hurricane and the price of crude oil. The VIX
still has some room down to its daily support, and combined with the high
Put/Call ratio, I would expect to see some follow-through on Friday.
Trading Slumps
There are 2 kinds of traders. Those who
have experienced a trading slump, and those who will. Any experienced
trader who says he’s never been through a slump is a liar. The majority of
good traders have gone through flat periods at some point in their career.
Many slumps have a psychological reason behind them. Your belief and
confidence in yourself are going to be your main tools in pulling yourself out
of a slump. Let’s say you’ve found a trading method that works for you.
You’ve also developed good money management rules. Everything is in place,
yet you find yourself still not pulling the trigger. You still don’t feel
comfortable following your rules, you have trouble exiting losing trades, and in
general, you’ve lost your “rhythm” with the market. What’s missing?
The psychological part of trading is the most important, yet that is the side
that people spend the least time on. How many people are willing to admit
that the battleground isn’t the market itself, but what’s going on inside them?
The more you talk with other traders, the more you’ll learn that they all go
through common experiences. Speaking personally, most traders have run the
gamut through all the classic mistakes, and back again. But what
distinguishes those who can overcome them?
The markets are an exciting
game, but at the same time, they are also emotionally, and sometimes physically
challenging. The mental side can be summed up as 1/3 beliefs, 1/3
concentration, and 1/3 managing the stress. Learn how to deal with
distractions, because they’re going to be present almost every single day.
You will have more confidence if you’re following a defined method. You
must feel like you’re making the right play, rather than worrying about the
outcome. It’s OK to make the right play and not have the trade work out.
Don’t worry if the price goes a little bit higher after you sell it. I
always say to treat trading mistakes like cheating on a diet. There is
nothing you can do to undo the damage except get back to exercising to work it
off. Stress impairs your judgment, so learn to recognize when your
thinking is being clouded by stress. Your mental state outside market
hours will affect your decision-making ability during market hours. A
person can have all the knowledge in the world, but if he doesn’t have the
presence of mind to handle a stressful situation, where does that knowledge go?
Straight out the window. It’s easier to be flexible and change your
mind when you’re relaxed. If you’re all tensed up, it blocks the flow of
thought. Unfortunately, human beings are creatures of emotion.
Intelligence with regards to trading is not about knowing the names of every
company in the S&P 500, but more about reacting the right way under pressure and
making the right decisions when they need to be made.
Experience is
learning how to recognize your mistakes when you make them. However,
speaking personally again, experience doesn’t always keep you from making the
same mistakes. Quit thinking about ways you can lose money. It’s
better to put the trade on and assume some risk than it is not to try at all.
Once you’ve made it back after a drawdown, your confidence will triple.
You will quickly get a “feel” for the market when you have a trade on.
However, you’re always going to be the most objective when you don’t have a
trade on. Funny how that works. If any of this has struck home or if
you have stories to share, please feel free to email me.
Daily Pivot Points for 9-23-05
| Symbol | Pivot | R1 | R2 | R3 | S1 | S2 | S3 |
| INDU | 10405.84 | 10460.72 | 10499.39 | 10554.27 | 10367.17 | 10312.29 | 10273.62 |
| SPX | 1212.20 | 1219.06 | 1223.49 | 1230.35 | 1207.77 | 1200.91 | 1196.48 |
| ES Z5 | 1217.75 | 1224.75 | 1229.75 | 1236.75 | 1212.75 | 1205.75 | 1200.75 |
| SP Z5 | 1217.90 | 1224.80 | 1229.60 | 1236.50 | 1213.10 | 1206.20 | 1201.40 |
| YM Z5 | 10437.00 | 10490.00 | 10537.00 | 10590.00 | 10390.00 | 10337.00 | 10290.00 |
| BKX | 96.20 | 97.09 | 97.63 | 98.52 | 95.66 | 94.77 | 94.23 |
| SOX | 456.97 | 461.13 | 465.15 | 469.31 | 452.95 | 448.79 | 444.77 |
Weekly Pivot Points for Week of 9-19-05
| Symbol | Pivot | R1 | R2 | R3 | S1 | S2 | S3 |
| INDU | 10621.56 | 10722.19 | 10802.44 | 10903.07 | 10541.31 | 10440.68 | 10360.43 |
| SPX | 1235.12 | 1245.39 | 1252.87 | 1263.14 | 1227.64 | 1217.37 | 1209.89 |
| ES Z5 | 1241.33 | 1251.92 | 1261.58 | 1272.17 | 1231.67 | 1221.08 | 1211.42 |
| SP Z5 | 1240.70 | 1250.70 | 1259.10 | 1269.10 | 1232.30 | 1222.30 | 1213.90 |
| YM Z5 | 10658.33 | 10756.67 | 10840.33 | 10938.67 | 10574.67 | 10476.33 | 10392.67 |
| BKX | 98.60 | 100.00 | 100.67 | 102.07 | 97.93 | 96.53 | 95.86 |
| SOX | 476.53 | 483.84 | 492.91 | 500.22 | 467.46 | 460.15 | 451.08 |
Please feel free to email me with any questions
you might have, and have a great trading week!
Chris Curran