The question I get asked the most in markets like this is how do you survive. With daily swings + or – 300 pts how can swing trading be profitable?
First, there are a lot of things to swing trade in the universe:) And many are not correlated to the general market direction.
Second, when volatility increases, its time to abandon your bad habits that crept in when the markets were going straight up. It’s like running good in poker, you would be amazed at the bad habits that poker players develop. Then when the fortunes of variance disappear, many are in shock when what once worked does not anymore.
In other words, the entire point of it all is not to look at trading, poker-playing or sports betting as something unique. It does require skills, but they all are subject to the fickle winds of chance. You are an arena where nothing is a sure thing. The best you can do is carve out an edge.
And as the saying goes “If you do not know what your edge is, you do not have one”.
But let us say your one of the few that have an edge. You still are not out of the woods. The killer variance is still lurking. And a killer it is. I have seen the best poker players in the world go busted because they do not respect variance. Not only do they go busted, but they also stay busted.
When chance enters into the equation, and you’re risking your money on probabilities, variance is always at play. No exceptions!
It comes down to methodology, money management, and discipline. You have to have all three mastered before you can begin to make money. And each one of the three is no pushover to get mastered.
I have always said that human nature will attempt to sabotage your success in games of chance. Its something you will have to fight every step of the way. Because human nature, with few exceptions, runs contrary to being successful in games of chance.
As an example, put Spock up against someone like Beto in a game of chance, and Spock will win every time:)
So now back to the original question. How do you win in markets like this, swing trading? You adjust and you learn. And more importantly, you understand the arena you are in. The arena I have just talked about.
That is my Tuesday morning diatribe:) After a sold down day yesterday, we find ourselves with the markets set to open up almost 1% today. TLT is -1/4%, @CL is +1.45% and Vix.x is -8.65%.
This is a very strong premarket. Its one in which you look for gap continuation trades not gap fill trades. Now we are an hour before the open and this assumes the numbers do not change much.
Every once in awhile I notice a shorting opportunity in companies where they decide to become SJWs. Dicks sporting goods was an excellent example. They have never recovered.
But now a new unexpected one has arisen. One who the FBI heads said you could smell the Trump supporters that frequented their stores.
Walmart, the last company you would have expected to get into the SJW arena, has now entered the fray on the side that 90% of its customers are against. They have decided that the left’s position on gun control is reasonable and are taking actions in support of the left on this issue.
This will not sit well with Walmart’s customer base. Walmart is trading at all-time highs and is +1% premarket this morning. If you short here you will most likely have some short term pain. You could buy far out puts. I am going to look this morning, but I would guess a year out is where you want to be.
The numbers will not show up right away in Walmart. But, watch around the next earnings report, and then the one after that will most likely be the one that will shock people.
Walmart used to be for the heart of America. They became successful in Small rural areas. As we know the left has no love for them. Its most likely going to be brutal before it is over.
Some things to watch for in the next month: Congress will be back in session. So the mayhem and chaos will most likely begin again the day they get back. Expect impeachment talk to be front and center.
The trade agreement between the U.S., Mexico, and Canada is dead in the water in the House. Politics will kill that, they are not going to give Trump that win. Odds, 8 to 1 against it getting through the House in a form that is viable. They may pass it, but it will have a poison pill in it.
China, I do not expect a China deal. China will be doing everything it can to make sure Trump goes down in 2020. They are staking their economy on it. Instead of a deal, they are betting on Trump’s defeat. Then it will be business as usual.
Last but not least, we have the IG FISA report, Durham and Huber. There are some very bright people that are expecting a large swath of indictments coming soon. Most at this point are disappointed it has not happened yet, and some are gleeful they have won this battle.
Myself, its a tough prediction for me on this one. Knowing the degree of corruption in DC, and that if a proper job were done indictments would most likely take out many in Congress on both sides, let alone former intelligence heads and even Obama and his henchmen.
I read Barr as competent, but someone that will not burn DC to the ground, even though it may be time to do that. (figuratively speaking of course):)
So that is a wait and see. But, all of this means is that volatility is not going away anytime soon.
While many handicapping services come and go, at 10x the price of my subscription, mine has stayed solid over the years producing positive EV plays consistently.
If you have ever sat at the poker table with me you know that I am a pretty conservative gambler:) I pretty much play a % game with a few twists. But overall it is a positive EV play. That is the way I approach sports handicapping and the markets.
If you have an interest take a look at the post and send me an email if you have any questions.
As a part of my sports handicapping subscription, I send out almost all of my trades via Viber. This has been a nice value-added feature of the handicapping service. At $49.00 a month for all sports plays I handicap, you get most of my stock trades. With the NFL almost here, its time to consider joining us.
If you want to follow some of my thoughts typically given after the open you can go to @rickjswings. Typically I talk about the overall day expected with the markets and also give some levels on the ES and NQ for failed breakout scalping.
It’s my private twitter feed for the stock market and its free.
Sports Handicapping is the subscription-based part of this site. But considering the cost of joining it’s almost free:)
Good Luck Today
RickJ’s Handicapping Picks