Are you getting dizzy yet? Volatility is definitely on the rise which makes it very difficult to swing trade if your risk adverse:)
As in betting sports, you can reduce variance by the use of filters. However, typically reduction of variance means a lower EV.
It would be great to find the magical formula that reduces variance and also increases EV. I am still searching.
So it is a balance and the right balance for one person might not fit with someone else’s idea of balance.
I know professional sports bettors that wager ungodly amounts of money on each game as long as their calculations show an edge. They ride the ups and downs the way casinos do with their edge in the table games.
The problem with trying to follow their techniques and betting style is of course #1 figuring out if you have an edge but more importantly for us, humans recognizing what tolerance you have for variance.
And that does not only mean money, it also includes mental tolerance.
As long as you’re not a compulsive gambler with severe delusional thinking the money tolerance is fairly easy to understand and implement.
The mental is the toughest. I say that not only from my experience but watching some very good traders and poker players go dusted.
Let me share with you another or RickJ’s Rules:
If you do not have your mental tolerance of variance in check you cannot win trading or betting on sports. Not maybe, not sometimes, but you can take this to the bank “YOU WILL NOT WIN”.
That is why so few traders or poker players are successful. It’s not the technical skills that do people in. I have seen the best of the best at one time or another succumb to the mental aspect of gambling.
It could just be a bad several weeks that triggers it or it may be self-destructive life patterns that haves not been dealt with. But whereever it comes from it will sabatouge your success.
I got off on a tangent this morning but it is an important one. The people in Vegas that stick around and play at high stakes have to a person conquered the mental aspect of handling variance.
The rest are either history or playing at such low levels you could get a monster streak and not win any money. I have seen many 300/600 limit players struggle to decide whether to play 10/20 or risk playing 20/40 after being in vegas for 20 to 30 years.
So where was I:) Ah yes, variance.
So, for me, I am willing to take a reduced EV to harness when I can the negative variance that can raise its head at any time. Very few can take a wide open approach.
Looking at the markets today we have SPY and DIA on the plus side while QQQ and IWM are negative.
Of note, Financials are strong, oil strong, metals weak TLT weak. A positive bias premarket.
Seasonally we have a short term buying opportunity especially if we see weakness today. I plan on taking advantage of it toward the close if it sets up right.
Other than that yesterday’s surprise move down left some longs hanging out to dry. I imagine many are very nervous waiting to see what today is going to bring as they are trapped after getting long on Wednesday’s rally.
Not much news to talk about this morning unless you want to indulge yourself with the Trump/Morning Joe drama. Myself, I want to stay away from that as far as I can get. Too many other issues that directly affect the markets to let that interfer with my thinking.
I have a few stocks that I will consider trading this morning if I get a trigger. But while better than yesterday not in the perfect category by a long shot today.
If you want to follow some of my trades along with 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