By: Steve Smith
Earlier this week, the President announced that he was going to cut off negotiations for a new stimulus package with Congress, and the market tanked.
The next day he walked that statement back and the market came roaring back…
So how can we put on trades if a tweet or a comment at a press conference can send the market into a tailspin, or send it soaring to the moon?
Do the technicals even matter anymore?
The answer is yes and no.
I understand that can be a frustrating answer, so let me explain.
Technical analysis is still great for very short term positions, and it can be accurate for longer-term positions as well with a caveat…
When there is so much stimulus and money printing going on the market is tied to what politicians, the Fed, and policymakers say on a minute to minute basis.
That means we need to be defensive in our positions, and we need to trade either very short term (a day or two) or we need to keep positions on long enough to ensure that the effects of a tweet will shake out before we have to close the trade.
And even more importantly, we need to make sure that all our positions are properly hedged so if we do have a losing trade it is not devastating.
Yes that means we won’t make quite as much on our winners, but remember Buffett’s rules of investing:
- Never lose money, and
- Don’t forget rule #1
If you can make reasonable big wins and only have very small losers, you increase your chances of making money with your portfolio drastically.
And that’s why we trade, to make money!
That’s how we manage risk in Options360. Hedged positions and we give the market time to find a short term balance so we don’t get caught in a squeeze.
In addition to my research and trade recommendations, you will be invited to a webinar every other week where I explain why we put on the positions we have. The goal is to make sure you understand what we are doing so you can find great trades on your own in addition to my recommendations.
The webinars themselves are worth far more than the modest trial subscription rate.
To Your Success,
Steve Smith have been involved in all facets of the investment industry in a variety of roles ranging from speculator, educator, manager and advisor. This has taken him from the trading floors of Chicago to hedge funds on Wall Street to the world online. From 1987 to 1996, he served as a market maker at the Chicago Board of Options Exchange (CBOE) and Chicago Board of Trade (CBOT). From 1997 to 2007, he was a Senior Columnist and Managing Editor for TheStreet.com, handling their Option Alert and Short Report newsletters. The Option Alert was awarded the MIN “best business newsletter” in 2006. From 2009 to 2013, Smith was a Senior Columnist and Managing Editor for Minyanville’s OptionSmith newsletter, as well as a Risk Manager Consultant for New Vernon Capital LLC. Smith acted as an advisor to build models and option strategies to reduce portfolio exposure and enhance returns for the four main funds. Since 2015, he has worked for Adam Mesh Trading Group. There, he has managed Options360 and Earning 360, been co-leader of Option Academy, and contributed to The Option Specialist website.
November 11, 2020
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