SPY on the Market: Knowing When Not to Trade | | by Hugh Grossman and Jon Johnson
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DISCLOSURE: EnergyX's Regulation A offering has been qualified by the SEC. Before investing, carefully review the offering circular, including the risk factors. The offering circular is available at invest.energyx.com. | | | Knowing when NOT to trade is just as important, if not more so, than understanding when to enter a position. We all love to trade, but remember, the ultimate goal is to make -- and keep -- money. Many traders can make money, but remarkably, few can keep it. Studies show that most who lose do it because they overtrade. They simply cannot stay away from the market. Long-term success requires that you know when to stay out.
Experience is a great teacher, and nowhere more than the stock market are we taught these lessons better. I celebrate my wins but carefully study my losses to determine what went wrong and how I can improve. The following is a loose guide to keep me clear of the icebergs, so to speak. Hitting any one of them can bring down even the best of traders. | | One options strategy. 10 minutes to set up. 89% win rate Is there a simpler way – a faster way – and a more lucrative way to trade options?
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Click here for more info. | | | - Physically not feeling 100%. Anything less than feeling totally rested and healthy can result in weak emotional control. This includes being under the influence of meds. It is easy to fall prey to this as there may not be any obvious outside symptoms. Even feeling a little "off" may stimulate a negative emotion. Being medicated can cloud your judgment in that you know what you are doing but don't care; hence, you make bad decisions.
- Immediately after a trade. If you had a winner, there's the feeling of extreme confidence and arrogance. If you suffered a loss, the feeling of retribution can make you want to make up for it. In both cases, your emotions are hot and you run the risk of a bad trade.
- Excessive uncertainty in the market. While we can never be totally certain of anything in the market -- by nature, it is a finicky entity -- there are conditions that lead us to believe that trading at this time may be just too much of a gamble. The legacy news swirling around the war in Iran can create havoc as a) we likely are not getting complete and accurate news, b) markets react to what they are receiving from this distorted media, c) pundits are trying to unpack the twisted news and put their own spin on what they perceive as accurate and d) markets trade from what the pundits spew out from their analysis. One can only imagine how mangled this could be.
- Ultra-high implied volatility. Some volatility is good, as that is where we make most of our money day trading options on the SPDR S&P 500 (SPY), but when implied volatility, as shown on our trading platforms, is excessive, we could fall into a deadly trap of overpaying for an option. My preferred implied volatility level is 18-23%. Some days, we see it hovering considerably higher at 30%, 40% and even higher. That means that options will be overpriced with high bid/ask spreads as traders sit on the sidelines waiting for the passage of the event that is causing the elevated volatility.
- Low trading volume. I like to see at least 1,000 options having traded already, before entering a position. When conditions are not ready, knowledgeable traders will wait it out.
Follow these five guideposts and watch your trading improve. Just because the market is open does not mean you must be in a trade. The objective is to make money and keep it. If you absolutely feel the need, execute a paper trade to stay in shape. | | Take a Break from the Chaos – Your A.I. Watchlist is Ready Trading doesn't have to feel like chaos.
Sure, the market moves fast. News breaks. Volatility spikes. Sectors rotate without warning.
But chaos is just complexity you haven't organized yet.
Instead of drowning in charts and indicators, it's time for a clear, actionable watchlist of what matters most for March.
Get Your A.I. Watchlist - Register Now | | | Please join us for this Sunday night's Intro to Trading/Week in Review webinar. This informal session starts at 8 p.m., and is informative, engaging and even entertaining. You may even win an exciting free e-book!
If you know what calls and puts are, join our Trading Room, hosted by pro trader Jon Johnson and myself, 9:20 to 10:30 a.m., ET, daily.
For details on our ever-popular DTS Signal for a 5% gain, click here. This is a great morning market tool to execute a trade, especially if you are unable to watch the charts.
Looking for an easy pre-market Pick? Let us do the honors. Click here. All our services offer excellent success rates.
Just starting out? Click to join the Inner Circle for an easy entry into what we do.
And remember, "It's better to not be in a trade wishing you were than to be in a trade wishing you weren't."
Incidentally, watch your email for exciting news from DayTradeSPY. You will not want to miss this!
Create great trades!
Sincerely,
Hugh Grossman and Jon Johnson
Editors, Trading Room, Pick of the Day, Inner Circle, and Signal | | About Hugh:
 Hugh Grossman has manned the helm of DayTradeSPY for over 15 years now. A self-taught trader, who turned master trader, has learned everything about trading the SPY (the SPDR S&P 500 ETF). Hugh has been guiding his subscribers of Inner Circle, Pick of the Day, Signal, Master Class and the Trading Room to daily profits since 2010. | About Jon:
 Jon has over 21 years experience helping thousands of clients gain success in the financial markets through his newsletters and education services. His philosophy in investing and trading is to take what the market gives you regardless if that is to the upside or downside. The goal, of course, is to make money… which leads to his definition of success: doing what you want to do when you want to do it.
He has been featured in various financial articles, including articles in the Washington Post, Chicago Sun, The Wall Street Journal’s Smart Money Magazine, Bloomberg, Kiplinger Personal Finance Magazine, Houston Chronicle, Business Week, Money Magazine and other news magazines. He was even featured in Forbes.com’s Best of The Web online edition. | | | | | |
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