I am glad to see it, as well as the rising retail sales that are said to be very good, but am optimistically cautious. The market will not rally to long here as the investor sentiment is still to high for an extended run. Their are to many people expecting the market to continue its long rally at this point which will cause problems. Had the sentiment stayed under control, we could have move higher after my short term target of 1220 was hit, but that has put a damper on things.

I mentioned last week that we could retest the highs but thought that any rally would be short lived. I did a U-Tube Video a couple of days ago (Monday) and pointed out their,  that we were in a position to rally back up to around 1210 and possibly to the old highs of 1222. It took an extra day of consolidation, but the short term rally did come and here we are. Over all, a large drop can come in at any time. With the news being so volatile, anything can happen now, because of the overwhelming bullish bias. We know the masses are rarely right and if so, not for long, as the market has not dropped as of yet, we are building the pressure needed to do just that. So, be careful long term.

I have not been trading the last week and half of so, but did take a few trades here and there, but nothing to big. I will likely either start up tomorrow or Monday and expect the action to be pretty good for at least two weeks as we get closer to Christmas. I would love to see this market hold up, even though I am predominantly bearish in the daily’s.  I will try and show some of the low risk market entries on the S&P emini futures  for a weekend post and if I trade tomorrow those too. So until then, good trading, Vince.

Related posts:

1. Markets Rally on Que
2. Chart Pattern Showing Previous Resistance as Current Support
3. Bullish Sentiment backs off- Room to Rally

The market ran up on the open as it continued from its night trading move higher only to top out and pull back to end the day flat. The Dow was up over 100 points and actually ended the day slightly down -20 points.

I think the move was just a move off of some new resistance levels that were touched. On the S&P it came within a few points of that 1106 resistance number that I have talked about and only now becomes even more clearly defined. The Dow is facing the same kind of resistance once it hit its high in today’s session.

Over the weekend, I looked again at all the charts that make up the Dow Jones Industrial Index and I would have to say, that what I am seeing does not look good. I do see a push up as we are making happen right now and likely over the next week or two, but I do see resistance at those middle numbers I put out yesterday, 1122 to 1142. You can pick the middle of those two and say 1132, that would be the average. I am pretty sure we will see the market trade up to those numbers and I can not help but see weakness in the charts that say, we go down pretty big. It may not be a long drawn out thing that lasts till the end of the year or something, but a big move down to around 8800 -9000 Dow at the best and then a possible big move up, taking out our most recent highs.

That is a bold prediction and I am not sure how it is going to coincide with the sentiment numbers, but that is what I could easily see happening. The first move is now up a bit over the next week or two and then a sharp fast drop down, enough to get everyone and there mother to throw in the towel and get bearish, just as we get a short squeeze back up. This is an election year and I don’t think the “powers that be”, wants to let this market tank down to new lows. The first two moves, up slightly and then down big and fast. The last move, we will have to see, because I am a roaring bear long term, but later in the year or early next.

If things change, I will update and show why it may be different, but I look at the charts as if I was looking at a tick chart of the S&P and or any other trading instrument and it just looks like that is the way it is going to go down, no pun intended.

————————————————————————————————————————————————–

Today’s trading was pretty painless, as I just picked up a few scalp trades as I saw them. All winning trades here today and did scale out with size as I kept trading. I did not want to dig my way out of a loss by taking a loss with size on it. I was going to stop, but one way to keep trading is trade smaller size, so your draw-downs will not hurt your efforts much to that point.

Later in the session, I decided to try and trade the NASDAQ market and see how its movements are. I have picked one chart below, the smaller time frame to show you the trades I took in it today. The first trade was a loss, but picked up several trades in a row after that, pretty good. I was trying to trade both ways as you can see in the chart below. Down, up, down – that one I missed, but was a good trade, then up, down, and finally up.

I don’t advise this kind of trading for most people, but I did it today. In the last 50 minutes of the day, I took all the directional moves except one, which got away from me and did not chase.

I took most of the trades at the market, because I was not familiar with the fills and it was just easier to go in at the market. The one trade that was not a market order was the one that got away.

The NASDAQ market is a smaller size market. The S&P is traded in .25 points and there are 4 quarters that make up 1 point, which is $50 or $12.50 per increment. The NASDAQ also moves in .25 or quarters and 4 of them makes up 1 point. Each tick or .25 point is $5 dollars for you or against you and 1 point is $20 dollars. I think a 9 or 10 tick stop is good when trading this market and may even be giving yourself more room on the trade when compared to the S&P. That would be $45-50 dollar stop per contract traded. If you can hit an 8 point move, that would be 8 x $20 x 3 contracts = 160 x 3= $480.  Your risk if 9 tick is 45 x 3 = -135 and that is pretty good. I do like the fact that you can have a 9 tick stop and 10 tick target or higher and get the commissions taken care of, because of the smaller increments.

Even at times if you are scalp trading and going for one to one, that is 9 tick stop and say, 10 tick target or 2.50 points for $ 50 x 3 (contracts) and $ 150. Your loss is the same and your gain is the same. You are not looking for a home run here. If you pick up 3 of those little moves, you have a nice wage for the day, but that is just scalping a small piece here and there.  My trading method can definitely do that and more for those interested.

I never got to the lesson on “Day Trading Goals”, and again got on about something else. We will try again tomorrow.  I hope you enjoyed the new information on a new market. This can be done on stocks as well, no problem and if anything,  is easier to trade than the index futures. More on new markets in the coming days, stay tuned.

Good Trading to All.

Related posts:

1. Scalp Trading the Emini
2. Scalp Trading Lesson Today -
3. Scalp Trade the S&P Emini’s

Common Terms and Definitions Used in E-Mini Day Trading
Show All Definitions | Hide All Definitions

Back Months:
Futures delivery months other than front month.
Bear:
One who expects a decline in prices. A news item is considered bearish if it is expected to result in lower prices.
Bear Market:
A market in which prices generally are declining over a period of months or years.
Bid:
An offer to buy a specific quantity of a commodity at a stated price.
CME:
Chicago Mercantile Exchange. This is where the Nasdaq and S&P 500 Emini markets are traded.
Contract:
An agreement made at a specific price for delivery on a certain day. The Emini Contracts are all cash based. Also known as Futures Contracts.
Day Trader:
An active trader who opens and closes positions the same day and seldom hold positions after the close. A day trader usually trades very liquid markets like the S&P 500 Eminis, Russell Eminis, Dow Eminis, and Nasdaq Eminis.
Dow Eminis:
The emini futures market that is a basket of 30 stocks. It is the average of the Dow Jones Industrial Average.
Emini:
A mini contract that is traded exclusively on an electronic trading facility.. E-Mini is a trademark of the Chicago Mercantile Exchange.
Russell Eminis:
The Emini futures market that is a stock index of 2000 stocks.
Front Month:
The current trading month. The S&P 500 Eminis trade 4 contract months: March, June, September, and December.
Futures:
Market trading in contracts to buy and sell a particular commodity at a fixed price on a certain date.
Limit Order:
An order to enter a position at a set price or better.
Market Order:
An order to enter a position at the next available price.
Mini:
Refers to a futures contract that has a smaller contract size than an otherwise identical futures contract.
Stock Index:
An average of a basket of stocks, that are usually weighted, meaning some stocks have more “significance” in the index price than others.
Swing Trading:
Opposite of daytrading. Swing Traders speculate longer term on prices of stocks, futures, etc.
Tick:
The minimum price fluctuation price action can make. In the S&P 500 Eminis the minimum movement is $12.50. So each “tick” is $12.50.

Related posts:

1. Sentiment numbers stronger than expected
2. Will Dow Jones Industrial support hold?
3. Scalp Traded The NASDAQ Emini’s Today

The Dow was down -266 points and the S&P -34 points on the session, one-sided market all day long. We were up against temporary resistance and what ever news came out today, sent it down in the premarket and it just kept on going down from there. There was a few good places to get short just after the open that produced multiple point gains for anyone who took it.

I quick mention about the market sentiment. On January 11th the market hit the high of the recent rally. It retested it on the 14th and 19th as well, same price 1147 S&P March Futures. On January 12th the sentiment was at its highest going back to December 07, almost 54%. That is one percentage point shy of what some would say a sell signal. When you combine that with bullish and bearish extremes together, it was the highest since 2001.

Since that time, January 12th, the sentiment numbers have been steadily dropping week after week. These numbers are put out by professional newletter writters weekly and represents there current view on the market, bullish, bearish or nuetral. The numbers were 53.4% , 52.2, 40 and 38.9% as of this week Tuesday. Now 35% or lower is usually considered a bullish signal and can often spark a sustained rally. The 38.9% figure came out on Tuesday well before todays drop. Depending on how the “Professional Newsletters Writters” view this recent sell off, it is possible we could be at yet another extreme, but back on the bullish side. This drop is one of the quickest drops in market sentiment that I can remember. It usually takes a lot longer to convince the so-called professionals that the market has turned. Next weeks numbers will be very interested to see since as I said, it has not taken in todays drop or any other price drops that may follow Tuesdays closing market. Something to watch.

I traded the afternoon session today and only had a couple of small losses and several gains to pick up my daily goal, but it was not as smooth as I wish it could have been. I did take a few non method trades and that bothers me. A couple of them did work out, but I almost consider that a lose even though they worked out for me.

The price action was a bit weird later in the day. The market was trying to absorb all the selling and the price action was really only to the downside. I caught the only meaningful rally long today, but I was running out of time and movement was really not very large.  It turned out OK, but trading on the open sure would have been a lot easier and the movement then was a lot smoother.

Tomorrow is a new day, lets see if this market is going to sell off again or shore itself up. It will first need to get above 1066 S&P futures to start and slow the decline down. If it can do that with any meaningful advance behind it, that will slow things down and we could see 1080. If we continue to sell off, I could see 1048 to 1050 on the downside before a bounce comes back into play. The odds say that we continue with the sell off to the lower numbers and bounce from there. Today the cash S&P did close at its lows for the day, showing weakness going into the close. That is usually not a good sign for the opening bell, but tomorrow will tell.

That is it for today and good trading to all !

http://www.screencast.com/t/OThmOTA2

Related posts:

1. Alert !!!!! Big Development for Wall Street Bulls
2. Wall Street Rally – Mission accomplished
3. Sell off on Wall Street, Market sitting on Major Support

The market sold off like fiercely on Friday and took the Dow down about 250 points. The S&P was off about 30 points. I did think that a re-test of the Wednesday and Thursdays low would come, but not so fast. I thought we had at least one more day to top out for the counter trend rally. There was news that came out on Friday, not really sure what it was to tell you the truth, but I could only imagine that it wasn’t good and the market reacted to it. It is to be expected.

Let me tell you, that in the month of September and October, the general public has become bullish. The last two months has only produced paltry gains when compared to the gains of the previous six months. That is where all of the money has been made. The general public is always late to the party and I don’t imagine that this time is going to be any different.

Mondays session is going to tell all, at least for now. What I mean is as I was telling you last week that the Dow has been outperforming the S&P and that was a problem. Well, it is not only the S&P that it is outperforming but the other index’s, but in a bigger way.

Based on my experience and I did not see this or hear this from anywhere, but years of seeing price action at work, the institutions are lightening up their riskier positions and reallocating equity assets in the high quality Dow Stocks. I mentioned this a couple of weeks ago, if I remember correctly. That is pretty typical at market tops

The Nasdaq Index is at a double bottom from its most recent pivot point low, something that the S&P is thinking about doing, to follow suit. The Russel 2000 Index has already overwhelmingly broke its most recent pivot low, by a wide margin. The Dow on the other hand has not broken down yet at all, but is sitting right on a major trend line support.

So, the Dow is the strongest, next comes the S&P 500, then the Nasdaq and lastly the Russel 2000. If the Dow holds and moves higher, the other indexes will only be making a counter trend rally, but will still remain in a down-trend, stopping at overhead resistance. Once the Dow does break down, all of the other Indexes will only go down that much farther and faster. There is a lot of room for the market to move back to the middle of its range of the last 8 months.

The last thing I will say about all of this tonight is, “Earnings”. I don’t follow this much either, but just the big picture. The projected earning that Standard & Poors are putting out for the S&P 500 for next year are a bit of a fairy tale. They have been constantly wrong and now they are painting a wonderful rebound of large proportion in earnings. Anything is possible, but I doubt it. I had heard, according to Bloomburg, that the S&P has had declining earnings for 9 straight quarters and only this last quarter have they been able to increase earnings. Those increases are from very depressed levels, not that hard. The increase in earnings in my estimation is coming from cost cutting in various forms. You can only cut cost so much and for so long, before you can not cut anymore. Where are the increases in sales going to come from. No one is spending and no one is lending and money??? INTERESTING.

That is why, the market is going to adjust itself to reflect where it is going to be in 6-9 months from now, probable lower. Just now the S&P is turning their earnings, like this month. If you invest in these companies now, you are going to pay way to much. But that is what the public does. You needed to be invested at least 6 months ago to be able to enjoy some of this rally, not two months ago, like I talked about at the top of todays post.

We need to see what the Dow is going to do in Mondays session. If it to breaks support, then all of the indexes will have downside momentum working for it. But if it can hold, there is now room for it to clear 10,300, a complete 50 retracement from it’s all time high. The S&P numbers for the same retracement are 1120. We got close.

The sentiment numbers backed off just a little last week. It is sitting at 48% Bulls. A reading of 55% is considered bearish. We only got as high as 51. One last push to the numbers above could push the reading to 55%, the big word in there is COULD.

Friday’s session was incredible. So many great clear signals all day long. I only took one trade and it was split up, what I call a “T-2″.   The first half for +1 point and the second part for 3 1/2 points. I was in the market for less than 1 minute on the first part and 4 more minutes for the second part. I really only had my screen open for 15 minutes, start to finish. There will be plenty of other trading days to capture higher point returns. But my daily goal was meet, no struggle, no fuss, no mess. Just the way I like it.

Until tomorrow

Related posts:

1. Dow Jones Industrial In Position for New Highs on Year
2. Today’s low needs to hold, so far so good
3. Sentiment numbers stronger than expected

The market had some good moves today in both directions. I saw a couple of 5 point sell off’s and a couple of 3 point sell off’s that were very clear. The moves on the upside had more room in them, especially in the late afternoon. I saw a couple of 5 point moves to the upside and a couple of 10 point moves as well. I had some of both to pick up my daily goal plus. Todays total was over $ 2,000, but I traded a little higher contract size of 5 to 8 to get it.

I had a little misstep in the early going but was able to recover. It was a mis-trade that cost me, but I was able to make up for it in the late afternoon in one of the nice rallies upwards that we had. I had manually put my stop in, but placed the order in the wrong direction adding to a loss, I traded my way through it and had some nice returns at the end of the day.

I have posted a chart of the hourly S&P and daily Dow. Yesterday I called the initial resistance top of the S&P and it was good for a very large move to the downside. Today’s open took the market up, back to the middle of yesterday’s range, selling off a couple of times on the way up. It wasn’t until the last hour that the market decided to advance up through the overhead resistance and push its way higher, it did not take me long to figure out that the market was strong and decided to go with it for some nice gains.

It is only in reading the charts that we can make a true determination on the current market direction. That is day trading “one O one”. It’s nice to call big directional changes and a lot of times they work out, but to place all of your market calls on what has not happened in the future is not wise, while day-trading. We are only trying to capture a few points in either direction with the prevailing direction being of no consequence. Trading up is just as good as trading down.

I will point out that the sentiment numbers did come out last week and they were only 26% bullish at -3% and 47 bearish at +3%.  So last week people became less bullish and more bearish. I think that is adding to the rally we are having. These readings are currently very bullish for the market and we are seeing some of that played out. A reading of 35% or lower is typically good for a move up on the markets and the last reading is 9% below that. So over all, don’t be surprised with the current move up. If the market does come back in the middle of the last rally and then overcomes the last pivot point high, it will have a lot more power behind it. On the other hand, if it can push through the current outside resistance and move up, it will have a higher failure rate, when it starts to drop. So I am all for a pull back, but when it comes to trading the markets, I don’t really care. I know we will find moves in both directions.

Let’s take a look at tomorrow, and see if the Dow can break through the outside resistance, it is coming up on it now. The Dow closed the day matching yesterdays high, while the S&P closed slightly higher than that. I have seen many times the indexes go slightly past their previous highs, only to fall back and fail, thus taking the late comers down.

http://www.screencast.com/t/AUgxJSONYx      Some of today’s trades “Live”

http://www.screencast.com/t/LRwBANuN          Still shot of hourly S&P and daily Dow

Related posts:

1. Wall Street Rally – Mission accomplished
2. Market continues sell off & Nice smooth day of gains
3. Sentiment numbers stronger than expected

While Trading the S&P e-minis today, I called out the short term top in the market before it happened. You can hear me make the call before it happens exactly at the the high of the day. Then you can hear me make the call, on how we will be pulling back from that high point down to lower levels. At the close of the day, the S&P pulled back off of my short term target, by 20 points. That is a lot in two hours, with the Dow off 190 points.

This is going to lay the ground work for a continued pull back. I suspect that, at the open, we will get a small reactionary rally, but I would definitely be watching for short trades. We have had some technical damage and the path of least resistance should be to the downside.

With this being said, the market can do anything it wants at any time, there is no guarantees. All I can tell you is that when I see a pattern like the one I am looking at right now, a pull back is what usually follows. I will be watching for short trade setups and will stagger some of my exits. That does not mean all of them. I always watch price action to tell me what to do and that is what I will be doing.

I try to not have a strong bias for direction too far in advance, but it is something I will be looking at. It may be that the big sell off does not come until the afternoon session, or it could come early on. Price action is what will influence my decisions at that time. I only lay this out for you because I am looking at the daily chart, just like I am looking at a 5 minute chart or tick chart for that matter. The price action is the same and currently looks bearish.

The day was really pretty smooth. I had the time to trade, so I just kept at it. I started out with some nice gains and within a few minutes I had my daily goal. I cut my size back but kept on trading and added to earlier gains. I mostly traded small all day, 2’s and 3’s were the most common contract size. If I had some draw downs it was not going to eat into earlier gains with the small size. I did have some good runners today and captured some of them on video below, so be sure to take a look.

There are different ways to approach the trading market based on price action. If we are in a choppy market and you are trying to go for bigger moves, you are going to struggle. One way that I overcome some of that is to first identify what kind of market we are in. If its choppy, don’t even think about going for more than 4-6 ticks. You will have another trade in just a couple of minutes to capture additional profit. If in a trending market, you can set yourself up for a few more ticks, but you have to know how to play it and not get greedy.

Again, in today’s market, I had quit a few of these. If you have the time, take a look. If short on time, you can always come back later. The bottom line is that I try to get myself in a break even situation first, then a small gain, locked in. After that, if the market runs, it’s all gravy.  By only trading small, I was still able to post some nice gains because of the runners.

I closed out a long position that I got stuck with over the week end for a profit of several points. That gain did not count towards today’s numbers below. Today, I took 32 trades, 25 gainers and 7 losers and my total scaled out percentage was 77%. The total equity gain for the day was just a little under $2,500 dollars on mostly small size.

During a couple of the videos I am calling the intermediate term direction and as the next video progresses you can see it come to pass. We hit the short term top in the market today and pulled back 20 points, take a look.

http://www.screencast.com/t/oPiqTiFG6              Today’s equity chart

http://www.screencast.com/t/P9iiuTUPd              Some of  Today’s Live Trades

http://www.screencast.com/t/Bna8H6Oe              Some of  Today’s Live Trades

http://www.screencast.com/t/NAik15UUR           Some of  Today’s Live Trades

http://www.screencast.com/t/y7YeoTIZC            Some of  Today’s Live Trades

Related posts:

1. Live S&P Futures Trading Video’s Today
2. Short Term Momentum Turns Up for Market
3. Looking Like the Short Term Top Is In

It was nice to see the market rally today, because yesterday I stuck my neck out with a bold market call. I stated that the market should move up nicely off the low end support and rally up at least +185 points plus. When you see patterns and formations thousands of times, you can come to expect repeatable patterns when the conditions are right. That is what I saw in yesterday’ s close, a market that was ripe for a move up.

Technical Analysis is the study of price action patterns combined with support and resistance. It takes a lot of screen time to be able to spot those patterns so that they are second nature to your eyes. Meaning it does not take long to be able to identify whether a pattern is bullish or bearish and have the confidence to be able to place a trade in that direction.

I feel blessed to have the amount of screen time that I do, because it has made me a better trader overall. There are so few people who can process the amount of information you need quick enough to trade the short term swings and, as I said, I feel fortunate to be able to do so. As time goes on, I would expect that anyone who comes into my trading group would have the benefit of years of market knowledge available to them. It is not easy to be consistent, it takes work, and I feel, if you are going to cut down the time it takes to learn how to trade, you will definitely need a mentor. It does not have to be me, but it can be if you choose.

I did not have a mentor and learned how to trade by myself over many years. If I had the benefit of a mentor years ago, I could have learned a lot faster. One of the reasons I didn’t was I could not find anyone I could trust and who I thought really understood how the market flows. So, I worked through it all by myself.

You can see through my videos and postings and consistent trading that I do know how the market works and how to capture daily profit from it. I will soon be gathering up a group of traders who want to learn my method of trading and be able to pull good money out of the market each day. If you are one of them, send me an email message and I will get back to you with more details. I will write about this again in the coming days.

Today’ s trading went very well. I had 10 trades with 8 gains and 2 losses. I split some of the exits up for some increased profits again today and was still trading small, but had very good profit of around $ 1,200 plus for the session.

Again some of my trades below.

http://www.screencast.com/t/LnlvBx6z             Today’s equity chart

http://www.screencast.com/t/ZckxwreoV        Screen shot early trades

http://www.screencast.com/t/9kx1aNNQxfu    Live -some of todays trades

Related posts:

1. Wall Street Plunge, down 266 !
2. Big Day on Wall Street & Day 6 training
3. Reversal on Wall Street

I had talked about the investment newsletter writer’s poll out for this week, expecting them to be a bit weaker than last week was, adding to a more negative environment, which would set the stage for a bigger rally. It did not work out that way.

We may still get a rally but when is the big question? The numbers changed in the positive direction, which is a little bit of a surprise. They were 28.6 bullish last week and they moved up to 29.7 bullish this week. A reading below 35 is typically a bullish sign, with a rally potentially at hand. With this sell off, extremes are difficult to time and it can take longer for the signals to have their usual counter effect. The reading only went up by 1.1%.  That may help in prolonging the coming rally. We will have a rally, that is for sure, but we don’t know if it is going to be from 1,ooo dow points lower. These numbers are just something to watch and keep in the back of your mind.

Most people who write investment newsletters have their opinion taken each week and some of them became a little more bullish this last week as of  the Tuesday reading. The point is they are usually wrong when polled as a group. It is just like so many other investors, they follow the trend and as the trend continues in the initial direction for some time more and more of them become bullish or bearish, whichever the direction.

Basically, they are late to the party and become bullish at the top of the market, when it is only then apparent to them The herd mentality. The same is true during a market sell off, they then think it is going to continue down, since that is the direction of the current trend. Last week 45 percent of them thought the market was going down. This week only 44 percent had those same feelings. That lets up the pressure a bit for the market to continue down possibly, but I would say, not by much. It is not a science. I have posted and explained this before, but for the benefit of those who are not aware of it, there you have it.

There is another point to all of this. Learn how to read the markets for yourself and you won’t be victimized by other people’s opinions. There is a way to do that. It is kind of like a language. If you don’t know it, you will be lost, wandering from place to place, looking for your way. I am not the only person who knows how to read the markets, for sure.  But I would say, there are very few who can do it effectively and consistently. I will be talking more in the future about just reading the charts themselves, with no indicators at all, just the price action.

This is a great way to start understanding what is happening on the screen. There is a struggle going on, constantly. A change in ownership, from weak hands to strong hands. Those that want to sell to others who want to buy – but at what price. It is their price, the price that they are willing to pay. In the case of a sell off, it is people who cannot handle the heat (weak hands) who sell to those who can assume the risk and are at that moment strong (hands). It usually takes only a short while of seeing lower prices until those strong hands soon become the new weak hands and begin to offer their shares and/or contracts to other stronger hands, but at their price (the new strong hands). This is how a sell off is carried on and how we get continued lower prices.

There is always someone buying, all day long, but again at their price, which often times does not hold and then the selling continues. This process stops when there are no longer a majority of sellers left to sell to and the buyers are taking the upper hand, taking all of the available supply the market has to offer and the struggle continues. There is always someone selling and there is always someone buying – but at adjusted prices. That is how and why the price changes.

We step in now and then and help them out. We create liquidity for the market place. When a mutual fund manager is faced with selling a large portion of his portfolio to meet redemption requests, but feels the drop is only short term, he can sell futures contracts by the thousands and give himself the insurance that he needs from a large market drop. If he had to sell all of the shares in the open market, he may be pushing the market down with his large size and thus adding fuel to a down market. If the drop comes, he is protecting his portfolio ( a kind of insurance ) from a market decline. When the market comes back up, the original value comes back into his portfolio but he has made a big profit from the decline. If the market does not come back, his portfolio has taken a big loss in the drop in value, but he has large gains in selling the futures contracts so he has offset his portfolio and has not lost money for his clients. If there was no one to take the other side of the trade, when he wanted to sell thousands of contracts over time, he would not be able to do what he did in the example above.

Traders and yes, day-traders, provide an essential part to the process. We make it possible for so many to buy the insurance they need to protect themselves. The market would have so much more volatility to it if we traders were not there to help smooth out the process. So there is a purpose being served here.

It is the same for the farmer growing corn or the company selling orange juice or coffee beans. By them selling futures contracts in the future, they are agreeing on a price they can live with, a set price in the future. If at that time the current price is much higher, they do not get to enjoy that higher price. Their contract says they agreed on xyz price and that is the price they will get 2 or 3 months from now when the crop come to harvest. By same token, if the current price at the time of harvest is 20% lower, they will still get the agreed price of xyz at the day the contract was agreed on.

Traders take the other sides of those trades and speculate that the price will be higher or lower in the future. The farmer is guaranteed on his price and he is happy to get it. If he came to market in the future and received  30% lower than current price, he may get financially destroyed and he can’t afford to take on that risk. But others are able to.

Those are just a couple of examples in the financial and commodity markets of the functionality of the instruments that we trade and why. On a personal note, most traders trade for personnel profit and that is understandable. They are taking a risk, and for that risk they can be rewarded when they are right.

The trading day was good today, picking up 1 & 1/2 times daily goal. I have some of those trades in a small recording from the session. I think it may be helpful for some to see the market trade in a live environment. I have had technical problems in posting my equity chart so this is the next best thing and probably better for most. As soon as I can get it fixed, I will post them again.

http://www.screencast.com/t/m8FOo2HQwNj       some live trades from Friday’s session

Related posts:

1. At last, an up day
2. Market Sentiment Numbers Helped Take the Market Down
3. Market Sentiment Turns More Bullish – Trader Beware !

We did not get a bounce, but a sell off today. I checked the exact number on the S&P bottom of November and  I see that the market went right down to it, at 742, and stopped. The Dow continued it’s slide falling 250 point to 7,114. I may have been a day early, but I still think we are in for a bounce.

The whole economic picture is pretty bleak. It has been said that the more the government does, the worse things get. I would agree with that, but that is just my opinion. Actually, I take that back. The facts would say that this is true – so far.

I do not want to be a downer to my readers, but I have been ”Bearish” on the market for some time, as many of you know. I have been hoping the slide takes a break and gives us all a little more time to get things together. But again, the market does not listen me.

A while back I had posted on the daily chart of the S&P that this market needed to stay above the 800 level – or else. Well, it is looking like the or else is happening. The daily chart has been in a solid downtrend since the purple line of support was broken on a daily basis. It has been confirmed by the indicator as well and nothing at this time has changed. The Monthly is down, the Weekly is down, the Daily is down and even the Hourly is down. It has been that way for the last 5 days now.  That is what I had to tell myself in looking at the slide today. Everything is down, don’t fight the trend.

Below is a chart of the S&P cash and my equity chart for the day. This is the start of week #4 and I have been posting my equity gains and losses every day.  I have not posted a losing day as of yet, and I don’t plan on it, but it could happen. My daily loss limit is two times my daily goal of 2 pts per day, so that would be a total of -4 points. If I am trading 5 contracts, then that would be 1,000 before commission. As I said yesterday, I came up to that point only one time and was able to turn it around for several times positive daily goal. Most of the trading days have been met with 2, 3, 4 times daily goal and up, so overall, I am pleased with my performance.

http://www.screencast.com/t/B7sIbT9SjS7                          Some of today’s trades

http://www.screencast.com/t/mQP1X38U7s                        Today’s equity chart

http://www.screencast.com/t/tOxsYylTb                               S&P Daily chart

Related posts:

1. Nice screen shot of 233 tick/ Thursday Feb, 19th
2. Sell Off Continues in the Stock Market
3. Called Live, Short Term Top In Today’s market.