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Limiting Beliefs That Prevent Trading Profits
David Frost
October 03, 2023
⚾PRE GAME WARMUP
It's turnaround Tuesday...
Not much activity overnight, the thieves were nowhere to be found...
We've got some of the Chinese stocks getting hit a little, but the US brothers and sisters aren't getting swept up just yet...
So what does the SPY look like in terms of the numbers and setup...
The flat line will be important leading up to and around the open...
Staying above is important, and getting below opens the door for a test and spike below 426.00. Let’s not forget she’s got some unfinished business from yesterday to contend with down around [Login here].
More selling will be met with real time posts as and if necessary...
On the flip side, if she pushes higher and can eclipse [Login here] on candle closes, the door opens for the big phat round number of 430.00 and likely a spike above where the next set of figures will be posted in a real time type formation…
🎬THINK IN PICTURES
The 10-Year Treasury Bond has always been a Stallworth in the bond trading and investing community. It’s a benchmark.
The chart below shows a very strong up trend and we know the trend is our friend until such time as it’s either over our your shit gets thrown out the window…
Within trends are events called “pull backs” that occur at resistance. You’ll notice a blue trendline that is marked at 4.89% which is the next place of such “overhead resistance" where price should run into the opposing teams goal line defense.
The media talking heads and pundits will continue to tell you that rates will keep rising because that’s the direction they’re headed at present. What they don’t know is that this chart is on its way to run a test of a very important and former breakdown area. It’s around 4.89%. We should expect that general area to reject price from moving on through upon arrival.
🌗RECYCLE TIN FOIL HAT
Gold (GC) has an appointment with a cycle low today…
Will she keep it or be late?
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💣WRECKONOMICS
We’re in “Save the Planet” mode. Our economy is centered around green stuff these days. Things like electric cars, solar and wind power generation are front and center.
The “Green Movement” is largely defined as an important campaign to ensure our sustainable future. There are a variety of ways the United States has implemented policies in order to shift the population in this direction. We’ve got national parks (green space), the EPA (Environmental Protection Agency) and even the declaration of Earth Day established over 50 years ago. All seems like good and reasonable stuff.
They keep moving the goal line of what we have to endure to be good green citizens. Enter the plastic products elimination discussion. Now they want to limit consumer use of as many products made from plastic such as grocery bags, straws and other everyday items.
Let’s see how we’re doing with this one. You walk into a grocery store and begin walking up and down the isles. We’ve got the deli department where you get a half a pound of turkey presented in a zip lock bag. Waltz over to the dairy section and pick up a jug of milk in a plastic container. Buy a loaf a bread in a plastic bag and a liter of soda in a plastic bottle. How about a pre made salad in a plastic box or a pound of ground beef on a dish covered in plastic wrap. We could do on, the entire grocery store is stacked with plastic containers throughout every inch of the store.
What should we do about this?
We should make the customers bring their own bags to carry home all the plastic containers that house the food we just purchased. The alternative of BYO bags is a newly minted fee as a deterrent.
We must also drink from a paper straw while they get soft and begin to disintegrate if you don’t finish your beverage in less than two minutes.
It’s like the green twilight zone where we live in a plastic place, but we’re not allowed to notice…
🩺PSYCH WARD
Why your trades constantly have small gains and large losses?
You’ve heard of muscle memory. How about losing trade memory, is this one you?
Traders struggle with something we call “early exit syndrome.” It comes from bad memories of trades we’ve taken large losses on. There’s a lack of understanding of how to take a loss or as they say in trading circles, cut and run…
Once we’re in a losing position our mind immediately goes into hopium mode, we “hope” the stock comes back and we can get out even or even with a small gain. The mind plays tricks.
We know one thing for sure, if we sell the position at a loss, as soon as we’re out, the stock will begin moving right back up in our direction. We don’t want to do that, so we hold it as it gets worse and worse to the point where we have to stop the bleeding and the pain at a much larger loss than it was just a couple of hours ago.
But why doesn’t it ever go the other way? Why can’t we go for a ride on the profit train for big gains?
The memory of our losses is a limiting belief that prevents us from staying in a good trade. Once we’re in a profit scenario, we immediately begin thinking about taking the profit before it disappears.
Stocks and markets go back and forth all day long. We watch the P&L do the same. Our account grows a little, then pulls back. Because of the bad trade memory situation, we tend to book small profits because the win feels good, we have a story to tell. We figure, a base hit is better than a loss, so we take it.
What we don’t realize is taking small profits doesn’t off set the big losers that occur due to our inability to book a loss small and fast when necessary,
The trick is knowing how to get the best of both worlds, turn a trade into a risk free emotionless one allowing us to rise the wave for big wins when Mrs. Market will give it up…
🏆MEMBERS SAYIN’
I set alerts around your numbers and they work, it’s pretty amazing to watch the price action once they get there. Lars W.
One of the best lessons you gave us is why we shouldn’t short the market during certain types of markets - invaluable. Steve M.
COMMON SENSE MARKET STUFF EVERY DAY
DISCLAIMER STUFF: Nothing found in this communication is financial advice. This newsletter is strictly educational and not intended for or should be thought of as investment advice or a solicitation to buy or sell any assets or to make any financial decisions whatsoever. Please be careful and always do your own homework.