Stupendous Friday rally to close out the week. Where have we seen this before?
The focus of today’s market was Non Farm Payrolls which comes out premarket first Friday every month at 8.30 a.m. NYC time. Analysts were expecting a number in the range of 180K, the number that dropped was 353,000 for January following upward revisions to the prior two months.
Normally in this economic climate where the FED has been forced to raise rates to contain inflation, this would be bad news and the market would tank, but we are so far past it now. The US economy is expanding and accelerating forward.
Traders obviously like this scenario even though the chances of FED cutting rates is pushed back to May 2024 at least.
Blockbuster earnings reports from META 0.00%↑ and AMZN 0.00%↑ further added fuel to the NQ rally.
I waited until 10 a.m. for UMICH consumer sentiment to be released and when that number showed sentiment increased sharply I took my primary edge and rode it all the way for a little more than R3 in the black day in the NQ.
If anyone else learned to trade the Cusp Strategy that I trade you must have had a sensational day as well.
There are a few basic things to trading well. The foundations if you will:
You have to be patient to wait for your Edge to appear. (If you don’t know what an Edge is or don’t have one, then you are flying blind in a storm.) This is where most traders get stuck either trading without an edge or having a massive case of FOMO - seeing the markets move and thinking it is getting away from you and entering a trade that is not your edge/setup. The markets will move away from you but it will also come back and give you an entry. Seriously. Have the patience. Let it play out. Don’t enter the market on a whim. Randomly.
You have to take your Edge when it appears, especially if the data lines up and the economic news is favorable, this way you have at least 2 variables that could take the trade in your favor. If you don’t take the Edge out of hesitation, doubt or fear then you miss out on making money. And days when you miss out on a rally because you second guessed yourself into entering the markets can have psychological consequences which usually leads to your equity taking a sharp downturn. You don’t want to do that. Just take the damn trade and deal with your psychology outside of market hours.
You have to let the trade play out. It is only one trade. You will take hundreds/thousands of trades in your career, let the damn thing play out. You never know where the market could go. Sure it could turn against you for a R1 loss but it could go in your favor and leave you with a R5 win for the day. You never know what could happen before you enter the market. No one can predict what the market is about to do, least of all you.
This one is the most important: Do not move your STOP. Again, it’s only one trade. Yes, you can move your stop to breakeven if the trade has gone in your favor by 100 points or but never ever take more than a R1 loss in a trade. Absolutely do not. If you are moving your stop not to take a loss then sooner rather than later you will move your stop and end up with a massive R loss for the day. Guaranteed. In this scenario you will lose not only a massive chunk of your equity but most importantly your self confidence which is harder to get back than the money.
That’s it folks. I am here to share my 15 year knowledge of trading the markets, I hope you have learned a little bit.
Have a great weekend. Get out in nature and spend some time with your loved ones.