The Nature Of Risk [November Newsletter]

We can’t achieve big things without taking some risk.

We can’t reach the big $ in the markets without being uncomfortable along the way.

We can't influence the direction of our family without experiencing some disagreement.

We will not grow if we don't get anything wrong. That’s just the way it is. There are those who are willing to take the leap and extend themselves - and there are those who aren’t.

Which group do you belong to?

This month is decision month.

It's when you decide to either keep living the way you've always been living, and keep getting the trading results you've always been getting...

OR...

You take the leap.

We've just opened our 2025 Mentor Program for bookings. I'll bet you're ready.

Take the leap.

Every year we book out.

Every year I'm plagued by people emailing me after I close it and they've missed out.

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There are traders who are raking in the $, while others have missed out completely.

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There's a huge myth in the markets.

That is that you MUST use a momentum indicator if you're going to make it big.

Something like an RSI, SIROC, ROC or MACD. All of these indicators fall under the 'momentum' family.

They are one of the 'magical indicators' out there that people rave about - pinning their hopes and misguided dreams onto the back of a small squiggly line that is about to crack under the pressure.

And that's just for entry. Some traders even get a bit distracted with trying to use a momentum indicator as confirmation of whether to exit or not. I beg you - don't have that as a rule. Take your exit from the chartprice data, rather than from an indicator that can barely make up its mind.

And for the love of all things to do with trading, don't use divergence to exit. Divergence can occur for AGES, and sometimes doesn't resolve itself the way you think it might.

Dump it as a rule for exiting. I've found just one use for them. Regardless of where the momentum oscillator (i.e. the squiggly line) is located - whether it is in an overbought or oversold territory - the indicator is still useful as a setup as long as it's pointing upwards.

I'll tell you why. Often I'm interested in getting in when a trend is already quite obvious. This has usually kicked the momentum indicator up fairly high anyway, so if I ignored that chart because of a high momentum indicator, then I'd miss thinking that this chart was a reasonable trade.

As long as the momentum oscillator isn't pointing down, I'm happy to use it as a setup (in conjunction with other indicators, of course). I'm begging you - don't get too hung up on this indicator.

You'll end up going around the bend and wasting a lot of time. Every indicator is an iteration of chart data and each iteration takes you further away from what the trade is telling you.

If you were going to ditch one family of indicators when it comes to identifying high-probability trades - ditch momentum. And if you have two momentum indicators or more in your selection criterion, they’re measuring the same thing, so they will not provide utility in your decision-making.

Mark my words, or live with the consequences.

And if I've blown you out of the water with this article because you're just getting going - give yourself time to learn. You'll get into it and follow along sooner than you'd expect I'm sure.

Tracking repeating significant world events, such as the 4-year cycle of the US Presidential Election, can be a useful tool to include in your trading plan.

Applied to the right instruments, the observable trends of repeating market advances/declines can give you an edge on a macro scale.

Jeffrey Hirsch from Almanac Trader says:

"With a few exceptions the market tends to rally from Election Day to Yearend. DJIA is up 72.2% of the time, average +2.38%. S&P 500 is up 66.7%, average +2.03%. NASDAQ is up 76.9% , average +1.50% and Russell 2000 is up 61.5% , average +4.93%."

- x.com, 7/11/2024

It is important to emphasise that this is just past market behavior.

But it may be wise to pay attention to significant global event cycles to give you that little bit more of an edge.

How will you position yourself for the rest of 2024?

What motivates you more – the carrot or the stick?

Do you work harder when running towards a personally meaningful aspirational goal? (Imagining the difference that becoming a full-time trader will make to your family is an example of a ‘carrot’)

Or, is the thing that motivates you something that fills you with fear and makes you run away from it? (Running away from a job where you’re not appreciated or respected can also motivate you to improve your trading).

Happy trading!

Louise

P.S. Zip forward into YOUR future. If you don’t choose trading this year… what choices will it block you from? An early retirement? A trip around the world? Comfort as you age? The top health care? Treats, presents and a legacy for your family?

This is a sliding doors moment. Either you walk through the Mentor Program doors this week… or you don’t.

I know which choice will bring you the brightest future, that’s for sure.

Curious about how our repeat-for-$0 Mentor Program works?

You need to read more.

We just have a few seats left for the 2025 course, so get a wriggle on.

Photo by The Chaffins on Unsplash

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Photo by Tom Parsons on Unsplash