I wanted to take a few minutes of your time to discuss trading size in the various marketplaces that we trade (stocks, futures, and Forex) and how it relates to our trade calls and signals in those markets. This conversation comes out of some of the comments that we received from the survey that we sent out last month. We discussed this briefly in the Trading Lab, but I want to have a more direct and open conversation about our trading services and how they relate to our trades as traders. In addition, I’m trying to work out a method to more frequently update you on our views on the three different asset classes from a “tradeability” perspective.
Let’s start by talking about what the three distinct Tradesight services are. Our flagship service, which has been around now over a decade, is our Stocks service. The reality is that stocks provide more opportunities because there are always so many more symbols that you can choose from to find logical trading entries. People are more familiar with stocks, and they certainly were a decade ago when we launched the service. If you assume that some people take only our stock service, which is logical, then think about what those people expect daily. We obviously include market analysis in our reports and in our YouTube videos, as well as pre-market analysis from Rich and Mark in the Trading Lab. We recap all of our trades from the prior day and keep a running report so that you can review all of the trade calls we made that triggered and how they worked going back through time. As a matter of fact, as a non-subscriber, you can get the last several years of our results by clicking here and scrolling down indefinitely. Subscribers can get results from even before that, going all the way back to 2003, inside the login area of the website. Do Tradesight analysts 100% of the time take trades that are called in the reports or in the Messenger/Tradesight Stock Twitter feed? No. We may make a call in the morning based on the market action at the time, and then the trade triggers later in the day when the market action no longer supports the trade. We may make a call, but then end up in several other trades at the time the call triggers and not have an opportunity to get in. Also, a trade could trigger over lunch, when we aren’t necessarily trading. Does that make the calls any less valid? No. At the time they were called, there is a technical validity to them. If you’ve taken our courses, you know how to analyze this and manage the trades. Do Tradesight analysts take additional trades that we don’t call at all? Very rarely. Rich might take some more aggressive stuff that he doesn’t call, but for the most part, if I can see the setup and it isn’t triggering right at that second, so I have time to type it into the Messenger/Twitter, you’re working off of all of the same information that I am.
One of the things that I have always stated is an objective of Tradesight is that whether we are in a trade or not, we should be able to answer your questions, help you manage the trade, give you guidance when appropriate and possible if we are skipping a trade, etc. In other words, we make calls based on valid technical criteria under the rules that we teach in our courses. If I end up not in that trade for whatever reason, I should still be guiding others on how to manage it if they ask. Or for example, if I come back from lunch and a trade triggered and I wasn’t able to take it, I should still be helping those that did. You should never know whether or not we are in a trade or not, because the reasons that we might not have taken a trade include reasons that aren’t saying that the trade wasn’t a good one to take at the time. A very common reason, for example, is exactly what I said. I tend to focus on stock trading in the first 2 hours and last 2 hours of the day. If I’m not around and something triggers over lunch, my participation or not in that trade should never change your management of the trade or my ability to help you.
The Forex service was added in 2005. In addition to providing the key Levels, which everyone who has taken at least our main Forex course should know and understand how to use, the service also provides two sample calls each day. The “mission statement,” if you will, of the Forex service is that one call for strength in the US Dollar and one call for weakness in the US Dollar will be made each day after I scan the major pairs that we cover and decide which gives the best technical entry and risk/reward scenario based on our rules. The idea is that if the Dollar heads one direction, the trade in that direction should trigger and have the best chance of working. Now, let’s take someone that only subscribes to the Forex service. Understand that the service is based around the Levels data that we provide, as any trader in any timeframe around the globe that understands our trading system should be able to work confidently off of those levels (this is also why our Forex only subscribers are the least likely to be in the Lab as they work on their own). But, it is safe to assume that someone paying for just the Forex service is expecting calls each day where I identify the best setups that I see. You can’t just tell someone, “Well, this month, I didn’t like anything, so no calls.” It is built into the Forex service that the best setups that I see will be called with entry, stop loss, and first target, and then managed. You can view all Forex results back for the last few years by clicking here and scrolling down, and subscribers can go back even further. We think the results pretty much stand up by themselves, even if there are slow periods in the market.
But, unlike stocks where you have thousands to choose from and can typically find something going on even on a slow, light-volume trading day, Forex goes through waves. In August, most years (though not all), things slow down. In 2007, we had a slow period of several months. Last year in 2012, we had five or so months that were also impossibly slow. In our opening comments that are recorded and follow our calls each night, we discuss the environment for trading Forex. But again, we don’t stop making calls. We always pick the best technical setups. However, it stands to reason that when the Forex market ranges dip considerably and we point out that ranges are bad, Levels spacing is bad, and there is maybe news due or something else, or that the setups aren’t quite as nice as we like to see them, that we might also not end up in those trades. We have certain times of year where we encourage people to trade “half size” because of the environment (based on ranges and technical action) to help them avoid trading normal size in an environment where losers are more likely to happen. But again, for someone that only trades Forex, we can’t exactly say, “Sorry, no calls for a week.” The point of the calls is to show you the better technical setups. There are days where I make other trades in Forex, especially later at night when I’m watching trading before the European open. We’ve had a couple of nights recently where we have been up talking about the movement of the market in the Lab at that time. Sometimes, I take trades that I see set up at that time, and this might be in addition to the earlier calls, or even in lieu of them if I didn’t get those calls in. Again, the goal is that when we post a call, we should still help you to manage it whether any of the Tradesight analysts took it or not. And, we’re around to answer your questions about additional setups or anything else you might want to discuss. Whether an analyst actually takes any given call, especially after weeks and weeks of saying that the Forex market “is not trading how we like to see it and might not be very high-probability right now,” is not relevant. The best setups must be called, guidance must be given as to how nice the patterns are and the environment is, and then traders must make their own decisions.
Finally, we have the Futures service. This is a newer service that launched in 2009. Just like stocks can get slow in low-volume environments and Forex can get slow in narrow-ranged environments, Futures can also get slow. Futures are directly impacted by market volume, which effects market ranges. If less people are trading, then Futures don’t move as far, get several false starts, and generally don’t follow through. The basis for ALL of the Tradesight services is that you need to have some bigger winners in your trading. You’ll trade small winners and some losers, but you have to have bigger winners that really add up to the bulk of your gains. We’ve talked a lot in the last year about how stock market volume has dropped off to levels not really seen consistently since the 1990’s. There are a variety of factors that are causing this, and I’m not going to get into them now. But, they are definitely having an impact on the Futures market and Futures trading in general. And again, we try to comment on this fairly regularly, although I think if I just look at it from the perspective of someone that is taking only our Futures service, we probably haven’t done as good of a job at this. We saw some improved volume at the beginning of the year, and it led to slightly better opportunities. You can view the last few years’ worth of results by clicking here. We saw some better action again in May, although the volume has not remained consistent. In reality, if market volume is remaining at or near 2 billion NASDAQ shares per day on average, then I would expect to see several futures calls per day for our futures subscribers. When the action gets poor and volume slips and ranges drop and the number of false starts (trigger and stop, then trigger and work) increases, then the number of calls that we make drops for two reasons: 1) Because we are looking for specific setups that meet our criteria, and there are simply less of them, and 2) because we recognize that the chances of winning drop. But again, like the other services, there is an obligation to try to make a call or two per day as we can usually find some sort of technical setup.
But the reality is that we break down and offer the individual Tradesight services because different people want to trade different asset classes, and each takes a certain amount of time and work on our part to find calls, create the Levels, create the tools, discuss the trade management, etc. Instead of only offering one price like our Platinum package that includes all of the services, we break them down to much more affordable pricing for those that only want a certain set of information. And we have to provide those people with the best that we can within those services. However, as someone who trades Stocks, Futures, and Forex, I approach the combination of the markets very differently. I don’t spend my day trying to force additional trades in any one asset class. If one area of the market is demonstrating to me (not just with a day or week of poor action, but extended periods) that it is not currently operating at the level that I like to see it and believe in my chances, then I either drop my size to a lower level or completely pass on some of the trades so that I can concentrate on the areas of the market that are working. And again, it’s important that in the relationship between Tradesight and our subscribers, you never are concerned about whether I am giving you the best information that I see available in that asset class in terms of trade entries, trade management, and other commentary, regardless of whether or not I am in a specific trade. We have always set a level of professionalism here that separates “how our day is going” from a trading perspective and “how we can help you.” This is a very important distinction and something that I laid out in Tradesight’s original mission statement because we do have analysts who are trading various areas of the market and who should not end up in a position that the information that they are providing you is better or worse based on how their trading day is going.
So, I hope that makes sense from everyone’s perspective. If you want someone to manage your funds, you can approach any of our analysts and discuss what their minimums are and how much they get paid for doing so. The Tradesight service itself is not about money management in the sense that we aren’t going to guarantee that you will be exactly in our trades from start to finish and exactly match our results daily. Frankly, the majority of people do NOT trade all three asset classes, and most rely on just one. We’re here to teach you via educational courses, YouTubes, and in real-time via the Lab whatever you need to know (if you’ll just ask) about the markets. We want you to learn so that as certain scenarios come up, you know how to make a good decision the next time you see it, not because we said “Click buy here, Click sell here.”
Having said all of that, we are going to try to do a better job at least monthly about framing our current view on the markets. So here we go as a starting point until I can come up with a numeric way of handling this:
Stocks – Despite the light volume that has been going on for a year now, I feel that we have adjusted accordingly and find plenty of solid options each day. I still adjust my size on my stock trades daily based on what market volume is that specific day, time of day, market direction, and strength of pattern (picks off of the report are the longer time frame picks, for example, and should be taken for more size when everything else is lined up) based on all of the factors that we teach in the courses, and it is my primary area of focus.
Futures – This market has been very uninteresting since January and I’m not really focusing on it more than trying to find setups against our Breaks, our Pressure Thresholds, the Value Areas, and looking for gap fills when they line up perfectly. At best I’m half size, and I’m not trying actively to spot tons of calls during the session. About two weeks ago, I was thinking that things were starting to improve, but at the moment, I’m not there yet.
Forex – As I said late last year, I felt that Forex would improve out of the gate in January once the “Fiscal Cliff” situation was resolved. I went back to full size then, and I have been happy with the results and continue to give it the normal amount of attention that I do for Forex. This isn’t to say that the results have been so good each month that everything is fully back to normal, but I would say that we are 60-70% back to normal if you go from this time last year to the worst part of the end of 2012, and that’s enough to be comfortable for now. Having a month like last month where we netted almost 400 pips is rock solid in my world.
We will attempt to update our thoughts more frequently about the status of the various trading markets.