MORNING MARKET THOUGHTS
Good morning. The market is set for a higher open this morning, with S&P futures up about 4 points, and the Nasdaq up just a few points. Today the Fed starts the last two day meeting under Janet Yellen’s expert guidance and is almost certainly going to hike the Fed Funds Rate by 25 bps. The best theory in favor of a rate hike this month is one mentioned on CNBC yesterday: If Janet doesn’t hike rates, she’ll basically be screwing her replacement. Can’t argue with that. The economy is improving, with unemployment numbers at (or near) historic lows and GDP growth on track for 3% — something that economic skeptics confidently proclaimed would never happen. My opinion of economists: Always supremely confident and, based on the broken clock theory, occasionally correct. But I digress. Traders have surely factored in a rate hike. While there are always gyrations in the S&P when a decision is reached, I suspect they will be quite tame. Don’t let the market’s reaction spook you. I doubt any of your stocks will be impacted much. One comment about Riot Blockchain (RIOT): I’ve been following this stock for awhile, noting that the recent high of $24 was likely to be exceeded as enthusiastic Bitcoinians look for other ways to trade the cryptocurrency bubble. This is a power move and likely to run higher from here. If you’re trading this high momentum stock, be sure to focus on…what I discuss below.===================================
WHAT IS YOUR TRADING PHILOSOPHY?
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Yesterday I addressed the interplay between fear and greed, and how they can tempt you to do things that are clearly wrong. Think about it — when is the last time you heard a profitable trader say, “I really try to trade according to my emotions. When I feel like I’m missing out on a big move, I just plunge. I mean, I just go ALL IN! Better to buy late than not at all. And when a trade is going against me, I accept the challenge! When a trade doesn’t go the way I think it should go, I take it personally! It’s not about money; it’s personal! I’ll double down; I’ll triple down; I’ll do whatever it takes to buy my way out of a trade that’s not going my way. That’s how I trade, baby. And I’ve made a fortune.” Have you ever heard that? Other than having just read it in the last paragraph, probably not. Let me tell you what great traders say: “Where you want to be is always in control, never wishing, always trading, and always first and foremost protecting your ass. That’s why most people lose money as individual investors or traders because they’re not focusing on losing money. They need to focus on the money that they have at risk and how much capital is at risk in any single investment they have. If everyone spent 90 percent of their time on that, not 90 percent of the time on pie-in-the-sky ideas on how much money they’re going to make, then they will be incredibly successful investors.” Paul Tudor Jones said that. But the interesting thing is that I could study the writings, interviews, speeches, and random comments made by just about any successful trader and find similar statements. They all trade the same way. They focus on risk. Before taking any action, they think about how much money they could lose. It’s a prerequisite to trading. And if you avoid thinking about how much money you could lose, you’ll lose more money than you think. And that’s a fact. –Dan
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