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Weekend Market Review December 9, 2022
And a look at The #1 Most Important Factor of successful trading
Welcome to the weekend! And welcome to all new subscribers!
For those that have been around, you may notice a couple of slight changes.
This publication has always been titled Trading Adventures. Now it has the URL to match. So when you’re sending the latest edition to all your friends and family you can simply type www.trading-adventures.com into the message.
I’ve also updated the logo, enhanced the charts a bit, and made a few minor tweaks to the layout of the website.
I hope you like it. If you do, tell a friend!
We already know the market is waiting on CPI and the Fed so I’ll get straight to the chart. If you missed that part, read this from Wednesday.
SPY — Not quite an inside day. But it is 3 days well inside of Tuesday’s range. Waiting. The 8-day is pushing down a bit and at the close, it is also below the 21-day.
QQQ — Similar situation; a tight range for three days and now just under the 8/21-day EMAs.
IWM — Continues to be relatively weak. It breached Tuesday’s low and closed on the 50-day.
DXY — No harm from the Dollar this week.
VIX — Volatility is staying fairly subdued.
The Bull and Bear Cases
The Bull Case is very straightforward. SPY must stay above 390 and resume movement back towards 410 and beyond.
The Bear Case is simply the opposite. Below SPY 390 and we’re looking back to 370 and 350.
Consensus says CPI and The Fed next week will be the catalyst. The near-term direction will depend on those reports.
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The #1 Most Important Factor of successful trading
Do you know what single component of your trading plan will have more impact on results than anything else?
It’s not how smart you are.
It’s not your chart reading skills or some “magic” indicator
It’s not the quality of your fundamental research
It’s not a “Holy Grail” setup.
It’s not how often you’re right or wrong.
It’s how much you make when you’re right and how much you lose when you’re wrong.
Proper position sizing is the most critical factor of successful, profitable trading.
No setup has a 100% win/loss ratio. No system works in all market types. As traders, we will be wrong. And we will be wrong more often than we are right. Not many genuinely have a winning percentage of greater than 50%.
Outcomes can vary greatly even in multiple series of trades with identical results.
No one demonstrated that better than Van Tharp and his “marble game.”
The game works as follows. I have a bag of ten marbles. Seven of the marbles are 1R losers. One marble is a 5R loser. Two marbles are 10R winners.
The marbles are randomly drawn out of the bag (and replaced) for 30 trades.
Everyone gets the same trades. After starting with $100,000 the final values can easily range from zero to well over a million dollars.
The only variables important to this game are people’s individual psychology and their position sizing method.
Your position sizing method produces huge variability in your performance.
-The Definitive Guide to Position Sizing by Van Tharp page 103
Think about that.
The same 30 trades. The same opportunities for profit and loss.
Some make millions. Some go broke.
So as you continue to learn and improve;
Study the markets
Refine your system
Perfect your execution
But as you work on all that, make sure to spend time learning and improving your position sizing as well.
Getting it right could be the difference between making millions, or going broke.
That’s it for this week.
As always, join me tomorrow (Saturday) morning for a look at the bigger picture with the weekly charts. We’ll begin preparing for next week and form a plan for whichever direction the market decides to move.
***This is NOT financial advice. NOT a recommendation to buy, sell, or trade any security. The content presented here is intended for educational purposes only.
Andrew Moss is an associated member of T3 Trading Group, LLC (“T3TG”) a SEC registered broker/dealer and member of FINRA/SIPC. All trades placed by Mr. Moss are done through T3TG.
Statements in this article represent the opinions of that person only and do not necessarily reflect the opinions of T3TG or any other person associated with T3TG.
It is possible that Mr. Moss may hold an investment position (or may be contemplating holding an investment position) that is inconsistent with the information provided or the opinion being expressed. This may reflect the financial or other circumstances of the individual or it may reflect some other consideration. Readers of this article should take this into account when evaluating the information provided or the opinions being expressed.
All investments are subject to risk of loss, which you should consider in making any investment decisions. Readers of this article should consult with their financial advisors, attorneys, accountants or other qualified investors prior to making any investment decision.
December 9, 2022 4:15 PM
Long: MSOS, QQQ
Options symbols are denoted as follows:
Ticker, Date, Call/Put, Strike Price
Example: VXX1218C30 = VXX 12/18 Call with a $30 strike