I came in long because today was option expiration day, and 85% of the time, they mark up the market on the morning of option expiration day, it has been going on for 25 years.
This is where the correlation comes into play, The last time Spx was trading at 1227 the bonds were 25 bid, and now they are 20 bid. Usually when bonds go down, Spx goes up. So the Spx should hold here and if it doesnt then the bonds should rally. I think i could buy SPx here and buy bonds here to make money.
I started paying attention to the intermarket relationships. For example if Spx was moving in an inverse lockstep to bonds, and bonds were down for the day but Spx was not responding on the upside, it would tell me i should sell Spx. Its funny, now, crude and Spx are moving down together. That is something new, before we never even looked at crude.
Since i started in the business, i have seen a number of traders wo ended up commiting suicide or being homeless. The one trail they all shared was that they had a gamblers mentality. WHen they were losing, they were always looking for that one trade that would make it all back. I learned early on that you cant do that. This is a business where you have to work. That is what i do. Every day i make hundreds of transactions. I grind out the returns. If you look at my daily returns you will see there are very few big up days.
Not too long ago i felt like it was at the end of my line. i had lost virtually nearly everything that was of material value and many important family members that could never be replaced. what lay ahead for me was darkness, anguish, pain and loneliness. what would i do, who or where would i turn to? once i stopped looking inward i found a low level, manual intensive part-time job just to earn enough to eat and have shelter. i unusually never accepted or looked for government aid – no food stamps, no unemployment compensation, no financial or moral support from the government.
i had always had an avid interest in investing/trading since childhood but had never found employment in the field although i had been a voracious reader of financial periodicals and books since my teens. did the roomful of trading books i had ever help me become a successful trader? unfortunately, the reply is no because an important element in my life was missing. once i began part-time employment i became to see first hand how the other half of americans live, perhaps it’s now more like 75% of americans – from pay check to pay check at best and dependent on government assistance. i knew then i would sacrifice every free moment and every free dollar i had to really learn how to trade and manage risk and avoid dependence on government and low wage jobs. 99% of books or seminars teach you the mechanics of trading a general or specific way but not how to manage the risk and avoid irregular equity draw downs.
how did i learn, what did i learn? i’ll briefly start with what i learned. i became aware that what ever you learn you have to make it part of you. what ever methods you learn, you have make them an integral part of your life. in essence you must own your trading methods. any one can do this. you can do this! neither i nor buffet or george soros can do it for you; but you and only you can do this for your self. when you’re driving to work or cooking your meal you will learn to think about how to become a better trader. when you’re showering you will review trading patterns. if you can learn to live and breathe trading/investing you will get closer and closer to your goals and then will raise the bar for your self with higher and higher goals. you will learn to separate the wheat from the chaff and believe me it’s mostly chaff. you won’t need newsletters, $3,000 seminars, expensive trading software and hardware, dozens of blogs (including my own). you see, all you need is you.
i hope to continue this conversation on a higher level with you in the next post, God willing.