Markets

The 13 New Trading Rules For 2017

By The Mad Hedge Fund Trader :

I'm sitting here at my Lake Tahoe lakefront mansion. It is one of those picture perfect postcard days with a blue sky and cobalt lake. The fields outside are covered with snow crystals sparkling in the sunshine. After the close, I'm going to have to shovel off my outside decks to keep the weight of the ice from collapsing them.

Those CurrencyShares Japanese Yen Trust ( FXY ) $91 puts are looking pretty good this morning, and are approaching the maximum profit point with only four weeks to expiration.

In these tedious trading conditions it is more important for me to teach you how to avoid doing the wrong thing than pursuing the right thing.

I am therefore going to fill you in on my 13 Rules for Trading in 2017 . Tape them to the top of your computer monitor, commit them to memory, and maintain iron discipline.

They will save your wealth, if not your health. Here they are:

1) Dump all hubris, pretentiousness and stubbornness. It will only cost you money.

2) The market is always right, even if all the prices appear wrong.

3) Only buy the puke outs and sell the euphoria. Do anything in the middle, and you will get whipsawed.

4) With option implied volatilities so low, outright calls and puts are offering a far better risk/reward right now than vertical bull and bear call and put spreads. It is also better to buy stocks and ETFs outright with a tight stop loss. This won't last forever.

5) If you do trade spreads, you can no longer run them into expiration. If you have a nice profit take it; don't hang on for the last 30 basis points, even if it means paying more in commissions. The world could end three times, and then recover three times, before the monthly expiration date rolls around.

6) Tighten up your stop loss limits. Not losing money is the key to winning in this market. There is nothing worse than having to dig yourself out of a hole. Don't run hemorrhaging losses, like the ProShares UltraShort 20+ Year Treasury ETF ( TBT ) from $57.56 down to $37. It will get easy again some day.

7) Buy every foreign crisis and sell every recovery. It really makes no difference to assets here in the US.

8) Several asset classes are becoming untradeable for long periods (gold, oil, ags). Stay away and stick to the asset classes that are working (stocks and short bonds). This is not the time to get greedy and bet the ranch.

10) Turn off the TV and just look at your screens and data. Public entertainers have no idea what the market is going to do, especially if their last job was sports reporting. Their job is to get you to watch the ads for General Motors ( GM ) and TD Ameritrade ( AMTD ).

11) As the bull market in stocks enters its eighth year, too many traders, analysts, and strategists have become complacent. You are going to have to work for your crust of bread this year. This is an earnings, technology, and cash flow driven bull, not a QE driven momentum one.

12) It is clear that more money was allocated to high frequency traders this year. That is driving the new, breakneck volatility, increasing stop outs.

13) It is no accident these tempestuous conditions are occurring in the wake of an election. Billions are being spent on media convincing you how terrible things are.

Only The Meanest and Toughest are Prospering in This Market

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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