Episodes
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The biggest security crypto hack just happened with Coincheck (Japan) - and it's bigger than the infamous Mount Gox collapse.
You can see this article: Coincheck Confirms Crypto Hack Loss Larger than Mt Gox
The total dollar amount hacked of the NEM cryptocurrency (no other cryptos were affected) was roughly $400 million - some sources say $533 million - compared to Mt Gox's estimated $340 million.
Coincheck confirmed Friday that the hack, now likely the largest ever in the space, occurred on its servers early afternoon local time in Tokyo. Shortly after it discovered the theft, the exchange suspended trading of NEM, the stolen crypto in question, then of the other dozen coins it lists.
Coincheck is looking into compensating its customers, its executives also announced - which is different from Mount Gox where there was a total loss for investors. The amount is unknown at this time.
So given this hack, we have to talk about security.
Anything that is connected to the internet can be potentially hacked. These are all hot wallets - because they are hot on the internet.
You should consider holding a cold storage unit - like the one we recoommend with Ledger Nano S.
When you plug it into a standard mini USB to full-size USB cable to a computer - the device will turn on and you can begin configuring it by pressing the two buttons at the top together.
Step 1) Use Google Chrome- adnd search for the Ledger Wallet
There's different apps - a Ledger Wallet Bitcoin for bitcoin and a Ledger Wallet Ethereum for ethereum. If you have both bitcoin and ethereum, you'll want to download both.
Step 2) Add the Chrome Extension for the Ledger Wallet Bitcoin/Ethereum
As the picture shows - you click the Add button.
Step 3) See Ledger Wallet App Added
You will see the two apps you downloaded - one for bitcoin and one for ethereum alongside your main Google Chrome apps.
If you don't see it - go to the top right Settings - and go to My Extensions and Apps and you should see it there.
Next, you login with your pin code on your Ledger USB device and enter inside the Ethereum app - matching the Ethereum app you have opened in your Google Chrome browser.
Then a new window should pop up allowing you to send and receive your ethereum.
This is a cold storage unit that you can carry around with you anywhere and is generally considered the safest way to store your crypto.
So if you don't already have one, check out the Ledger Nano S.
Bitcoin
Bitcoin may be peeping just outside of the downward sloping line. Ideally, I would like to see a move towards 14000 but it looks a bit sluggish to me.
Ethereum
The Ethereum chart is more bullish than Bitcoin. It, too, is just popping over its downward sloping channel - though it cleared its first downward sloping channel several days earlier and is now clearing its second slope line - so things look rosier for ethereum.
Today's S&P500 Hourly Chart
This market is seriously due for a correction but based on the potential a-b-c formation, we issued a buy alert earlier this week at around 2844 ES - and exited too early at 2861 ES - because the last hour on Friday pushed the market allt he way up towards 2875. People say cryptos are in a bubble - seriously?? Have you seen the S&P chart?
Today's Nasdaq Hourly Chart
The Nasdaq looks like it may go for another pop on Monday morning before maybe correcting?
Crypto Resources
If you are new to crypto - the most popular place to get started is Coinbase - use this link to get $10 in bitcoin when you sign up. For smaller cryptos, I've been using Binance - though I've been having issues verifying my identity with them. So far it seems to be one of the better platforms for getting exposure to various cryptos.
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Quite a bit has happened in crypto land since the last post just before the holidays. Ripple - Ripple stole the spotlight - due to its 10x gain in less than one month, making it the biggest crypto coin after bitcoin (previously Ethereum was #2).Ripple facilitates bank transfer of money over borders. The rise up has to do with a combination of banks adopting usage of Ripple's XRP token (which is the least used part of its protocol offering) - as well as speculation that more banks will adopt it. Rumors of it being listed on coinbase - which coinbase has since denied - also led to the run up.Now, Ripple cofounders (Ripple's current and former CEOs Chris Larsen and Brad Garlinghouse) are richer than Sergey and Larry from Google as well as the founder of Oracle - talk about madness. Jed McCaleb - another co-founder who left the company to start Stellar - is also a billionaire.Ripple launched in 2012 to facilitate global financial transactions. It differentiates itself from other digital currency platforms by its connections to legitimate banks. Companies that use the Ripple platform include Santander (SANPRA), Bank of America (BAC) and UBS (UBS).Cross-border payments that can take hours with bitcoin or days with traditional financial transactions can go through in a matter of seconds with ripple, the company says.CoinMarket Cap RankingsIf You Invested $100If an investor had placed $100 in each of the top 10 cryptocurrencies in 2017, the total yearly profit would have been $64,707 (on an initial investment of $1K).Ripple has surpassed Ethereum in market cap to become the #2 coin in terms of market cap. My apologies for not alerting on this one, I put in a speculative position at $.25, added at $.50, added at $.70, added at $1.3 - and it's near $3 now.Amazing from $.25 to $3+ - basically a 10x'er in 1 month. And this is not some micro-cap crypto - it's now the second largest.We'll have charts of the major cryptos below. During that Crash, we recommend buys at Litecoin 247, Bitcoin 13,000, and Ethereum at 620.Bitcoin is now over 16,000; ethereum over 900; and the only one stuck is Liteocoin which is still at 247.In fact with Ethereum - we reiterated a buy at 790 (see on the right) - and within one hour of alerting members, Ethereum shot up to 875. Now it's at 950.On the S&P side, we picked the correct direction as the markets opened for the New Year, but exited our SPY call way early. We entered bullish calls at 2690 and exited at 2702. Now it's 2742 -- completely ridiculous. Really can't make sense of the size of the move up, but it is what it is.BitcoinBitcoin pulled back from almost 20,000 to around 10,400. We alerted to members in chat a buy at 13,000. Today it finally started showing some bullish signs and is at around 16800, LitecoinLitecoin has been a lot weaker than I expected. It also doesn't help that the founder Charlie Lee sold all of his coins right at the top - that could be suppressing litecoin for a while and explain why litecoin has been underperforming most other coins.If Litecoin can clear 260 in the next day or so, then it should have momentum to be the 285 region a test.EthereumOur buy at alert for ethereum at 650 is now looking pretty good with Ethereum at 865. For those who missed it at 650, we alerted it once again at 790 -- now looks like it's giving 1000 a test.After selling at 820, we rebought at 650.Last time, we put the below chart on ETH - citing a traditional Elliott Wave pattern where the crash of cryptos was the giant -wave down from 850 down to 480. Our buy was at 650 - since it only spent very little time in the 500 range.The strength and resilience of Ethereum (relatively to other coins during the crash) - was a hint that Ethereum would later jump to where it is now - well over 900.Ripple (XRP)Ripplehas been the one stealing the show lately. After reaching 3.3 yesterday,
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Missing episodes?
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In chat to premium members - we alerted sells in Ethereum >$820 after our buys at $360.
After a few days, the entire crypto space dropped around 35%-45%. When bitcoin dropped close to 50% - lots of people panicked.
Instead, on that Friday - we mentioned that bitcoin, ethereum, and litecoin were all in buy zones to premium members in chat.
Now - a few days afterwards, CNBC gave this alert that Bitcoin rallied more than 50% from the Friday lows.
Remember our Litecoin video?- it rocketed from $100 to $400 - and we put - live in the video - buy orders at $247 - which we notified members when it was sitting right there shortly after the big drop in cryptos.
Bitcoin
Ethereum
S&P
Meanwhile the S&P is flat, looks like as long as the pink support levels hold, the pressure looks to pushing up.
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Litecoin was trading at $100 5 days ago. Today it hit over $400!
Just 5 days ago, Litecoin was $100 - this morning it touched over $400
Try Bitonnect and get bonus bitcoins: https://bitconnect.co/?ref=fushion83
$10 bonus coinbase signup link: https://www.coinbase.com/join/52d09ba5665390110c000076
I recommend this hardware wallet to store your crypto safely: -
Does North Korea and Hurricane Irma news affect the markets?
Based on recent price action, the answer appears to be no.
Even though the media shows a lot of imagery - and the markets could be down at some point - lately it's always bounced to higher levels shortly afterwards -- in the matter of hours.
So far this has happened twice in the last week or so - and each time it was a buying opportunity.
Hurricane Irma is about to hit South Florida after tearing apart a bunch of caribbean islands.
Yet, volatility is near all-time lows with each spike of volatility just coming down -- even as we are already in September -- a historically volatile month with Congress back in session and with threats that the government could shut down due to Trump-related issues.
Yet, the market continues to march higher.
More Details: http://www.lifestyletrading101.com/2017/09/09/wkd-9917-markets-up-on-north-korea-2464-es/ -
Coinbase, one of the most popular ways of buying cryptocurrencies such as bitcoin, ethereum, litecoin, and potentially more -- charges mostly a percentage fee.
According to their site:
(a) Minimum fee — a flat fee that applies to conversion transactions under $200, and which is disclosed before you execute the transaction.
(b) Percentage fee — varies by region and payment type, as follows:
USA
Base rate of 4% for all transactions**
Payment Method for Purchase Effective Rate of Conversion Fee (after waiver)
U.S. Bank Account 1.49%, with a $0.15 minimum
Coinbase USD Wallet 1.49%
Credit/Debit Card 3.99%
So is there a way to avoid these fees?
The good new is yes, we can avoid these fees.
We do so by transferring our coins into the GDAX platform at www.gdax.com
In the above video, we connect our coinbase account into GDAX so we can transfer our existing coins from coinbase into GDAX.
From there, we avoid market orders and instead use limit buy orders and limit sell orders.
This does not guarantee immediate execution, but if you place your orders close enough to where the market is trading, there's a good chance it will get filled -- without an exorbitant 1.5% or 3.5% fee. -
The market appears to be setting up in an ideal pattern on a daily chart basis that matches our theoretical diagram (see below).
While it looks really messy on a chart with hourly candles, from a daily chart perspective - it is much clearer.
Basically after a big A wave down and a big wave 1 down - this past week has been a wave 2 bounce.
But the wave 2 bounce has a characteristic "twin peaks" -- which we can see as being at the 2452 ES region - which is what my target was as mentioned in last week's video.
In fact, in that video at the 4:30 mark, I mention that we should get a bounce and my targets are 2446 ES and possibly 2452 ES. The high was 2454 ES, which we hit on Aug 22 and again today 3 days later Aug 25 - we reached up to 2453 ES on the Yellen speech in Jackson Hole, Wyoming.
So so far - the market is behaving exactly according to the C-wave pattern in the below diagram.
There's no guarantee that the market will follow through according to the pattern, but the setup is potentially there.
Perhaps over the weekend there will be some geopolitical headlines to "trigger" this move?
This pattern is not clear at all when we zoom in -- so I have less confidence when zoomed in, but when zoomed out on daily, it looks great.
Today's S&P500 Hourly Chart
During the day, after attempting 2453 ES and failing -- the market went towards 2440 ES - but then it attempted 2450 ES again -- at this point, I was not sure if the pattern was on track, but lo and behold at the last half hour - the market finally reversed and closed near 2442 ES.
As such, there's a chance for the pink count to target below 2430 ES. However, we could still be in a more complex b-wave -- so if we hold support in the 2430s and turn back up strongly to new highs - that would be something to watch out for.
But my preference is for the diagram to play out.
Today's Russell Hourly Chart
The Russell has held up unusually well -- but I see resistance at the 1380 region - which is where we pulled back from in that last hour.
The Russell was previously destroyed -- this past week was it outperformed on a relative basis to the other indices.
Today's Nasdaq Hourly Chart
The Nasdaq has reached into the 5870 region 3 times so far -- and pulled back each time.
Today's Silver Hourly Chart
Silver has crossed over the pink line and also come back to test that down trend -- and now it has consolidated near that 17 - it should eventually start moving up.
Trade Alert Performance (Model Portfolio)
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There's 2 parts to every trade. In order to make a good trade -- BOTH parts need to be correct.
This past week, we issued what appears to be an almost perfectly timed short entry via SPY puts on the index. But in actuality, it only turned out to be an OK trade.
Why?
Because the 2nd part wasn't timed well. Every trade has 2 parts - when to buy and when to sell. When to get in and when to get out.
Even if you get in at the perfect time - if you don't get out - you could be leaving a lot of money on the table.
We entered a trade perfectly this week but exited a bit too early cashing in $500 - on a $1000 investment - but if we had held on to my target - that $1000 would have become $4,000 - so definitely kicking myself. Lesson learned - it's not good enough to get one half of a trade correct. Both need to be correct. -
Be greedy when others are fearful.
The best opportunity to make money is when there's blood in the streets!
Well, on a smaller scale - that's what happened going into the Good Friday 3-Day Weekend in April 2017 -- the markets sold off.
That weekend, we posted a prediction on our blog and to our members that the markets would reverse.
The title of that post was: "Panic into Good Friday Wkend: Case for Reversal"
At that time, the S&P500 E-mini Futures were trading at 2327 ES. Two weeks later, the market at 2380ES after touching 2393 ES. That's well more than a 50+ rally.
Based on that prediction, we profited around $1,300+. This video discusses how we came to that prediction and how we and our members profited from this trade alert. -
What is the VXX and why do we care?
Well, we care about the VXX because we can make money with it - in a higher probability fashion than we can with some other tickers - and that's based 7 years of data. While limited, we can glean some interesting insights into how we can make VXX work for us.
VXX is an exchange traded note that trades just like a stock would (or an ETF) during market hours. By holding VXX -- it sort of continually does trades for you.
What kinds of trades?
It buys the 2nd month VIX futures contract and sells the front month VIX futures contract. In a contango up-ward slopoing term structure environment, this generally translates to buying high and selling low -- which is the opposite of what you're supposed to do to make money.
That's why VXX always loses value - historically. Just look at a long term chart.
To make money, shorting VXX is generally a good idea - especially during times of elevated volatility.
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Long Call Options Strategy - This is the most basic options strategy that lets you leverage your capital. The tricky part is timing because timing does matter when trading options.
Below is a video walkthrough of this most fundamental options strategy - along with pros and cons.
Out of the Money Call Options - This is a modified version of the long call options strategy. Instead of generically picking an at-the-money strike price where the strike price is close to or near where the stock is currently trading - an out of the money call option involves selecting a strike price that is above where the market is trading at.
These options are more high risk high reward - type trades and here's why: -
Warren Buffett's best investment advice is to buy the index fund - he recommends the S&P500 for solid diversification.
But there are multiple ways you can buy the S&P500 index fund.
Invest directly with Vanguard
Buy Vanguard's S&P500 ETF (VOO)
Buy the Spiders ETF (SPY)
We examine the pros and cons of each one in terms of expense ratio, trading commissions, and more.
We also examine a strategy that uses a no-fee broker (Robinhood) - and how this approach can let you get invested into the index fund without trading commissions.
However, the one downside is that when it comes to dollar cost averaging, it's not so simple as you can't buy decimal numer of shares. Still, our preferred method of getting invested in the S&P500 is either to buy SPY or VOO from your broker of choice. -
In this podcast, we talk about Warren Buffett's best investment advice - which is to dollar cost average into a low-cost S&P500 Index Fund over time.
We will cover:
What is an index fund
Why the S&P500?
What is dollar cost averaging?
Specific Buffett quotes from the Berkshire Hathaway Annual Report
What this means for you
In another podcast, we'll address specific share classes of the Vanguard S&P500 index fund and dive deeper into differences between the various ways you can invest in the S&P500 - and what the pros and cons of each method are. -
A recap of the financial markets leading into the November 8/9 election results including the option strategies we implemented before the election as well as after the election that resulted in 50%+ gains.
It is Thanksgiving Weekend 2016 - and a lot has happened leading into the election, the night of the election, as well as the first few weeks after the election results. We take a look at all three and review the option strategies we implemented to make money in this volatile environment.
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In this episode, we discuss the risks of credit spreads and go into detail on how to adjust a credit spread when the market moves against you by a lot.
People often associate credit spreads with high probability success -- which is true, but they also fail to mention that in the meantime, there could be significant volatility in your account, particularly if the market moves against you immediately after putting on the trade.
For each day that goes into expiration, you get a little help with time decay - and a market reversal can do wonders do position that has been in the red, but still - stomaching through the possibility of losing many multiples of what your max profit could be is not easily done.
This past week would have resulted in max profit - but due to the large drop in the market against our position (which we initially intended to leg in an iron condor - but never had the chance t0) -- we adjusted the short strike down from 215.5 to 213. In the process - we did not increase the quantity of the 213 strike enough. As a result, we were only slightly positive, rather than fully positive for this week - even with the market expiring above our short strike.
Wednesday Weekly SPY Options
Additionally, we now have Wednesday weekly options in SPY in addition to Friday weekly options. SPX is even better - with Monday, Wednesday, as well as Friday options.
This makes it easier to collect time decay on weekends -- since the weekend is that much closer to expiration with Wednesday options than it was with Friday options. That said, directional risk is still the number one concern with executing an option spread -- unless you are able to leg in an iron condor at the right times.
Eventually, we will get daily options -- it's just a matter of time. -
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Silver Surfer: Welcome to LifeStyleTrading101 where we trade the markets, and you live the lifestyle. We aim to make $1,000 every week.. We don’t always win, but we certainly win more often than we lose.
Guest Introduction: Don
Silver Surfer: Today we have a special guest - one of our customers joining us to share his experience so far trading with us. Don is taking time out of his busy schedule as someone who trades while having a full-time job to share his experience so far. And I thought it’d be really interesting to get his perspective since I know many of you have full time jobs as well. Don, pleasure to have you here.
Don: Yeah, thanks for having me.
Silver Surfer: Let's start off with quick introduction about yourself. Kind of your experience, how many years have you been trading, what your kind of arrangement is in terms of your daily schedule.
Don: I’m late 30s. I’ve been a saver and investor most of my life. Maxing out 401k, buying dividend stocks via drip - pretty traditional. Not a lot of trading in my past, not until about 5-6 years ago, I started paying more attention to overall net worth and realizing that I had a decent amount of capital not working very hard for me. I started getting interested in more strategic investing/trading. I my research I quickly gravitated toward technical analysis. I studied Investor’s Business Daily, various options trading - covered calls, iron condors, etc. Over that time of 5-6 years I got into day trading futures and found I was too busy at work to kind of keep up with that. And then not too long ago, a friend introduced me to LifestyleTrading101 and I rolled my eyes and said they’re all a scam but I’ll take a look at it. And uh, I’ve been really really extremely pleased with the results. I’ve been a part of your service since early June. And it’s been going quite well for me.
Silver Surfer: So early June, so basically a few months. You mentioned that you felt like a lot of services out there are kind of like scams. Is that what your perspective is based on your experience, maybe you signed up for other services...
Don: Absolutely. I wouldn’t say I’m a crazy person who spent $120K on services, I’ve met some folks who spent so much money on trading services that do nothing for them. But I’ve been with 3-4 different types of services all varying in the range of around $1k a year. But none of them have really helped me get to consistent profits. I think I could if I were a day trader based on the stuff I learned from one of them. But in general, I struggle to keep up with the daily tasks of work and job and a family and trading effectively. I haven’t really found anything that works for me personally. And I’ve tried many different services. But since I’ve signed up it’s been working extremely well. I’m almost floored. It kind of feels dirty but I like it. It’s working really well for me.
Silver Surfer: Yeah, great to hear. You also mentioned you’re familiar with options trading, covered calls, iron condors. Some of our members don’t have experience trading options. So curious, what was your process for learning about options, or is that something you just dabbled by experience or did you read books on it?
Don: I’m an adventurist learner myself by nature. I like to dig in and learn things all the time, so youtube videos. Reading books. There’s a book on iron condors I read, a book on basic options - kind of one of the basic getting started dummy’s book. And a lot of youtube videos. I was using ThinkorSwim as a platform prior to now, I’m using interactive brokers and ThinkorSwim, but getting on there and looking at the prices, writing them in excel, tracking what happened. Everybody learns differently, but I’ve definitely spent a lot of time learning options and because of that I’m very comfortable with understanding the risks and profits of what we’re doing with LST but also I’ve got a few friends who have started... -
Aaannnddd.... welcome to the Lifestyle Trading 101 Podcast. We are approaching the end of July and have recently been on fire with our trade calls. This doesn't always happen but we've been many many weeks of calling the markets correctly and trading it profitably.
Overview
This past month or two has been incredible and everything from the Brexit crisis or crash, stock market crash, which we've predicted ahead of time saying that it could be a buying opportunity. And then, indeed, the market went straight up since then for 2-3 weeks in a row.
Over July 4 weekend, the metals exploded to the upside and, since then, for 3 weeks it basically just trended down until we had this Fed day today, as really the best buying opportunity. And we do think there's more upside to gold and silver. Long-term, we think it's very good.
Guest Introduction: Peter
Silver Surfer: Today we have a special guest, actually my brother Peter, whose account I've actually been trading since the beginning of this year - January 2016. It's currently end of July going into August and we've had some incredible returns. Of course I've got to mention the downsides. There were times when we were down quite a bit.
Like many of you, Peter has been following the blog, listening to the podcast, really from an outsider perspective. Not completely understanding exactly what i'm doing. But curious. And so I thought it'd be interesting to get his perspective on perhaps he can ask some of the questions that some of you may have and that can help all of our listeners to better understand what it is that we're doing here at LifestyleTrading101. And what you can do to make money, $1k every week, which is the goal of our site.
Peter: Yeah, so this is Peter here. I'm SilverSurfer's brother, followed his investment blog and trades from the very beginning. There is just one thing I want to bring up first before I continue further. And that's related to what I'm allowed to say and versus what I'm allowed to say.
Legal Disclaimer:
Due to regulations related to the Investment Advisers Act of 1940 - I'm not allowed to talk about my client experience being positive because testimionials/endorsements by definition are selective -- usually filtering out the negatives and showing only the positives to the public. Further, my experience is not necessarily indicative that future experience will be similar -- that past success would mean future succes s. That's just not necessarily the case in trading and regulators don't want want investment advisers to suggest this in any way.
It's unfortunate because as a small investment fund, there's no way we can effectively encourage others to check us out if we don't point to the successes. But on the regulation side -- I can understand why the regulators want to protect investors --- nothing in trading is a guaranteed success. Failures inevitably come.
As such, there's a lot I can't say today. But here's what I think I can say today:
1) I can talk about my background as a more in-depth introduction
2) I can discuss / ask questions about the investment strategy
3) I can talk about transformation of this success into an investment fund - that once created will be regulated by the Investment Advisers Act of 1940.
That's about it. I have to avoid my personal client experience so that's what I'll do here today.
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Peter: A little bit about me. Besides being the brother here and providing some capital to invest, I've been involved in consulting, in investment banking in mergers and acquisitions.
So after my years working as an investment banking analyst, I was a teaching assistant at breakingintowallstreet.com, which has a sister blog called mergersandinquisitions.com and these two sites together help train financial analysts to-be to learn financial modeling, understand wall street, and succeed in their careers.
So my perspective for this podcast is coming from someone who has t... -
It has been a crazy trading week - the global stock markets are crashing everywhere - except gold and silver - which we've been recommending here on this show. What am I talking about? I'm talking about Trading the Brexit After math.
There have been some big headlines surrounding the UK's Brexit vote to leave the European Union. The Briitsh pound fell 9% to 30 year lows, the stock market crashed with Dow down over 600 points (800 points at one point)
The Brexit Vote
What is Brexit? You may ask.
Brexit the term itself is a blend between Britain and Exit -so Brexit.
On Thursday, June 23 going into Friday morning June 24 - there was a vote within the UK on whether they should stay in the European Union - or whether they should leave.
We won't go into the exact details of the vote or the economics of it --as you can find those by reading any news channel. But what we're interested in here - is what implications this has on you as a trader and what it was like trading during this Brexit vote.
Well, as any trader who was trading that day -- or I should say -- that night -- can attest to -- it was one of the craziest trading experiences ever–stressful and thrilling at the same time. There were people who said trading this market was more exciting than a Game 7 of an NBA finals. Really dramatic. Your account would’ve gone through wild swings.
Pre-Brexit Trading
The day before the vote, the market was around 2075 and as the day of the vote arrived, the market rallied towards 2095 and closed that day at 2098. That's already a 20+ point rally. The expectation was that everyone would vote to stay in the EU instead of exit. People were saying the odds were roughly 5:1 according to some sources - meaning a high probability that Britain would stay in the European union.
But the crazy part happened after the 4pm market close -- between 4pm and 6-7pm EST - the markets rallied even more. Usually after the market closes, not much happens in the futures market. It usually stays where it is. But this time, it moved like crazy and faster up than it did during market hours. It went from 2098 to 2118 -- another 20 points until around 6:30pm -- that's when the initial vote counts came in.
Trading the Brexit Vote
Instead of the votes showing an overhwhelming majority to stay in the EU, instead, the votes showed a super close tight race between stay and exit -- and actually, the exit voters were winning 51% to 49%.
Holy krap - that's definitely not what everyone else thought was going to happen.
The markets began reversing dramatically -- within minutes -- dropped all the gains from since the market close and dropped from 2118 to below 2090 -- then it rebounded.
The Brexit Stock Market Crash
You see, the voting numbers kept coming in and as new information came in, the market would move drastically in one direction and then reverse.
The market dumped and continued dumping as the voting numbers came in.
The weeks and weeks of gains that happened in the market -- all gone within an hour or two. Between 6:30pm EST and 1am -- the market dropped from 2118 down 120 points all the way to 1999 -- so much to the point that circuit breakers -- which are designed to prevent the market from falling more than 7% in a given day -- those circuit breakers kicked. Dow was down 800 points in the futures and the S&P was down 120 points. So when it reached the maximum 7% -- trading completely halted from 1am to 2am.
Remember back in 2008 financial crisis and congress had to vote on bailout packages -- and when the vote didn't go through - the Dow fell 1,000 points. I mean this Brexit trading day was in a way, historic, in a similar way. Everybody thought the UK would stay in the European Union -- but the vote results came out -- and they were about to leave because the voting was 51% vs 49% - the end result was closer to 52% and 48% once it was all done counting. But by then, -
Another week gone by - another $1,000 per week goal reached by LST subscribers worldwide.
In fact, this week, we made $4,500 on 3 out of 3 wins! - well surpassing our goal of $1,000 per week.
We bought the E-mini S&P's at 2086 and sold at 2116
We bought call options on the GDXJ junior Gold minors - sold a portion today for around 150% returns -- buying at $.65 and selling at $1.55
We bought silver at 16.03 and sold a portion today at 17.29. For more info, check us out at www.lifestyletrading101.com
Today we are going to talk about changing market conditions and how YOU have to adapt your trading strategy as the market changes as well -- otherwise, you're going to fall into the ocean.
Today's episode is brought to you by our sister company GMAT PILL -- those of you applying to business school will have to take the GMAT exam -- it's very difficult exam that typically takes 3-6 months of studying, but GMAT PILL lets you ace the GMAT in < 1 month. The online video course covers everything from verbal sentence correction, reading comprehension, to math problem solving -- complete with online videos that you can download to your mobile phone and a simulation online computer adaptive test. If you're studying for the GMAT, pop the pill - the GMAT PILL, and ace the GMAT.
Adapting to Changing Market Environments
OK - now onto today's topic of adapting to changing market environments.
Just like when you're surfing in water, when you're surfing the markets, you need to adjust the angle of your board and how much weight you put on which areas of the board as you surf the waters so you can adjust and adapt to how the strong the waves are.
The stock market is ever changing - and so you need to adapt in order to stay a profitable trader.
The strategy that we used over and over again in January, February, and March -- that made us thousands of dollars --- is now not as effective as before -- and we've adapted using slightly different strategies.
Why? What changed?
Well, because the market change - as it constantly does.
How so?
Well, Implied Volatility -- or the VIX index -- has dropped a LOT -- and that's largely because the market has rallied a significant amount since the 1800 lows -- we are now over 2100 -- that's a 300 point gain in just a few months.
With that S&P rally came a significant drop in volatilty.
If you've been paying attention, in the first few months of 2016, we've been talking about credit spreads -- in particular, put spreads --betting that the market would stay above a certain level and collecting money every single week.
That strategy worked well because volatility was high. If you look at the VIX -- it was mostly over 20 during those few months.
Ideally, you want to sell credit spreads when volatility is high -- ideally when VIX is above 20. Well, guess what -- VIX is now at 14-15 ---implying less than 1 percent move in the S&P on any given. How did I get 1%?
Well, the general rule is you divide by 16. 16 represents roughly 1% move -- so if VIX is at 14-15 -- it means the market expects small moves of less than 1 percent each day -- and that's implied volatility.
Usually, actual realized volatility is historically lower than the levels that are implied.
So we're talking about really low levels of volatility.
So in this low volatility environment, how does this affect our options strategy of selling credit spreads?
Well, in the past -- we generally were about to position our credit spreads such that we get a 5:1 risk:reward ratio.
What that means is we can collect a maximum profit of $1,000 on a trade if it works our way -- and our maximum loss would be 5x that amount -- so our max loss would be $5,000
That's a 5:1 ratio.
An 80% chance of collecting $1,000, but a 20% chance of losing 5 times as much ( in the worst case scenario when the market gets all the way to the other end of our long strike within th... -
Trading Psychology: The importance of reflecting on your mistakes.
We are aware of greed and fear when we talk about trading. Gordon Gecko said the famous movie quote line "greed is good" in Wall Street the movie. But what exactly greed and fear mean and how does it affect our trading psychology.
Well, this past week was a perfect example of these emotions playing out for me. Luckily, I was able to spot these emotions, correct them, and profit $1,600 from this initial mistake.
If you're interested in the making money in the markets, you will know how important trading psychology is to your account. This past week was the perfect example of that.
This past week, the Fed Chair Janet Yellen opened her mouth on Tuesday. Now this is different from the typical Wednesday 2pm Fed announcement on interest rates policy -- this was more just a speech she made on a Tuesday.
Still, it had drastic implications on the market.
But before we get to the Fed speech, let's talk about trading psychology.
Trading Psychology: Greed and fear.
Greed for more money.
But fear of what?
Usually it's fear of losing money. But in this past week, it was fear of missing out.
You see, every chartist and chart technician was calling for a massive crash this past week -- and for good reason. The market had already rallied from 1800 all the way over 2000 and we got to 2047 -- that's almost 250 points of pretty much nonstop rallying. A lot of fund managers and technicians were calling for a top -- shorting heavily.
And for a day and a half, things went their way. The market drifted lower and lower for a full day -- and even overnight, it could not even get a slight bump on the upside. Everything was down.
Maybe all the bears were right this time. I haven't seen such continued downside in a while. Maybe that WAS the top.
Everybody who was short the market -- if they were right and we were going down big -- then they would stand to make A TON of money.
Already, people were messaging me talking about how much money they made.
And I thought, I can't miss out on this opportunity of a lifetime to short and make it a big--a big short.
So I went short -- even though I could not clearly understand the structure of the wave pattern.
You see, I was going against my own rules of only trading if I clearly see a wave structure.
Instead, I was entering a trade because of my emotion - in this case fear of missing out.
Of course, when I entered this trade, I did not know this was a fear of missing out.
Oftentimes, when you're into what you're doing, you won't see things from an outside perspective.
And this is where it helps to talk with someone else.
In my case, I had my daily walk with my fiancee around the lake - and we talked about the mistake I had made.
Why did I make this mistake?
After talking it through -- she helped me spot my mistake. My mistake wasn't necessarily that I went short -- although that's how the mistake manifested itself. The real mistake was that I fell into the trap of having a fear of missing out.
A fear of missing out on money that everybody else was about to make and that I wouldn't make if I didn't jump in.
But I'm a wave pattern trader -- I only trade on recognizable wave patterns. Once I start trading based on fear of missing out -- I'll start to lose money in the long run -- even if this one works out.
In this case, this short did not work out.
I was down 10 E-mini S&P points and decided to exit this trade.
I wrote extensively about this mistake on my blog - LifeStyleTrading101.com -- and some readers even commended me for sticking out my neck and talking about it.
As you may know, a lot of people in this stock market industry are really shady. They will make money, but when they lose money, they won't tell anyone. I try to be as transparent as I can with my mistake so we can all learn from it.
I looked really carefully at the wave structure of that pattern... - Show more
