Newsletter: 10 April 2023
What's Going On In Markets?
The big mover of the week was the oil price. Last weekend saw the announcement of a surprise cut in production from OPEC. This saw the price of oil open sharply higher as Sunday night trading got underway.
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After that initial surge, the price of oil just marked time for the rest of the week – so what next for oil from here?
West Texas Crude Oil Hourly Chart
I think it is a tricky one to call up here. As usual, there are at least two views – it is after all differences of opinions that make markets. On the one hand you could take the view that because oil failed to continue higher after that shock opening on Sunday night then the market feels it is fairly valued – or perhaps even overvalued up here – and the risk is for a sell-off.
Alternatively, perhaps some traders have been building up short positions after the surge – but if oil breaks out through that Sunday night high, they will close the positions and we end up with something of a short squeeze, that pushes the price higher. I think both of these views are valid. I will probably not do anything until we get a bit more movement in either direction. Given the nature of oil it seems unlikely that we will have another week of flatlining.
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The other big news was Friday’s Non-Farm Payrolls – the monthly US employment numbers announcement. It was something of an oddity from a timing point of view this time around as the news came out when much of the world was on holiday.
NASDAQ 100 Hourly Chart
There wasn’t much of a surprise for the actual number – expectations were for around 239,000 jobs to be added in March and the actual reading was 236,000. There was a strong finish to the week for US stock markets, but we have to be careful reading too much into that due to the low volumes caused by the holiday.
Let’s see how markets perform when normal trading resumes this week.
Trading Tip: Two Things To Be Successful
This might sound like I am stating the obvious, but bear with me.
Large winning trades make a significant difference to your trading performance, and it is yet another factor that separates profitable traders from the large army of losers.
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I think when we start trading, plenty of us come into it assuming that the vast majority of our trades are going to be winners – and they are going to be really profitable. If you have traded for even a short while, you have probably had these hopes dashed by the reality of trading. But we need to look at it in a different way.
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If I use my own trading as an example – that period when I was openly discussing results from November to December – you can read more about it here if you want.
During those three months I did 57 trades on a £4,000 account with a risk of £100 per trade.
The closed profit at the end was £2,514.
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BUT
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£1,502 of that profit came from just SIX trades.
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Let’s think about that for a second.
Almost 60% of the profit over the three months came from around 10% of the trades. This reinforces the importance of trying to run winning trades for as long as possible – for as long as they continue to go in your favour.
If it wasn’t for those six trades the return would still have been very healthy – 25% over the three-month period – but they clearly made a massive difference to the bottom line.
There are only two things you need to do to be a profitable trader.
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Cut losses
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Run winners
Just four words that are very easy to say but very hard to do in reality.
Most people trip themselves up on the first point right from the off and end up letting losers get too big. This means the profitable trades must do incredibly well just for them to end up breaking even on their trading account.
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This ties back to why reviewing our own trading performance is so important. It can help us see if there are any obvious places that we are going wrong e.g., getting panicked out of good trades too quickly - and hopefully take steps to try and change that.
If you are not doing it already, it is well worth taking some time at the end of the day, week or month to sit down and go through the trades you have done and look at them objectively to see where you could improve.
What Am I Trading?
I had a good finish to the month with the FTSE trade ending as the most profitable for March, and a gold trade last week also doing well.
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As mentioned above, I think it’s really important to review your trades on a regular basis: what did you do right and where you can improve. I do this every month and this time around I decided to make a video on it.
You can watch it below or on the YouTube channel.
At the moment in my short-term trading account, I am long the S&P500. I did the trade last Wednesday and was underwater until late on Thursday, but Friday’s strong finish means it is showing some profit so far.
Who Do I Trade With?
We are spoilt for choice when it comes to brokers and trading platforms and, on the face of it, there is not much to choose between one company and another. Which is an interesting point – if we are all looking at broadly speaking the same information then why do so many struggle to make money?
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An important consideration for me is the analysis of my OWN trades. Where can I improve, where do I have some possible bad habits - and how can I fix it. I made a short video explaining why I trade with who I do – and you can try them out too.
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You can watch the video here.
You can visit the broker to find out more here.
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That's it for this week.
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Good luck with your trading.
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David