There is a Chinese curse which says “May you live in interesting times.”
Like it or not, we live in interesting times with these markets which have gone from “more and more” to now completely dominated by HFT (high frequency trading) computers.
So we’ve adjusted our trading.
But you always have to adjust your trading since what I did in 1999 no longer worked in 2009 (actually a lot sooner than 2009) and what I adapted to in 2009 no longer works today — and hasn’t for several years. You always have to adjust to the markets — which are never wrong.
January — March:
2017 began with this Blog being knocked off-line since the end of November 2016 — unknown to me. Apparently my friend, who was hosting, threw a huge temper tantrum when President Trump was elected and responded by just shutting down her servers. Talk about cutting off your nose to spite your face (and mine too!) . . . I finally got it back on-line at the end of February.
But trading was good to very good the first quarter — as it usually is.
April — June:
April trading was fantastic!
Then April ended and May began. Like a switch got flipped, volume and volatility dropped to near zero! What had been working so well for all of 2017 to date, just stopped. Suddenly. We were getting BE after BE. Markets weren’t moving. The number of trades that actually got to the Profit Target went down, down, down! But because we manage risk the way we do, we were still profitable on trades called in the LIVE! Trading Room.
That’s a big deal — and one we experienced through the rest of 2017: When major Hedge Funds were closing their doors right and left, when (since 2015) there had been record withdrawals from almost all managed funds — that is people demanding their money back, or what was left of it — when financial bloggers and market experts were tearing their hair out in despair — through all of that carnage, we still managed to make money for Members of the LIVE! Trading Room . . . just not as much as we would have liked.
Some didn’t understand. One got angry. Surely a real trader could turn on his computer and have money pour-out any time . . . Thankfully, we have those folks to take the other side of our trades — until their accounts are gone.
July — September:
The record low volume continued and the difficult conditions likewise also continued. In fact, conditions were getting steadily worse as the Stock Indexes made new ALL-TIME high after high after high — which were WEAK highs on almost no volume.
Central Banksters had completely captured all major markets across the world through their day-after-day hitting CTRL+P and creating more and more imaginary money which was given to their corporate buddies (or used by the banksters themselves) to buy-buy-BUY equities on every dip! The Indexes were glued to ALL-TIME highs. They couldn’t go up by any significant degree and were not allowed to come down.
And VIX (the Chicago Board Options Exchange — CBOE — Volatility Index) stayed glued to abnormal and historic lows!
In short, the markets were dead.
“As one measure of volatility, the Dow Jones Industrial Average traded in its tightest trading range since 1900 this year.”
That’s a record 117-YEAR tight range!
Here’s what Bank of America derivatives expert Benjamin Bowler recently wrote:
While asset valuations are not at life-extremes, volatility is.
In 2017 the Dow traded in a 110yr record tight trading range, the VIX hit all-time lows, and US equities reversed from sell-offs at near their fastest pace in 90 yrs. Investors no longer fear risk but love it, as it’s another opportunity to harvest “dip-alpha”. Volatility across asset classes has decoupled from uncertainty. Even if seemingly irrational, apathy to all risk has been the right trade and an impossible trend for most to fight – the definition of a bubble. [Underlining added].
We tried everything I could think of — and strangely continued to see much more success in the Pre-Market Session . . . but once the HFT computers were fully turned on, it was like a shroud of death covered the markets.
Gold futures have been blatantly manipulated for years. Now it was the various currencies, in addition to the Stock Indexes, which got jobbed. They stayed in small, whippy ranges — until the HFT computers spiked them (up or down — trend didn’t seem to matter) after which they went right back into a small, whippy range waiting for the next spike. Often there was simply a big order to fill (a large amount of, say, Euros that someone needed converted into Dollars) and that spiked price only to then spike right back.
So we made due with smaller profits in the LIVE! Trading Room and looked forward to October — historically the single most volatile month year-after-year-after-year!
October — December:
Finally October arrived! YEA!
But the historical volatility never did.
The trading world waited through that first week . . . through that second week . . . through that third week . . . and it became more and more apparent that the “historic” volatility was not coming at all.
In fact, October 2017 made a record as the LEAST volatile October ever! It was also the lowest volatility month of 2017 thus far. Amazing!
Now please think about that: Not only was October not the most volatile month of 2017 — as it historically always was — it was the LOWEST volatility month in the lowest volatility year! “What’s going on?” we asked over and over. Just like every other trader in the trading world . . .
What started in May continued into October, then November and finally into December.
We still had respectable results in the LIVE! Trading Room — but nothing like years past!
However, some days the best you can do is not lose.
Some years the best some traders can do is to stay in business — tread water and keep their heads above — not blow-out their Trading Accounts, or inflict so much damage they’re handcuffed going forward.
I’ve read over and over that 95% of all traders fail. It sounds and feels about right. That leaves 5%. Out of that 5% — about 3% manage to tread water — they become and remain break-even traders. They don’t really make anything but also don’t really lose. It takes a little help (or a LOT of hours and study in front of the screens) to join the 2%.
But I’m not talking about that Permanent 3%. I’m talking about professional traders already in the Top 2% who have a few excellent years and then a very tough one. It’s that very tough one that determines if they’re still around the next year. The worst thing you can do is get more aggressive to “make back” what was lost or missed out on. We do the exact opposite: cut-back and wait.
I’m explaining this because that doesn’t please some who want action — who demand an Add-On Day every single day and every single week — who demand that they get handed the Daily Profit Target in every market every day and especially the one that person has decided to trade that particular day — and who fully expect to be made a millionaire by next week with a $2,500 Trading Account. I’m talking about you MICHAEL!
I’d like to report that this year was even better than last year — which I can usually report. But I can’t. Not this year. During what was a blow-out year — during what was a year that saw the best and brightest $Billion+ money managers closing their doors because of 3-years of bad performance — we still managed to make money for Members of the LIVE! Trading Room. Just not as much as we would have liked. January through April provided the majority of our great trades and the majority of our Add-On Weeks. In fact, I’m pretty sure we could have walked away at the end of April and spent 8-months or so playing golf around the world and probably have enjoyed 2017 more. LOL!
Just watch the videos I posted from the end of November into the beginning of December. See the unusual number of losing trades and BEs? The theme for that video series was PATIENCE and DISCIPLINE. It’s always important but much more so in times like we’ve had in 2017.
They can be found here:
December 5, 2017
December 4, 2017
November 30, 2017
November 29, 2017
November 27, 2017
But that’s professional trading.
You never know what day will be a tremendous day — so you show-up and work through the tougher days.
You have to weather these storms — like the second half of 2017 — to be around for 2018 (hopefully) when volume and volatility returns.
We can already see it with the newest market we’ve added: NQ — the E-Mini NASDAQ. That market is (right now, in December 2017) violently, hysterically whippy . . . but volatile! I’ll have it tamed in 2018!
What are the plans for 2018?
Well, I’m an optimist and I don’t believe the record low volume and volatility can continue forever. It’s like that real picture I sometimes show in the LIVE! Trading Room of SEVEN (7) straight 19s coming-up on a roulette wheel – and an even more amazing 12-out-of-15 being a 19 or 20! Clearly that roulette wheel was broken and just as clearly to me the markets are now broken.
But they won’t stay broken!
There’s simply too much money at stake.
So . . . We will continue to take fewer, more selective, trades.
We will continue looking for smaller, tighter Profit Targets until volatility improves.
We will continue taking smaller losses in the LIVE! Trading Room, when possible — which is most of the time — so that a single profitable trade can erase multiple small losses.
We may begin taking more intra-day swing trades — trades that have bigger Profit Targets but also take longer to work. The only problem with this, and why I didn’t start in 2017, is they are often not completed by 11:30 a.m. when we stop the Morning Session. But that’s still a distinct possibility.
We also may start trading during the more reliable Pre-Market Session. But I like to save that Session and the Afternoon Sessions for One-On-One.
We will probably start what I’ve been thinking about for most of 2017: Teaching/Helping those who are interested successfully pass the test to become a funded trader at one of the several reputable funded trader programs. But I still have to work-out the logistics.
We had a very challenging but overall survivable 2017.
Markets are the most difficult that I’ve seen since I began this full-time in 1999 — and worse than any those who have been trading longer have seen since 1992. But all things change!
We have (so far — knock on wood!) weathered the 2017 Storm and are still here, every day as scheduled, doing our best. Our best in 2017 has been to enjoy success — just not as much as we would have liked.
We have definite and realistic plans for 2018.
I hope your 2017 was at least manageable.
P.S. — If you have comments or questions, please leave them in the comment section below.
2 Replies to “2017 — Year End Review”
Is it just me or is making money trading online getting harder and harder?
Thanks for your question!
The markets have been especially challenging for the second half of 2017. They are frequently “evolving” and the high frequency trading (HFT) computers take the old market maker tricks to a new level.
You don’t mention how long you’ve been trading . . . but since you’ve just recently asked the question, you (hopefully) weren’t one of those “Just buy the f*****g dip, STUPID!” traders who got wiped-out on the sudden “correction” on Friday (2/2) through Tuesday (2/6). They thought they were traders when it was more like a repeat of the NASDAQ right before the dot.com bubble burst almost 20-years ago. A chimp throwing darts could have made money just buying NASDAQ stocks — until it stopped working. That was their only trick. The “JBTFDS!” traders aren’t around this week.
Volatility has been MUCH improved the last couple of weeks. Now all we need is just a little (real) volume added — and it should start coming back in when the Hedge Funds get more comfortable regarding whether the markets will actually be allowed by the FED to move other than just up, up, UP!
Volume + Volatility = Good Times!