A Moneyball approach to trading success

The late, great trading coach Mark Douglas taught his students how to “trade in the zone.”

His focus was all about finding that zen-like, calm mindset approach to trading so that you can make money with as few mental mistakes as possible. 

The main difficulty in trading is that all decisions -- including the decision to buy & sell -- are always emotional decisions. But the successful trader must (in my opinion) trade with as calm & emotionless a demeanor as possible.

The rise of the robotic, algorithm trading is one way people try to fix this problem.

But, no matter how complex a robot is, they still don’t have the computing power of the human brain (yet).

Of course, you’re unlikely to be one of the programmers who builds their own algorithm anyway. I’m certainly not.

So, what’s the solution?

It’s rooted in the Moneyball quote above. 

That we can calmly make trading plans based on statistical evidence and just accept the outcomes as the market gives them. Not every trade will work perfectly every time. We know & accept that. But, over a longer period of time and/or more & more data points, the stats prove true.

That’s why the casino ultimately wins, even though the players sometimes beat it.

I’d rather be the “casino” than try and beat the “casino.”

Incidentally, this is why I prefer selling options to buying them.

All right, let’s talk about today’s news... 

US Trade Representative Jamieson Greer said rare earths were a key focus in recent US-China trade talks.

Yahoo Finance

“Speak loudly and carry a big tariff!” to paraphrase Theodore Roosevelt with the Donald J. Trump update! Ha  If you haven’t read The Art of the Deal, you are less likely to understand what the tariffs are all about, but this is the way the President has operated for his entire career.  He makes an audacious ask … 50% tariff to try to get some leverage, then starts the negotiation.  He knows he won’t end up at 50%, but will likely get more than if he starts at 5%.

I expect the President to hold to his deadline until countries feel the heat and come to the negotiation table.  We will then probably get a steady trickle of trade deals.  It is a brilliant plan, but won’t be regarded as such until we get through the painful shocks to the market.

You might notice, the market is in much less “freak out” mode than they were in April. Friday was down but today starts out green.  In April, we were deeply red for an entire week.

Comments: Nice green start to the morning! Actually, I prefer red Mondays to get extra premium, but we take what the market gives. Bitcoin and associated stocks may be ripe for a run back to $120k or more.

Last week I ended up rolling a lot more trades in my account than I had hoped to. Thus, I only had the capital for two trades today. However, they did bring in 1.35% in premium for me, pretty good money for one week of trading.

I’ll share both of those trades as well as an additional sample trade idea with my Premium subscribers...