You’re only a commission away

Special Weekend Edition

Here’s a tip I learned when I was “cutting my teeth” in the markets:

The cost of fixing a trading mistake is just a commission.

This applied more to the few times when I would accidentally make a mistake opening a new trade. Buying if I meant to sell, too many contracts, etc. It’s easy enough to just back out, take the small commission hit, and move on.

What’s worse is sticking with a bad idea when I could simply reset.

Or, even worse, making a mistake and trying to trade my way out of that.

(I don’t think I’ve ever successfully traded my way out of a stupid trading mistake. I’ve pretty much always had to take my lumps and learn.)

C.S. Lewis gives some similar advice here, albeit a lot more eloquently.

If I find myself in a situation where I don’t want to be, then my best plan of action is probably to get out and move on.

Now, I’m not talking about situations where the markets do something unexpected. I’m talking about times when I just straight up ignored my trading plan and made a stupid decision. In that case, the best plan of action is almost always to backtrack and get back on plan.

Besides, my trading system is so forgiving, that even stupid mistakes can be covered eventually.

Never be afraid to make a correction.

After all, it’s only a commission away.

The markets were up across the board from last week. We had some red at the close Friday, but the week was strong financially. 

The FOMC meeting this week will probably dominate the market. Expect sideways action until Wednesday afternoon. The Fed should lower interest rates by at least 0.25%. If it lowers by 0.5%, there will likely be some “hunter green” colors on the indexes. Expect the Russell 2000 small cap stocks to get the biggest percentage boost from the lowering of interest rates.  The IWM or TNA could be good plays this week (those are ETFs that track the Russell).

The Fear and Greed Index added 1 point from last week. (Basically, unchanged.) A steady slow growth in the indexes is the perfect scenario for our system and the economy.

Yahoo Finance

Why it matters …

This is not so much Macro as practical.

From the article …

“The pool of 401(k) millionaires climbed 16% from the end of March to reach an all-time high, totaling 595,000 at the end of June.”

We’ve run the numbers with our trading system. If you opened a Roth IRA today with $0 and contribute the maximum $7,000 each year, then invest that money using our system, you should have $1,000,000 in 5 to 7 years by collecting an average or 1.5% - 2.0% premium per week! The beauty of the Roth is that the contribution is after tax, so the earnings are not taxable when withdrawn at age 59-½.

In my opinion, every pre-retirement person should be doing this! Older folks could help their children or grandchildren get started.  There are some limitations like they have to report on their taxes more income than the contribution and there is a maximum they can make in a year to be eligible to contribute.  Consult a tax advisor to get real advice, but this is a good strategy for retirement in my (educational) opinion.

Three real trades collecting $108 of premium for single contract trades. Average Return on Risk (ROR) = 1.84% for this week.

Sample Trade Ideas Spotlight (Free subscribers):

Average Return on Risk (ROR) = 1.54%

Sample Returns = $337 for single contract trades -- that could cover well over a year of a Premium subscription, if someone took all of those trade ideas. 

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