Another example of a high probability trade is in the S&P. Go short at 1120, well let's say you did that, you'd cover at 1110-1115 because a reversal up to these levels is highly likely, any lower than 1110 and suddenly your gambling which I hate. I used to play poker, but now I don't. I hate chance. I hate flopping a straight and then lossing to a full house. Chance sucks. I don't take it.
When trading HNU.TO / HND.TO there are seven factors to consider when trying to make money.. Following these steps will give you an edge. How did I come up with them? I used to write in a journal before work and after work every trade and every mistake I did. It was hard work, but eventually you come to some conclusions. I also used to work at a high frequency firm in Montreal and I paid attention to what the failures did and what the success people did. I placed bets with friends at the firm to who would get fired. I was right on all of them.
These are the seven steps you need to really succeed in natural gas (when I mean really, I mean really)
1) Fundamentals, 2) Technicals, and 3) Futures roll-overs, 4) Decay, 5) Timing/Patience, 6) Stop Playing Lottery, 7) Take your Losses
1) Fundamentals: Know natural gas inside and out. Watch out for the external factors that can affect Natural Gas Prices. Underwhat what undersupply/oversupply means. Research, research research. Eventually decide if you think natural gas is bearish or bullish, that should be the long-term trend and make sure whatever decision you make is supported by price action.
2) Technicals: AVOID the intra-day trend. It's the plague. It will scare ya. It will beat you down. You'll never beat noise. I used to trade half a million shares a day, and I was barely able to scalp half a penny off highly liquid stocks. It can't be done. If you seriously can trade off noise, e-mail me and I'll get you a very high salaried job at a firm where I know the boss in montreal.
3) Futures Roll-Overs
Avoid trading HNU.TO/HND.TO 1-2 days before the actual contract rollover (usually last wednesday of the month), and avoid trading HNU.TO/HND.TO when the managers of the ETF rolls over the contracts (search stockhouse.com, I'm sure you can find the rollover dates.. they are likely available on the Horizon BetaProShares website too). Why avoid these dates? They can be manipulated intraday for options, or whatever reasons. I don't like it. You could lose a lot of money these days, so why trade?! Think of it like the fed-day when they announce interest rates at 2:15. trading is dead at 2:10-2:15, you know why? risk is too high. The same for $natgas.
4) Decay:
If you don't know what this is research contango and backwardization. Then look at the historical price of HNU.TO and compare them with the NG price that month. You should realize that even though natural gas goes up over time, HNU.TO won't.
That brings to my next point,
5) Timing:
Timing is everything for natural gas. If your bullish too early, your going to get scared. If your bearish too early you will be squeezed. Follow technicals and be emotionless. Don't put too much capital that you can't handle, and never ever ever go on margin.
6) Lottery:
Real traders are happy with 1.5% returns a month. Compounded, that's 19.5% a year, which is better than what the S&P returns on average, and better than most banks/hedge funds.
Small hits wins the race. Why play lotto at 10:29 on Thursday before NGI#s come out?
Aim for very small hits, and whenever you get a homer, keep yourself grounded.
7) Taking your losses:
Not taking losses in HNU.TO can hurt you very quickly. Why? Because if $NATGAS falls 5% then HNU.TO losses -10% but it will take a 5.5% gain in natural gas to recover these losses. The more you hold onto these 'ETFs', the more you lose and the more the original value of HNU.TO will never come back. The best example is HOU.TO for an example of decay.
If you want to trade, take gains quickly [were looking for a 2-3% return/month, right?], but take losses QUICKER. When I used to high-frequency trade, the worst traders were not the ones who were making the least money, IT WAS the traders taking the most risk. Heck the girl who made $0/day wasn't that bad.. sure she got laughed at, but atleast she showed she was able to control his emotions.
The top HFT at a firm I worked for, used to take a $1,000 loss almost every day. In one shot. He never said 'f***, or s***", he took the loss and moved on.
This guy also makes about $10,000 gross/day. He's good because he takes losses. Once you understand that taking losses saves your bank account from going to 0, your a zillion steps ahead of the pack. When I used to high-frequency trade, the pack was seperated from those who took losses, and those who let them ride and ride and ride (note some of the traders traded 20,000-100,000 shares in 1 trade, so a 5 cent move is esentially a $2,000-$10,000 gain/loss)..
I remember one guy, he was about 23, and everyday he used to swear because his stock never returned to his original price. He used to always hold and never took a loss. Eventually his losses became so big intra-day that he was shut down for the day and couldn't trade for the next day. Rince and repeat. He never got a paycheque.
If a stock doesn't act right don't touch it; because, being
unable to tell precisely what is wrong, you cannot tell which way it is going.
No diagnosis, no prognosis. No prognosis, no profit.
It takes a man a long time to learn all the lessons of all his
mistakes.-Jesse Livermore
GL, See you on Friday.
