Weekly Market Overview November 21, 2021

I got asked questions about trade frequency, is trading too much good or bad, in essence. I thought that would be a great subject to touch on here...

At the end of every year your trading returns are a function of three things:

1. Forecast accuracy
2. Bet size
3. Forecast frequency

The first one is the most important. There’s just no way to turn a profit unless you have an edge over the market. Our trading forecasts have to be accurate enough so that we have enough winning trades to cancel out the losing trades and then some. 

Bet size is extremely important too, but we have plenty of formulas like R multiples. Once mastered it becomes a relatively rote process. 

Trade frequency impacts the final P&L in a big way as well. A trading year with 80 high quality trading opportunities will yield a lot more profit than one with 10 high quality opportunities. Plus as trade frequency increases our account’s equity curve smooths due to the law of large numbers. With a high trade frequency the account experiences both good luck and bad luck which balance each other out.  

I find that many intermediate to advanced traders forget how much trade frequency contributes to performance. 

And it’s easy to see why….

From early on in everyone’s trading careers we’re taught to be ultra selective, only swing at the fat pitches, and NEVER overtrade.

This is good advice for a new trader because the most common issue traders have in the early stages is making accurate forecasts that have a real edge.

New traders don’t have the market acumen to put together a positive Expected Value trade. Instead they like to press buttons on a platform and watch the P&L cycle up and down like its a Vegas slot machine.

That’s why this advice is good for us in the beginning, it keeps us from making dumb trades that have no edge or even negative edge…. 

But once you start to figure things out, and understand what separates a good trade from a bad trade it’s actually beneficial to start taking more trades

The best of the best traders approach markets in a similar way. Once they master one area of the market they move onto the next to increase their “hourly rate” (read return on capital).

The top traders know that if they can apply their edge more often they will make more money come the end of the year.

That's why I develop my trading strategies that work across multiple asset classes, from Equities, to Crypto, to FX to Futures, the more swings I get, with positive expectancy, the better my outcome. 

The New Equity Momentum Swing Beast strategy is the pinnacle of trading, it stacks multiple edges catching massive moves that can really boost an account balance. 

One of the hardest jobs in trading is to take a small account to a large account, momentum is the only trading style you can use to do that. 

A momentum strategy should also be a major component for any trader, a system that captures high R Multiples (big winners) while maintaining constant 1R losers. 

One of the tough parts of momentum systems is that they have lower win rates than mean reversion strategies, generally. 

Most traders start out trading momentum systems, but usually fail at them, because they don't have a proper system, usually they are just chasing news and Twitter consensus from important sounding people. 

We are getting ready to release the strategy this coming week and it couldn't be better timing. 

One of our traders in the the Trading Lab forwarded me a market seasonality chart and to no ones surprise, (except maybe Northman Traders), the market is tracking its historical seasonal trends perfectly this year. 

Basically from October to May we historically have risen, ideal conditions for a momentum system. 

Tying it back in to what I covered at the beginning of this email, we are one month in to the 8 month most bullish time of the year.

When's the the best time to start trading a new strategy?

At the beginning of course, that gives us plenty of trades and many of opportunities to capture those big runners!

Another interesting thing about where we are in markets, all S&P 500 sectors are either in Neutral, Bull Quiet, or Bull Volatile regimes. To me this means we might start rotating around from those in the Bull Volatile sectors to start buying up the Neutral and Bull Quiet ones. 

We'll be keeping a close eye on this going forward.

I can't wait to share this system with you so that you can join us in crushing these major movers in stocks, in futures and most definitely in crypto!

The Momentum Beast Strategy will be included in our Black Friday/Cyber Monday deals coming up this week so definitely be on the lookout for deals on the Trading Lab, the Courses and this new Momentum Beast Strategy💪.💪