Chart Talk

Risk is fundamental to trading, unavoidable because it's necessary. However, not all risk is created equal. Generally speaking, trading involves two types of risk: appropriate risk ("good" risk) and needless risk ("bad" risk). Going first with the worst, needless risk occurs when you enter into a position at a suboptimal area so that your stop is either unclear, exposes you to more loss than is necessary, or, even worse, you don't have a stop in at all. Moving over to the best, appropriate risk is: a. Clearly defined b. Minimal Position size is also a key component of risk. Your trading volume (the number of shares per trade) should differ depending on each particular trade. Having too big a position on at any given time is reckless and can lead to needless losses, while having too small of a position can prevent suitable profitability. But figuring out the correct position size will allow you to strike an appropriate risk balance. In a business where risk c...

 Will a Fed-fueled rally following the most recent interest rate decision be the catalyst that sends our bedraggled stock market on a prolonged upward march?  With the market heading essentially straight down week over week for the last three months, that's like me asking if that one chip shot I somehow put in from 80 yards out actually means I'm a good golfer. A sustained market move in either direction takes time to prove before we can confidently claim that a move is underway. So while Tuesday's rally off historic lows to end the session, followed by Wednesday's strong advance after some initial post-Fed volatility might have been a sight for sore eyes, it by no means signifies a bull market in the making.  And, what about the overall economy? The Federal Reserve's .75 basis point raise on interest rates, the largest single rate hike in almost 30 years, means that it just got more expensive for lenders to borrow from each other, therefore making it more expensive...

The Dow jones Industrial Average ended the session on Friday, June 10th down a mind-numbing 880 points from the previous close and all other major indexes were similarly maligned. As such no one would blame you for lamenting if you were not among those lucky enough to have either covered positions or gotten short at the top. The great Yankees pitcher Lefty Gomez famously admitted "I'd rather be lucky than good"  back in the 1930s. But a trader would rather be good than lucky any day of the week because it's the talent and ability that we cultivate that allows us to identify the right trades to make in any situation. In the long run, ability always triumphs over chance or simply being in the right place at the right time. A vital component to developing the ability that leads to good trading is being able to both anticipate when the market is about to make a significant move and then find ways to trade with the market's direction. Friday's session long sell-off...