How To Master Trading Discomfort To Improve Your Results.

Ministry of Silly Walks.  Cheese Shop.  Self-Defense Against Fresh Fruit.  Dead Parrot.  My Friend Earwax.  These are the names of four of the funniest and most irreverent sketches by Monthy Python, and one really bad idea I once had for a short film.

I have long posited the theory that there are only two types of people in this world; those that “get” Monty Python, and those that don’t.  Personally I love Monty Python, and although my favorite player is Michael Palin, John Cleese has traditionally been thought of as the “leader” of the troupe.

Recently I came across a video of Cleese giving a talk on the subject of how to be creative. It’s fascinating and a must watch for anyone who wants to learn how to get their creative juices flowing.

In the video Cleese tells a story from back in the day when the Pythons were trying to write sketches.  One of the other members of the group, who remains unnamed but whom Cleese felt was more talented than himself, always seemed to come up with less original and creative material than he did.

This puzzled Cleese, however after observing his colleague for a while,  it became apparent to him why this condition existed.  When the other member was faced with a problem in writing a sketch, as soon as he saw a solution he was inclined to take it, even though he knew it wasn’t perhaps the best or most original answer.

Cleese himself realized that the reason he was able to write better material than his more talented colleague was that when he came to a problem, instead of taking the “easy” route, he was able to stick with the problem longer and ultimately would find a better solution.

Simply put, Cleese was more comfortable with discomfort that his fellow Python.

It makes perfect sense of course.  The normal human reaction when faced with discomfort, no matter what kind, is to seek relief and do so as soon as possible.  This behavior is very common in trading, and the ability to make a friend of discomfort may help improve your bottom line results.

Causes of Trading Discomfort

Discomfort in trading usually comes in two forms and both have micro and macro causes.

Monetary Discomfort – Just like it sounds, this is where you are uncomfortable because you are losing money.

This can happen simply because you have a position with an open loss that is beyond your comfort level, or it can have more a more complex genesis.

Are you down big for the year in your trading account?  Are you in financial trouble in your regular life?  Is the mortgage payment coming due and your trading profits are the funds you have to use to pay it?

Control Discomfort – This where you feel discomfort not because of the monetary loss, but because the trade is “not doing what it is supposed to.”

This could be the result of a choppy day where every trade you attempt, no matter long or short, reverses against you.

Or once again it could be a related to larger issue.  Are you the type of person that always needs to be in control in your life?  Do you have an obsession with always being “right?”  Is the world a place that would  be better off if it listened to your opinions DAMMIT?

Whatever the cause of the discomfort, in an attempt to end it as fast as possible, traders often make bad decisions that affect performance.

Effects Of Trading Discomfort

The list of things traders do because of discomfort is endless, but here are some of the more common ones;

Getting back into a trade too fast after a loss – Your pristine trading day is blemished by a loss after your first trade, but instead of waiting to find another suitable setup, you find yourself rushing back into a trade, because that is the only way to “get it back” and end the discomfort.

Closing a losing trade too soon –  A trade has gone against you, and you can’t stand that you are in the red.  Even though your stop has not been hit yet, you know it will be and you just want to cut your losses and end the pain, so you close the trade early.  Your pain is only increased when price reverses before your original stop and proceeds higher, into what would have been a profit.

Closing a winning trade too soon –  You have a profit.  You need a profit.  You want to bank that profit, even though price has not hit your target.  Every minute that profit is open there is a chance it can go away, and so you take it right where it is, only to see price continue higher, and higher, and higher throughout the rest of the trading day.

Holding a winning trade too long –  Price has hit your target, but you want more, because you need more.  You let it go, until it reverses and comes back down below your target. With every tick down you continue to hold the position because you wanted to close it out one tick higher.  Eventually it goes back to even, or worse, into a loss.

And the list goes on.  One thing that is important to remember about discomfort is that it can cause you to make bad decisions, but it can also cause you to make no decision by paralyzing your thought process.

How To Deal With Micro Discomfort

In order to master trading discomfort you have to reverse engineer the process of what causes it, and this starts with being brutally honest with yourself.  You have to know what makes you uncomfortable in trading.  It is a certain dollar size loss threshold?  It is holding a position past a certain amount of time?  It is an “ego” battle where you need to impose your will on a trade?

Once you can sincerely answer these types of questions, then you can start the process to solve or minimize the impact.

The issue of micro monetary discomfort is the “easiest” to work on, and it begins by taking some steps to remove yourself from the trade, distancing yourself from the discomfort.

That’s starts with making sure you have a trading methodology.  A methodology gives you an objective framework for your trading.  An objective framework gives your confidence. Confidence allows trust and trust brings comfort.

Another thing that can help is if you know that before you take a trade you will never lose more money than you are comfortable with.  That can be accomplished by using the “R” method to size your positions, one of the most important concepts in successful trading.

Micro control discomfort is also a relatively easier issue to deal with, but involves changing your perception a bit.

The first thing you have to drill into your head is that your will lose on more trades than you will win on.  It’s the nature of the game, and you have to learn it or you will fail at trading.

The next thing you need to do is get some context on your individual trades. Understand that you are just trading.  Sure it’s complex and mentally challenging, but you are sitting at a desk in front of a computer.  You can take a break, listen to music, drink a Coke; it’s not like you are tarring roofs in the hot sun or working in a coal mine. Getting some perspective can do wonders towards alleviating your trading discomfort.

Dealing With Macro Discomfort

Macro trading discomfort, both the monetary and the control type is much tougher to deal with.

From the monetary side, you once again have to ask yourself some tough questions. For example, are you well capitalized enough to be trading?  If paying your bills is solely dependent on your trading profits you must have enough of a bankroll to weather the inevitable losing streaks.  If you don’t have enough, perhaps it is time to rethink things.

One way to alleviate the stress of paying you bills with your profits is to create another revenue stream.  Are you a good stock picker?  Could you turn that into a paid subscription service that would help to smooth out your equity curve with trading? Maybe you should take a steady job and concentrate on swing trades that you can manage without being in front of your screen during the day?

Point is, whatever the reason for the macro monetary discomfort, you have to make real and serious changes, because the alternative is that your account will in all likelihood eventually implode.

Macro control issue are the absolute most difficult to deal with because they extend way beyond trading and can be as complex as your mommy not giving your enough love when you were a kid.

Although I have a reputation of being a bit of a smartass a times, I am totally serious and totally sincere in saying that if you have macro control issues, you really owe it to yourself to seek the services of a psychologist or psychiatrist.  Doing that can also provide the extra bonus of improving your life in general in addition to improving your trading.


The process of mastering your trading discomfort, no matter what kind, and no matter what scope, all starts with first acknowledging that discomfort.  Then from there you must identify what the causes are of the discomfort are by asking yourself some probing questions, and ultimately take concrete actions towards minimizing or eliminating it so as to not adversely effect your trading.

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What bclund is, is the intersection of markets, trading, and life (with some punk rock, pop culture, and off-beat humor mixed in).

John Cleese – A Lecture On Creativity via YouTube

Batman….As A 1950’s Greaser.

I’m not particularly a fan of Batman.  Nor do I have any fixation with the 1950’s.  But for some reason these graphics are so cool.  I think I would actually be interested in seeing a Batman film set in the 50’s, especially if he teamed up with The Fonz and Carmine Ragusa to fight crime.

Chachi Arcola as “Robin”…..???

1950’s greaser Batman need to be a reality via i09

What bclund is, is the intersection of markets, trading, and life (with some punk rock, pop culture, and off-beat humor mixed in).

Why not subscribe to for free  Via E-mail or Via RSS and follow me on StockTwits and Twitter?


Week In Review: Best Of The StockTwits Blog Network

Let’s be honest, you could pretty much throw a dart any day of the week at the StockTwits Blog Network, and end up hitting a post that is better than 99% of the other stuff out there that passes as financial blogging.  So to say these are “The Best of….” is a little disingenuous; let’s just say these are some of the posts from the last week that caught my attention and I think will interest you.

There’s not one for kids.  God knows there’s not one for marriage.  And there sure as hell is not one for that “Made in China” wireless keyboard I bought last week.  But The Reformed Broker suggests there might me one for the markets.  “What If Someone Wrote an Owner’s Manual for the Financial Markets?”

Success in trading depends on your ability to constantly re-evaluate and refine your process. The Minimalist Trader takes us through the steps he is taking to do just that in “When in Doubt: Get out.”

Gold ($GC_F) as a tell for the US Dollar ($DX_F) and a predictor for QE3 is what The FX Cafe brings us in “Forget the FOMC…I Am Watching Gold Today.”

Jeff Carter of Points and Figures makes a compelling case for why the Midwest is going to be a major center of entrepreneurial activity in the coming years.  And the photo of a lovely corn-feed cowgirl “working” on her tractor doesn’t hurt his case one bit.  “Entrepreneurs, Engineers, Move to the Midwest.”

Kid Dynamite’s World is starting a “Trading Rules” series, and “Trading Rule #1: Know What You Don’t Know” & “Trading Rule #2: Know Why You’re In A Trade,” kick it off.

“Market Games” influence our psychology and can cause us to be out of sync with our trading, as Ivanhoff Capital explains in this post.

Investing With Options uses a rant and a Blazing Saddles reference to illustrate where we are in the markets right now.  “The Echo Chamber is Getting Full.”

Even if StockTwits hadn’t given me a massive six-figure advance to join their blog network I would still tell you they are the best thing going right now for market content.  CEO and Founder Howard Lidzon shows in “The StockTwits Social Heatmap – Finding Signal inside StockTwits” how that content has been harnessed in a powerful new discovery tool.

One of the ways to be successful in trading is to specialize.  Lydia Idem is a specialist in sterling ($GBPUSD & $EURGBP) and on her blog, FaithMightFX she posts a daily commentary and curated linkfest focusing on it like a laser.  “Sterling Digest, April 26 2012: double-dip musings” is a prime example.

Traders often focus only on the micro and lose track of important macro factors.  The relationship between the $EEM and the $SPY is one of those macro factors that Dragonfly Capital analyzes in “Macro Flows Set from Emerging Markets into US Markets.”  And an update on the current S&P 500 wave count is worth a read as well.  “1923: Revisiting the Long Term Bullish Elliot Wave for the S&P 500.”

Crossing Wall Street provides a comprehensive look at where we are in the current earnings season, and give us some hints about what is to come in “CWS Market Review – April 27, 2012.”

If you are a technical trader, as JC Parets of All Star Charts is, then his post “My Technical Books, Blogs, and Tools” is a must read.  As a bonus he also give us his “for fun” Blog list, whiCh aLthoUgh guilty of one glariNg omission, is a pretty gooD list.

Once thought of as virginally pure structured products, the public is finally starting to understand that not all ETF’s are created equal.  Abnormal Returns post “Avoiding bad ETF’s” helps you to do just that.

And finally, the question of whether or not Apple Inc. ($AAPL) will regain its all-time highs again is still open.  But The Stock Sage highlights some interesting correlations between analysts price targets on it and its recent sell off in “Did the Analyst Mark the Top for $AAPL.”

What bclund is, is the intersection of markets, trading, and life (with some punk rock, pop culture, and off-beat humor mixed in).

Why not subscribe to for free  Via E-mail or Via RSS and follow me on StockTwits and Twitter?

The Stanton Moore Trio – Knocker

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What bclund is, is the intersection of markets, trading, and life (with some punk rock, pop culture, and off-beat humor mixed in).

The Tumbler Theory

In the faded mist of everybody’s adolescent memories exist mythical characters whose deeds and personas only enlarge with the passage of time.  Tom Damski is one of those people for me.

Tom was an enigma.  In the summer of 1982, in the middle of punk rock city California, he was firmly tethered to everything that embodied the 70’s.  Terry cloth shirt, puka shell necklace, and long hair that flipped up at the neckline was his signature look.

The rumor was that he had gone up to the Starwood in LA, stood in the middle of a slam pit, and beat the shit out of any punk rocker who dared to knock into him.  And I fully believed it.  Yet for all his 6’3″ 250lbs of football playing toughness, he actually seemed like a pretty cool guy.  He could have dispatched yours truly with the flick of his wrist, but for some reason he was always very cool to me.

The lasting vision I have of Tom is from a Frosh-Soph football game against our cross town rivals.  He was a full-back, and I remember watching him (from the bench of course), literally exploding through the line of scrimage, defensive players hurling themselves at him and clinging on for dear life as he carried them down the field on his back.

Later that same year I heard that Tom stepped off the curb to cross the street and was hit by a car.  He died on the spot.  It was so random.  But that is how life is…..random.


Life for the most part is not random.  In the vast majority of cases it serves you up with the consequence that you deserve based upon your previous actions.  For lack of a better term, I call this “The Tumbler Theory.”

What is a tumbler?  Besides being a delivery vessel for fine and delicious booze, it is defined by a random online dictionary as;

“The part of a lock that retains or releases the bolt and is moved by the action of a key..”

In reality, for a lock to open, a number of tumblers have to be put in place. Sometimes it only takes three tumblers to do the trick, but in more complex locks it can be five or more tumblers that need to be perfectly aligned in order to release the mechanism.

The tumbler theory exists in life as well as in the markets, and you will save yourself a lot of grief if you understand how it works.  Let me illustrate.

“Dude, my wife left me.  I don’t even see my kids anymore.  I can’t concentrate on my work and it is beginning to show.  I think I am going to lose it all.”

…or so went the kvetching from my one time best high school drinking friend.  I had known him for almost twenty years and as we threw them back at our class reunion and pseudo-rebonded, he continued….

“…it just sucks man,  I mean I don’t deserve this.  A guy should not be penalized for one mistake.”

His mistake was banging his ex-girlfriend while his wife and two young kids were away visiting his mother-in-law.  Misplaced memories of loyalty initially made me sympathize with him, but as he continued with the story, any empathy I had soon went out the door.

This was not a random event; no outlier incident that cost him everything he valued in life.  He had numerous opportunities to avoid having the tumblers line up for what ultimately resulted in his wife and children catching him in a post in flagrante delicto keepsake moment.

It started with a phone call from his buddy on the fifth night that his family was out-of-town.

“Hey man, we are going out to have a little fun, why don’t you come out and join us,” went the story line from his serpent-like friend.

“What the fuck,” he thought.  “Sure, I’m married with kids, and have long left that single bar life behind, but I’ve been working hard, and I don’t just want to sit at home tonight by myself.  What is the harm in going out and hanging with my old crew?”

Tumbler one in place, check!

“Oh yeah,” his friend continued, “your ex-girlfriend Barbara is going to be there.  I guess she just broke up with her boyfriend.  Guy was a total dick to her and she is ready to cut loose.”

Click!  Tumbler number two.

When my friend got to the bar, all his still single power drinking buddies were there. Old habits die-hard, and he felt that he “just had to match them” pitcher for pitcher.

“Paging tumbler number three, tumbler number three, you have a call.”

He described to me how Barbara looked good that night.  Real good.  He loved the way she looked at him.  The sexy pout and coy glance over the shoulder as she moved to the rhythm of the music on the dance floor.

He knew he should not have fed into her game, but his ego was not interested in listening as it was empowered by a steady stream of moderately priced booze.  And most of all, the thing she had going for her that night was that she wasn’t his wife.

Hmmmm…..let’s call those tumblers number four, five, and six.

The final tumbler fell into place when, as the bar was announcing last call, he told Barbara “yes” when she asked him if she could “crash” at his place, since her roommate had left with some guy and would be up all night at their studio apartment.

See, having your recently single ex-girlfriend in your house, at two-thirty in the morning, shitty drunk, with your family out of town….well, you’re not really in a position of power at that point to say “No,” when she asks if she can sleep in your bed with you.

At that point you’ve missed the opportunity to avoid the tumblers you can’t control and change the ones you can.

The wackiness that ensued can only be imagined when his wife and kids, hoping to surprise him from an unexpectedly truncated trip, walked into the bedroom the next morning and found him with Barbara.

It was hard to have sympathy for him.  Perhaps that is harsh, but this is a guy who spent his life allowing the tumblers to line up.  It was easier that way because it freed him from any responsibility for what happened to him in his life.  Then the bad events that befell him were just random.  Or bad luck.  Or fate.  Or feng shui.  Or whatever.

I on the other hand had spent my whole life doing the opposite, working hard to make sure the tumblers didn’t line up, which largely spared me from most major self-imposed tragedies.

The same tumbler theory applies to trading.  There are an almost infinite number of tumblers that can line up and cause you to blow up on your trades.

Not enough sleep the night before.  Failing to review your charts.  Chasing a breakout.  Taking an out-sized risk position.  Pulling a stop.  Averaging down. And so on.

Usually no single tumbler in and of itself is enough to cause too much damage, but have enough of them line up, and it can crush you.

That’s the way the tumbler theory works.  You will never know how many are needed to be in place to cause you the most damage.  Sometime it’s just a couple.  And sometimes it is so many, over such a long time frame, that you can’t recognize the series of events that you ultimately allowed to happen, and which led you to your demise.

Put in place some of the “good” tumblers by subscribing for free to Via E-mail or Via RSS and by following me on StockTwits and Twitter.

What bclund is, is the intersection of markets, trading, and life (with some punk rock, pop culture, and off-beat humor mixed in).

Deconstructing A Trade: Managing A Target Trade

One of the toughest things about managing a trade to a target level is deciding when and if you need to close your position out early.  In this video we go through a trade and see what your options are for managing a target trade.

(Enlarge when video starts to watch in HD)

Don’t forget to subscribe to for free Via E-mail or Via RSS and follow me on StockTwits and Twitter.

What bclund is, is the intersection of markets, trading, and life (with some punk rock, pop culture, and off-beat humor mixed in).

How To Day Trade With Less Than $25,000


This post has me in a bit of a conundrum.  I am writing about something that I am not totally on board with but recognize as a necessary evil; day trading with less than $25,000 in your account.

Day trading is definitely one of the hardest things that somebody can do, and the optimal way to do it is to have a well-capitalized account and some practical experience in riding the intraday lightning.  The obvious financial issue is that not everybody can afford to drop 25K+ into a trading account to get day trading privileges, and the experience issue ends up being a “chicken or the egg” scenario.

I know that some of you are shouting at your screens right now, and not just because a trade is going against you.  You’re yelling “Hey Poindexter, how about paper trading?”  Well, I don’t believe in paper trading, a point I made again in my recent post about finding a trading mentor.  My alternative is to trade small position size until your skill/equity level gets to the point where you can start to scale up.

That post prompted a lot of emails posing the question, “how can I get practice/experience day trading since I don’t have $25,000 to put in my account?”  This then is my answer to that question.

The Rolling Five Day Method:

This is the best and I believe safest method for day trading a sub-25K account.  You are allowed to do three-day trades during a rolling five-day period.  You won’t get 4x buying power, but you can use regular 2x margin for your trades.

I like and recommend this method most because it forces you to be more discriminating in your trading choices.  If you see a number of mediocre setups one day, you are more likely to pass on them and wait for more optimal ones on another day since your dry powder is limited.

The Split Brokerage Account:

So let’s say that you have only 10K to trade with, and you are dead set on day trading (…you know there are things called “swing trading” and “position trading” too).  You can split your funds in half and open two accounts with two different brokers.

By doing this you will effectively be able to do six day trades on a rolling five-day basis (once again only with 2x margin buying power), which should be more than enough for a beginning trader.

In the past this would be an awkward way to execute trades, but the ease with which you can now open accounts, transfer money, and trade online makes it definitely a viable option.

The Split Brokerage Account Wash Method:

Same set up as above but if you insist on having an almost unlimited ability to day trade a sub-25K account, this method will appeal to you.

For example, you take a long trade of 50 shares in XYZ in broker #1.  When you are ready to “close the position” you just sell short 50 shares of XYZ in broker #2, effectively making you flat.  You can then close each side out the next day, without using up any of your three day trades.

Obviously you will incur some extra costs as you will have four commissionable events instead of two, as well as a bit of slippage depending on the width of the spread on the stock you are trading.  Because of this, I suggest you only use this method if you are trading with a per share commission set up.

If you are trading small (25-100 shares), you will most likely only incur a minimum ticket charge per side (usually $1.00) and the slippage costs, if any, will be negligible.  It’s a small price to pay for almost unlimited day trading ability with a sub-25K account.

One last note on the “Split Brokerage” options.  I highly doubt it, but it is possible that in the mounds of SEC regulations that exist, there might be some rules against trading two separate brokerage accounts in this related way, but if there is A) nobody is monitoring it, and B) really, what would the “penalty” be?  I think I can safely say that for all intents and purposes, this is completely allowable.

Prop Trading:

There are a number of prop trading firms out there that you can trade with, either on their floor or “virtually.”  These firms allow very small account minimums (often as low as $5,000) and you can trade with the firm’s capital which allows you full day trading buying power (sometimes more) and no day trading limit restrictions.  You also can usually trade with a micro commission structure.

Of course as you might guess, there is no such thing as a free lunch.  When trading with a prop firm you don’t get to keep 100% of your profits, you get a “payout” percentage that is based on a number of factors.  You also may have to do a minimum number of trades or pay a fee to use their platform.

I have never used a prop shop myself but know traders who have.  I have heard good and bad stories, so if you choose to go this route, make sure you fully investigate them and get some references before you commit.

Futures Trading:

There are no day trading restrictions on futures and since you are only required to put up a small percentage of your overall contract size, leverage is more than you will need.

That being said, if you are in any way thinking about trading gold ($GC_F), oil ($CL_F), wheat ($ZW_F), or basically anything other the E-mini’s, just send me 95% percent of your trading funds and ask your friend to slam your head in between your car door.  That you way you will end up with more money and still feel better that you would otherwise.

The S&P 500 E-mini ($ES_F) and the NASDAQ 100 E-mini ($NQ_F) are the ONLY futures contracts that a beginning trader should try to day trade.

Even so, it is still tough for a lightly capitalized trader to trade $EF_F as each point is equal to $50.00 ($12.50 per tick, four ticks to a point).  If you have a 5K account, only one point would equal 1% of risk capital which does not give you much room to be wrong.  You would probably want to have a minimum account size of 10K+ in order to effectively trade the $ES_F.

The $NQ_F is only $20.00 per point ($5.00 per tick, four ticks per point), but moves faster, farther, and more erratically than the $ES_F.  I have personally spent the last two years trading it, having 23 years previous equities trading experience, and I still find it challenging at times.

No matter how hard you want to day trade with a sub-25K account, be forewarned that futures are a very, very tough and specialized asset class, and only a small number of new traders will ever be consistently profitable with them.

Forex Trading:

Like futures, forex has no day trading restrictions and ample leverage for small account traders.  There has also been a proliferation of resources for learning about forex trading over the last few years.

One of the benefits of trading forex over futures is that you can have a minimum size position that better relates risk-wise with a small account.  As a beginning day trader you should stick will the most liquid crosses like the EUR/USD ($EURUSD).  If you trade the EUR/TRY (Euro against the Turkish Lira), once again, put head in car door……

Currencies have their own set of challenges.  They do not trade like equities, however many traders feel that they do more closely respect the “rules” of technical analysis. Fortunately, there are many great currency traders out there to learn from like my punk rock friend @CloudChartist, @Tradergav, and @faithmight.


So there you have it, how to get around the system, beat the “man,” and be a trading vandal.  Just make sure you always keep risk foremost in your mind so that you can graduate from this level of trading and make it to a fully funded day trading account.

If It’s Good Enough For Sting And Paul Tudor Jones, It’s Good Enough For Me!

James Altucher has been a regular proponent of doing yoga, and he’s right.  I tried it for a while about 5 years ago, and I have to say not only did I love it, but I could feel the difference it made in my life.

But work, and kids, and….well you know that story.  I stopped going for “just a week or two” and haven’t been back since.  This last year I have for the first time really started to feel the effect of age and have been promising myself that I would start again, but have yet to make the commitment.

Then I came across this photo:

Pictured from left, Trudie Styler, Sharath Jois, grandson and successor of Pattabhi Jois, Sting, Sonia Jones, owner of the Jois yoga studio, and her husband Paul Tudor Jones, at the opening of the Greenwich Jois studio. Credit Insider Images

One of the greatest musicians and one of the greatest traders are die hard yoga enthusiast. What more motivation do I need to get off my ass and sign up for a class?

Check in with me this time next week so see if I actually follow through.  In the meantime check out “Paul Tudor Jones Is Better At Yoga Than Me” via James Altucher.

Don’t forget to subscribe to for free Via E-mail or Via RSS and follow me on StockTwits and Twitter.

What bclund is, is the intersection of markets, trading, and life (with some punk rock, pop culture, and off-beat humor mixed in).

5 Tips For Trading The Overnight Market Session.

Earlier this month I had an article come out in SFO Magazine entitled “The Night Shift -Trading After Hours” and one of the traders I interviewed for it was Dan Tylenda-Emmons, known as @codertrader on StockTwits.

Dan was very generous in sharing his knowledge about trading the E-mini ($ES_F) in the overnight session and his info really helped the article.  However there were 5 tips that Dan had sent me that could not be included due to space constraints.  I am going to share them here along with a short video from the SFO article that illustrates Dan’s preferred time frames to trade overnight.

Here they are:

1) Use half your normal position size.  The markets can stay irrational longer than you can stay solvent — this is especially true when cash markets aren’t open and there aren’t market internal indicators to use as a guide.

2) Use currency futures as risk indicators. When trading $ES_F always keep an eye on what $6E_F and especially $DX_F is doing. Most of the time, the euro and the dollar index can be used as a warning sign of things to come, whether you are long or short.

3) Listen to a news source. News can happen any time of day, just like futures markets are open around the clock. RanSquawk is an international news source that is offered independently, or if you have a ThinkOrSwim account, you can listen to it under Chat/Global News. It is extremely important to have at least one source for news, and possibly use Bloomberg streaming news (free on their website) as a backup.

4) Know your economic calendar.  One of the worst things that can happen to you is have a profitable trade rip against you due to a seemingly random GDP report out of France or an unemployment report out of Germany.  The point is, you must be aware of global economic news if you want to trade global markets.

5) Only price pays.  Don’t try to think you are smarter than the market because price is moving against you “on light volume”.  That thinking is toxic and pervasive, especially in this market.  The reason volume is light is that there are simply fewer participants overnight and it doesn’t take that much volume to rip your face off.  Your broker doesn’t care about volume when they send you a margin call. Volume is fine, especially if you stick to London cash market times. Stick to your stops.

* Bonus: some may disagree with me, but try to trade 2-5AM CST. Outside of that time range, liquidity is hard to come by and you can get chopped to pieces.

The Night Shift – Trading After Hours via SFO Magazine.

“I’m Tired Of F*cking Earth Day” – George Carlin

The late great George Carlin talks about “saving the planet.”

No trees were harmed in the creating of this blog post.

What bclund is, is the intersection of markets, trading, and life (with some punk rock, pop culture, and off-beat humor mixed in).  Subscribe for free Via E-mail or Via RSS and follow me on StockTwits and Twitter.