Trade of the Week by TradePartner

 Dear Friend, Welcome to this week's Trade of the Week by TradePartner where we show you one trade you should be looking into for the week. We do this every week for you, so keep an eye out for another one next week. Open Positions Summary BIDU From the roll we did two weeks ago, she’s still holding steady but China remains weak. The current position has us in gains but slightly underwater overall in total cost basis. The roll cost us 2 points and we are current up around 1 point. We continue to hold. VIX We saw another pop this week in the VIX on Monday. The market had some selling that morning but the VIX stayed tame and our spread here is looking good. As mentioned last week, some of you got in at better pricing on this trade, so I would most definitely look at closing the trade here or at the very least protecting some gains. A good number of you really loaded up on contracts here so the gains are handsome but don’t forget to watch your trade size in the future. BABA Much like BIDU above, China is still weak so this position has gained little ground. Holding. GLD Off to a good start. There’s a bit of trepidation in market sentiment so the gold position is starting off ok. We’re looking for the $195 strike in the coming months. Holding. This Week’s Play For this week, we are not going with a play, but rather for the holiday, I wanted to dive into a couple of things that I feel need clarity in your trading. Alpha and Beta In professionally managed accounts, its performance is measured by its alpha and beta numbers. Without going into too much boring explanation, in a nutshell your alpha is the performance of your account versus the benchmark (in most cases, it’s the S&P 500) and the beta is the risk taken to achieve its return. Believe it or not, the buy and hold strategy isn’t terrible for a lot of people. Do I recommend it? No, but for those that do not want to deal with any kind of learning curve in the markets, it works for them. You’ll average 10% annually and as long as you don’t look at it, especially in times of drawdown, you’ll be fine. But that’s not what we’re here for is it? No, it is not and in fact you CAN outperform the market but not in the way you read about. Can the markets make you “rich”? Depends on your definition of rich. Over time, as with most assets, they should reap you returns well north of where you attained them. Ever read about “a trading pro” who said to buy XYZ stock and now it’s 1000% higher? Or my current favorite, the endless people who said to buy Tesla 2 years ago. Look, I’m all for holding stock and reaping dividends in the long term but what isn’t explained is the risk. Please don’t ever feel like you’re missing out in the markets. That’s how people will feed off you and take your money. Most traders will fall into two categories. The first is looking for the next high flyer by combing through the small caps and then there’s the bunch that will try to leverage their money with derivatives like options to catch moves. Learn this and learn it well: If you massively outpace the markets randomly in a year using derivatives (which happens a lot), DON’T GET GREEDY. Sounds silly right? You’ve heard it a thousand times before, right? But what does that really mean? Volatility The “Holy Grail” to traders will vary greatly. Do you want to know the true Holy Grail? It’s timing volatility expansion. Period. We trade volatility quite a bit here and there’s a reason for it. It is purely math and its probabilities are more predictable. Does that mean we know when volatility will expand? Absolutely not. Take a look at the VIX chart below:   This is just a small period of time but wouldn’t it be great to know when those red circled areas would occur? Those areas are market sell offs and when your account would hit a drawdown if you are long biased. STOP TRYING TO AVOID DRAWDOWNS. If there is anything you take away from this program it’s that. No one likes to lose money so it’s natural for one to seek out the path to zero drawdowns. You will lose money in the long run if you stay that path, I can promise you that. Instead, embrace your drawdowns and accept it will happen. How much you give back, you can control, use it. The yellow circled areas are the periods of time the market remained complacent. This is where emotions that drive the market begin to stir. Why? Because you have various outlooks, with most being the obvious, in that the market “is due a correction”. So, what happens? You have one trader that liquidates all of his long positions and goes to cash and then you have another trader that feels there will be no correction and remains long. Who’s right? They both are. It’s the timing that will ruin you. If the market pushes higher then the trader playing it safe will feel “FOMO” (Fear of Missing Out) and if the market sells off then the aggressive trader will get hit with a drawdown and be tested. If you had to choose, who would you rather be? I’d rather be neither, but if I had to choose, then the FOMO guy because at least he lost very little, if at all and being in cash IS a position. The aggressive trader now has to deal with being underwater. So, I want to explain why fear of missing out is the single worst thing you can feel in your trading. Look at this chart:   This was the move leading up to COVID. The first yellow arrow was when market theorists began being cautious. If you went to cash here, you’d have to be in cash or equivalent for over a year before you saw a pop down. Do you have that kind of patience? Most do not. Alternatively, if you stayed long with the same position sizing and aggression you always do, the yellow line shows from the entire year to the correction where you’d be. You would have had a nice gain prior to the move down but then gave it all back and even went negative for a short time. I know what you’re thinking, “I would have not stayed in that long” blah blah blah. Most would have and do. Hindsight is 20/20 and skimming a year on a chart is a breeze but living it day to day is considerably harder. The COVID sell off was a very fast rebound but that is NOT the norm. Now, the red arrow is where most FOMO guys hop in and as you can see, it was a bad choice. So, what do I want you to take away from all of this? If you’re the safe guy, things aren’t so bad if you kept your emotions in check. If you were the aggressive guy and stayed long with the same vigor, then all was not lost, provided you took gains but most don’t (there’s that greed again). You could have gone to cash mid-move, but as you can see by the yellow line, if you did that you’d be at about breakeven just like the conservative guy. The only one who truly lost would be the FOMO guy where odds are he/she did not take any gains or hedge since it was early in their move and they had to wait much longer to see breakeven again.   What should you do? Don’t overcomplicate it. If you want to be conservative, do so, but be prepared to keep your emotions in check if your timing is off. If you want to be aggressive, do so, but remember to take gains and reduce your size as the market moves your way. But above all, do not be the FOMO guy. This guy is the one that gives his paycheck to the markets and complains he can’t catch a break. Patience is key. Remind yourself you can outpace the markets but not by outrageous numbers (because it’s not sustainable long-term) and that you can control how much money to give back to the markets. Pick a side and stay on it. Have a wonderful Holiday everyone. Our next update will be after the New Year. Walk away from the screen. Markets aren’t going anywhere. And also, for now, we will continue as a free service until we can finish with regulatory hurdles, so I thank you for taking the time and reading my content. More to come in 2022 and we’re excited. Trade focused, Benjamin – Market Monster Hunter  Sent to: {EMAIL} [Unsubscribe]( Spyrol Group, LLC, PO Box 1510, Clearwater, Florida 33757, United States