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Monday, February 15, 2016 - Weekly e-Newsletter - Issue No. 692

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Economic Calendar
Date
ET
Release
For
Consensus
Prior
Feb 16
8:30 AM
Empire Manufacturing
Feb
-9.9
-19.4
Feb 16
10:00 AM
NAHB Housing Market Index
Feb
60
60
Feb 16
4:00 PM
Net Long-Term TIC Flows
Dec
NA
$31.4B
Feb 17
7:00 AM
MBA Mortgage Index
02/13
NA
9.3%
Feb 17
8:30 AM
PPI
Jan
-0.2%
-0.2%
Feb 17
8:30 AM
Core PPI
Jan
0.0%
0.1%
Feb 17
8:30 AM
Housing Starts
Jan
1171K
1149K
Feb 17
8:30 AM
Building Permits
Jan
1200K
1232K
Feb 17
9:15 AM
Industrial Production
Jan
0.3%
-0.4%
Feb 17
9:15 AM
Capacity Utilization
Jan
76.6%
76.5%
Feb 17
10:30 AM
Crude Inventories
02/13
NA
-0.754M
Feb 17
2:00 PM
FOMC Minutes
Jan 27
NA
-
Feb 18
8:30 AM
Initial Claims
02/13
274K
269K
Feb 18
8:30 AM
Continuing Claims
02/06
2237K
2239K
Feb 18
8:30 AM
Philadelphia Fed
Feb
-2.9
-3.5
Feb 18
10:30 AM
Natural Gas Inventories
02/13
NA
-70 bcf
Feb 19
8:30 AM
CPI
Jan
-0.1%
-0.1%
Feb 19
8:30 AM
Core CPI
Jan
0.1%
0.1%
 
This Week's Featured Trading Indicator:
PARABOLIC SAR

Developed by Welles Wilder, Parabolic SAR (or stop-and-reversal) is an indicator used to help determine the momentum of an asset’s price movements. The interpretation of price momentum rests on the dots. A dot below the asset’s price indicates a “bullish” momentum while a dot above indicates a “bearish” momentum. If price violates the dot (which would be considered a “stop” or “reversal” point), then it indicates the possibility of a reversal in trend.

PROS:

  • Parabolic SAR can be used in combination with other indicators to gauge or confirm a trend.
  • The dots can be used to indicate points at which price reversals can be anticipated.
  • Some traders have used the dots for stop loss or stop and reverse orders (though this may prove to be risky if markets move sideways or if reversals are small retracements that will once again reverse).

CONS:

  • During sideways market movements, price will violate upper and lower dots frequently as there may not be any momentum or trend present.
  • The Parabolic SAR is not capable of showing longer term trend momentum; the dots are calculated based on momentum, so that as price continues to extend, the dots move closer to the price.
This Week in History

Feb 18, 1873 - Credit Mobilier implicated in bribing Union Pacific to sdecure building contracts and charging US govt double the job costs

Feb 21, 1946 - Pres. Truman created the Office of Economic Stabiliztion designed to watch prices and try to keep inflation down

Assessing your Trading Performance after Taking a Loss
Part 2 – Following your trading plan (and losing)

The markets can be a harsh teacher, but that’s only if you pay attention. Everyone takes losses, and every loss presents an opportunity to learn. If you are a new trader, a loss can be taken as an opportunity to assess your method or performance. If you are an experienced trader, a loss can serve as an opportunity to re-assess what you are doing.

In this 5 week series, we’ll present a few thoughts to consider after taking a loss in your trading. We cannot cover everything, but we’ll cover several important points that traders often miss or ignore.

This week is part 2 of 5. Let’s dive in.

Part 2 – Following your trading plan (and losing)

Every trading method will experience losing periods. The question is…are the losses within your pre-determined frame of statistical expectation, or do the losses exceed what you had anticipated?

Let’s suppose that you followed your trading plan to a tee, and you still ended up taking losses. What then? If the losses didn’t violate your pre-determined expectations, then you might not have much to worry about as you were expecting to endure a certain amount of losses. If you have the means to double-check this, then you should. For instance, some platforms have market-replay capabilities, such as our GLOBAL ZEN TRADER platform – REQUEST A DEMO. What would happen if you ran a simulated trade of the same live session that day? If the difference is minimal, then you can confirm your trading result. But if the difference is significant—most likely due to slippage—then you’ve got problems.

Slippage matters and it is something that doesn’t show up in a simulated environment. The reason for this is that simulated fills are not subject to real supply/demand conditions. If you find a large discrepancy between your live and simulated trading results due to slippage and fills, then you know that accurate performance stats must come from live trading (and if your method is based on hypothetical stats, then those stats can be unreliable).

So if you follow your trading plan and experience losses, you need to evaluate if the losses fall within the realm of pre-determined expectation. If they don’t, then your losses indicate that you may not have analyzed your trading method well enough - we will explore this topic next week.

 
 

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