Trust Your Indicators

A recent email that I received read:

“I am a new subscriber, and lost my nerve at around 11:30 a.m. and decided to change my order (to sell for a 5% profit) to sell for an 8% loss. I was unwilling to lose more than that, but as the rest of the trading day continued after my order was filled, I realized that I should have stayed with my original order, as per your recommendation. I realize now that I should have trusted your judgement and not bailed out.”

The author’s name has been withheld to protect the guilty.

Pilots are taught to trust their instruments. If you find yourself in a cloud, you literally do not know up from down. It’s true. The seat of your pants lies to you and you may think you’re flying straight and level when, in fact, you’re quickly spiraling to the ground. Flight academies teach us that, no matter what, no matter how it “feels,” watch and trust your instruments. If you are heading to the ground, you need to take corrective action. Immediately. “Trust your instruments,” they say.

The same holds true 98% of the time for stock trading. For example, when we determine with great conviction that the market is going up, based on our fundamental research, technical analysis, Ahrens’s deep dive analysis, seasonals, current market conditions and activity, you can be sure it is a high probability trade, especially given that there is enough time to expiration. You may not believe it and even trade against us, but at some point, our picks will likely hit our target.

This applies to all our options selections, be they the DayTradeSPY Signal, Pick of the Day or trades we initiate in the Trading Room. We have no interest in advising anything but trades that will likely be winners. “I would rather not be in a trade wishing I was than to be in a trade wishing I wasn’t” is more than just a platitudinous saying, it is our modus operandi.

Now, here’s the best part: both Ahren and I use completely independent indicators. When Ahren, through his in-depth analysis determines the SPDR S&P 500 ETF Trust (NYSEARCA: SPY) is headed down, and I completely independently concur with the same conclusion, it is almost a sure thing this stock is headed south … and you would likely do well buying put options.

I now take this opportunity to step out of my humble self and say I sure wish I had a “Hugh and Ahren” back when I learned how to trade. I cannot imagine how much money I would have saved. By extension, you have no idea how fortunate you are to be able to mine our extensive experience. We urge you to take full advantage. To be clear, we relish teaching others and watching other traders succeed. Thank you to all who chime in with their amazing results.

Another comment I recently received was to the effect that the trader was risking much more than the value she stood to gain. This is true, except that the propensity of the option to work in her favor was much greater than the likelihood of it failing. To reiterate, where we shine is the fact that these trades are very likely to succeed. Her belief of the possibility of a huge loss was valid if trading were like a gamble — either a hit or miss. We don’t trade that way. We trigger off positive proven setups, making sure there is ample room to grow into, buying plenty of time and exiting when reasonable gains are attained.

Much of our success comes from having done it for so long. Between Ahren and myself, we have over 40 years of market participation. There isn’t much we have not seen, but rest assured, no two days on the market are the same.

And for that reason, we reserve the other 2% for when possible outlier trades develop, often based on unannounced news or events that present themselves. While we trust our indicators, we still have to remain vigilant for the presence of unusual market activity that may change our minds. As retail traders, we can reverse our opinions instantly.

These are just some of the concepts we discuss in our Trading Room. Imagine what you can absorb when you are actually a member! Join us daily, 9:20 to 10:30 a.m., ET. Click here to subscribe.

New to options? Click here to join us at 8 p.m., ET, Sunday night for our weekly Introduction to Trading/Week in Review!