Decision Point Time

market regime prop trading Feb 15, 2021

First off, I got a buuuuunch of questions about yesterdays email regarding Prop Trading. Let me address some of them here then we'll get in to my thoughts on the market.

I used $100k example, but I think you can start with a prop firm for a couple thousand dollars. Or you could do $1 Million dollars too, I'm sure. Just wanted to make sure that you didn't instantly eliminate yourself because I said $100k.

Next, why wouldn't you just do a hedge fund? You certainly can but hedge funds are a lot more work with raising money, hiring attorneys, accountants, regulation, compliance, software, fund raising and it's as much about managing relationships with your investors (if not more) than just trading. You can continue to manage money even if you are losing money, and still charge a management fee.

With prop, you just trade. If you make money, you get more money. If you don't make money, you don't get more money, you lose it. 

So if you can make money, consistently, with lower risk, trading, you can make a looot of money. If you can't then you should be working on being able to do that before considering a hedge fund or going prop.

Here's the link to joining a Forex prop trading program

And here's the one for the Options prop trading program

Any more questions, hit reply to this email.

On to markets...

Let's look at the S&P 500 emini futures aka "the market"

If you recall what Grant wrote about with the Bear Quiet Regime of 2008, we are in a similar spot, the characteristics of a bear quiet regime are the same. 

  • Bounces are aggressive and are face ripping 10% up/down moves in a day
  • Longs and shorts work well, but your risk ranges are massive, so adjust position sizing
  • Best trades tend to be VBO's to the short side

And now we've moved back in to a bear quiet market regime, currently. But if we keep going higher we end up in a Sideways/Neutral regime.

From here we can easily move to Bear Volatile or Sideways/Neutral and the range to get to either is MASSIVE

This is not easy to trade.

But we have a double top formed on the daily chart and a sell stop below Tuesdays low would have triggered the short. The path of least resistance is down, obviously. 

But this is where the ol' Bear Trap can get you. 

If bears get sucked in to get more emboldened on the short side, aggressive bears that is, and the second leg down fails, they'll have to cover above Tuesday's high.

If that happens, then the bulls who took this bounce to exit their longs and get to cash are going to see it as they missed the V Bottom and will start buying hand over fist. 

How many people do you know who have been hitting you up asking if they should've bought the dip, or bragging that they bought the dip. I mean your parents, or people who don't trade, they just wish they bought the 2009 bottom and so they are doing the same here. 

That's the recipe for another knee to the groin selloff

Just my thoughts on this market today.

I'm personally on the sidelines coaching traders through this and waiting patiently to find a low risk entry. I don't see it yet. 



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