Keep an Even Keel

Oil went down, and earnings for several blue chip companies were good. This was the trigger to move the market to a high volume follow through day, where the market moved to theoretical Dow tops of 11,487.

Traders were able to buy the July 580C as low as 1.50, and sell to highs of 4.40, for the 4th profitable trade of the week, and leaving us with no open inventory.

Bulls are now in charge, and the market babblers will be telling us of the upside potential, and that the worst is past.

To understand what is really occurring, we need to understand more of WHY oil went up, WHY mortgages defaulted, and WHY no government intervention has helped.

Floyd Lessson #4788:

Let's assume the mortgage industry problem started from how the industry was structured with three different groups. The first group was paid by how many underwritings they could sell. So they had an incentive to make it easier for people to get mortgages. No documentation. No money down.

The next group is the rating services. House prices were going up, because house prices always go up, and there's a big demand for housing from mortgages with no money down. So house prices went up. Rating services looked for the pieces of paper already issued, and they found that in the bubble no one had defaulted. They then falsely concluded that these were great investments. And the third part of this story, is that investors concluded that these were great investments with clearly high returns and high credit ratings.

The mortgage industry reached the point where "everybody" who wanted a loan had one. By this time all the loans, the "paper" was stinking, and the industry was being held up by each sector inflating the true loan values. The house of cards fell.

At this point no one really knows who holds all the bad paper, and the house of cards erodes the financial sector because all the money is going bad. The losses mount with all financial institutions. The government will have to be at the rescue again.

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Keeping an even keel while trading is key. You must be consistent while there is uncertainty in the market, and attempt to simply interpret conditions around support/resistance lines. Watch projections of short term movement. Have clarity to understand that it is your FEAR of not being right that causes the greatest losses. Once this behavior begins ("I am not going to make a living, I am failing my family, All my money is going away") the Fear of Failure combines with the FEAR of Loss, a double edged sword of set up to fail.

This is a form of self sabotage.

There is no real predictability. When traders complain Floyd is wrong on a signal, or group of signals, or when the market surprises us all with shocking developments only a few will be right in their prediction. It is our human desire to be able to predict that sets us up to fail most often. When we risk and must win, this is a form of "black and white, and one must win." It does not ever really occur. When one wins at anything, a sense of loss occurs. Think of that.

It's diabolically true.

To trade successfully one must be a professional, not an amateur.