The Wolf Den #41 - Trades, Markets, OBV, Metals, Stimulus and More
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A MAJOR THANK YOU AS ALWAYS to my newsletter sponsors, VOYAGER and PHEMEX. Please make sure to read about them below and to check them out! I use Voyager for my spot trading and investing (and to compound interest) and I use Phemex for trading with leverage.Last week I went into great detail on the EIDL and PPP loans being offered by the United States government to help "small businesses" through the global economic crisis. I also mentioned that companies like McDonalds, as well as Wall Street firms, were taking advantage of the loose wording and claiming need, leading to trillions of dollars in loan applications in the first days of the program when only 350 billion was allotted. Since then, additional small business stimulus was rejected by the Senate, while 2.3 trillion more was allocated to propping up the stock market.This morning, Bloomberg confirmed what I said about Hedge Funds, which was based on conversations I had with Wall Street friends. Everyone wants a piece of the pie and guys with hundreds of millions are claiming need.Sad and morally bankrupt - but not illegal. Should we be surprised that Cronyism has supplanted Capitalism in the United States and that any wealthy person who desires a bailout can get one? It's socialism for the rich, and we know who will get the short end of that stick. The average American.Meanwhile, the stock market is rising on stimulus, while the rest of Americans suffers. To add to the lunacy, the International Monetary Fund (a historically corrupt organization itself, but that's a top for another day) has predicted "the worst recession since the Great Depression." The disconnect between the stock market and reality is mind boggling and probably not even worth harping on at this point - but it's important to understand what is happening.As traders, opportunities continue to appear in multiple markets. I am still weary of stocks and took a few shorts last week, as you know. I short sold SPY (now slightly underwater) and also shorted BRK.B (Berkshire Hathaway aka Warren Buffett). I am still holding that short as well, although it looks shaky as the market continues to show signs of strength.Subscribers often ask me how I short these assets. Since I am generally risk averse and try to avoid trades that I have to babysit, I rarely trade options. When I want to short something, I generally strictly do a classic short sell on ETRADE. Sometimes I use inverse ETFs, but that's a bit advanced and can be very confusing if you have never done it before, as they are most often structured to be used for a day, not for holding. The simplest way to short is to open a margin account and short sell - but this carries risk, because you are technically borrowing to make it happen. It's still FAR EASIER to just be patient and buy at the right time.I have also taken a long position on silver, which is discussed in the precious metals section below. I also took my first Bitcoin short in years this weekend, which I closed for a 5% profit just a day later. I am currently long again, but there are mixed signals. I am cautiously optimistic, although more downside certainly would not surprise me.We can continue to trade through any market, making money regardless of direction. All that truly matters is how we manage the risk on those trades.As a quick reminder, I ONLY trade with 15% of my portfolio. Of that 15%, I only assume 1-2% risk on a trade. This does NOT MEAN (people have been confused) that I set a stop loss 2% below my entry. It means that I risk 1-2% of the 15% that I trade with, which depending on position size can be a much larger loss on the individual trade. Here's a simple example.Let's say my entire portfolio is 100K. That means I have 70K investments, 15K cash and 15K to trade with. If this is the case, I can lose $150-$300 on a given trade, which amounts to 1-2% of my 15K trading stack. If I see a trade that I want to enter, and the appropriate stop loss is 10% below my entry, then I back calculate my position size against my portfolio to reflect this. If I want to risk 1%, then I take a $1,500 position on the trade - I can afford to lose 10% on that trade, which amounts to $150 or 1% of my trading portfolio. If I see a trade that has an invalidation and stop loss 1% below my entry (this is rare, but good for illustration), then I can take a 15K position - my entire trading stack. Your STOP LOSS and invalidation determine your position size. This is the MOST IMPORTANT part of trading. Appropriate position size based on your invalidation. If you can simply manage this and then NOT MESS WITH THE TRADE BY MOVING YOUR STOP, then you are likely to be successful.Easier said than done.What’s in this issue?Bitcoin Thoughts And AnalysisThe Wolf Of All Streets Podcast Ft. Zac PrinceAltcoinsThe Case For Bitcoin And GoldOne Image Captures It AllOn-Balance Volume (OBV) - Follow The "Smart Money"Goldman Sachs Is BipolarHow To Use Your Stimulus CheckPrecious MetalsVoyagerPhemexMusic Corner
The Wolf Den #41 - Trades, Markets, OBV, Metals, Stimulus and More
The Wolf Den #41 - Trades, Markets, OBV…
The Wolf Den #41 - Trades, Markets, OBV, Metals, Stimulus and More
A MAJOR THANK YOU AS ALWAYS to my newsletter sponsors, VOYAGER and PHEMEX. Please make sure to read about them below and to check them out! I use Voyager for my spot trading and investing (and to compound interest) and I use Phemex for trading with leverage.Last week I went into great detail on the EIDL and PPP loans being offered by the United States government to help "small businesses" through the global economic crisis. I also mentioned that companies like McDonalds, as well as Wall Street firms, were taking advantage of the loose wording and claiming need, leading to trillions of dollars in loan applications in the first days of the program when only 350 billion was allotted. Since then, additional small business stimulus was rejected by the Senate, while 2.3 trillion more was allocated to propping up the stock market.This morning, Bloomberg confirmed what I said about Hedge Funds, which was based on conversations I had with Wall Street friends. Everyone wants a piece of the pie and guys with hundreds of millions are claiming need.Sad and morally bankrupt - but not illegal. Should we be surprised that Cronyism has supplanted Capitalism in the United States and that any wealthy person who desires a bailout can get one? It's socialism for the rich, and we know who will get the short end of that stick. The average American.Meanwhile, the stock market is rising on stimulus, while the rest of Americans suffers. To add to the lunacy, the International Monetary Fund (a historically corrupt organization itself, but that's a top for another day) has predicted "the worst recession since the Great Depression." The disconnect between the stock market and reality is mind boggling and probably not even worth harping on at this point - but it's important to understand what is happening.As traders, opportunities continue to appear in multiple markets. I am still weary of stocks and took a few shorts last week, as you know. I short sold SPY (now slightly underwater) and also shorted BRK.B (Berkshire Hathaway aka Warren Buffett). I am still holding that short as well, although it looks shaky as the market continues to show signs of strength.Subscribers often ask me how I short these assets. Since I am generally risk averse and try to avoid trades that I have to babysit, I rarely trade options. When I want to short something, I generally strictly do a classic short sell on ETRADE. Sometimes I use inverse ETFs, but that's a bit advanced and can be very confusing if you have never done it before, as they are most often structured to be used for a day, not for holding. The simplest way to short is to open a margin account and short sell - but this carries risk, because you are technically borrowing to make it happen. It's still FAR EASIER to just be patient and buy at the right time.I have also taken a long position on silver, which is discussed in the precious metals section below. I also took my first Bitcoin short in years this weekend, which I closed for a 5% profit just a day later. I am currently long again, but there are mixed signals. I am cautiously optimistic, although more downside certainly would not surprise me.We can continue to trade through any market, making money regardless of direction. All that truly matters is how we manage the risk on those trades.As a quick reminder, I ONLY trade with 15% of my portfolio. Of that 15%, I only assume 1-2% risk on a trade. This does NOT MEAN (people have been confused) that I set a stop loss 2% below my entry. It means that I risk 1-2% of the 15% that I trade with, which depending on position size can be a much larger loss on the individual trade. Here's a simple example.Let's say my entire portfolio is 100K. That means I have 70K investments, 15K cash and 15K to trade with. If this is the case, I can lose $150-$300 on a given trade, which amounts to 1-2% of my 15K trading stack. If I see a trade that I want to enter, and the appropriate stop loss is 10% below my entry, then I back calculate my position size against my portfolio to reflect this. If I want to risk 1%, then I take a $1,500 position on the trade - I can afford to lose 10% on that trade, which amounts to $150 or 1% of my trading portfolio. If I see a trade that has an invalidation and stop loss 1% below my entry (this is rare, but good for illustration), then I can take a 15K position - my entire trading stack. Your STOP LOSS and invalidation determine your position size. This is the MOST IMPORTANT part of trading. Appropriate position size based on your invalidation. If you can simply manage this and then NOT MESS WITH THE TRADE BY MOVING YOUR STOP, then you are likely to be successful.Easier said than done.What’s in this issue?Bitcoin Thoughts And AnalysisThe Wolf Of All Streets Podcast Ft. Zac PrinceAltcoinsThe Case For Bitcoin And GoldOne Image Captures It AllOn-Balance Volume (OBV) - Follow The "Smart Money"Goldman Sachs Is BipolarHow To Use Your Stimulus CheckPrecious MetalsVoyagerPhemexMusic Corner