Another Trading Survival Tool You Must Know From Rob Hoffman

Welcome back! In tonight’s video what I want to do is talk to you about something that really ties to a theme I shared with you way back in January, February and March of last year’s videos. It is using the news to help avoid the disaster that becomes of us for many of retail traders. This morning was a classic example of this and I was warning the student family about this in the Live Trading Room. It saves a lot of money from a lot of disasters. What happens is that you’ll see the news coming in the US Open. This morning it was “US sees second straight quarter of rapid growth”. That is awesome and great and look at the market. Here we go ahead and have this great push to the upside as well (on my charts at 1:03). Fantastic.

How many of you as retail traders have come in and seen the positive news then see the positive market. You go ahead and jump in long only to have a disaster. How many of you have read really bearish news and you walk in to the market selling off like it is going to heck in a hand basket only to have it turn around and v-spike right back up and you’re caught with loosing lots of money. It is a concept that I share a lot. It is a retail trap. In fact, I have the title of this screenshot as classic retail breakout failure setup. It happens so often because retails traders come in right before the US open, in most cases, see the news and how it jives with what we are seeing on the screen and then jump in.

I learned many years ago that that could be very hazardous to your financial health. It was back in the 90’s when I couldn’t figure out, “why does this always happen to me?” I eventually discovered this correlation between super positive news and the market reacting into the open or vice versa.

What ended up happening here today was that retail traders thought they had gotten in just in time to catch the next breakout. The problem is that we conveniently forget that we are sitting here into hourly down trending resistance (on my charts at 2:40). You see that coming down like a ton of bricks? We also forget that on the daily chart we are smack dab in the middle of a plethora of resistance that I’ve been focusing on for the last couple of days. This is the DOW futures chart that we are looking at. All of the stock index futures were struggling at their down trending speed lines in relation to the rising trend in the backdrop. My forecast was that this was going to pull back and start chopping around for a while. That is exactly what happened.

With those good feelings and the good news people jumped in and then they just got crushed (on my screen at 3:25). There was no real chance for an out from where people got in at that point. There just wasn’t much of a chance. That stunk for some people that didn’t heed the warnings to watch out for this whole process.

I wanted to share that tip and trick with you guys. Whenever you see a big sell off into the open and you see really bearish news, watch out for those v-spikes back up. Also, when you see really bullish news and you see a bullish rally into the open, watch out for short term reversals that might take your head off.

It is one of those many risks of trading in those first 15 minutes of the US open that I usually warn people about.

You guys have a great night. I look forward to seeing you in the weekend videos or in the Live Trading Room tomorrow morning. Have a great evening. Take care.

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