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I firmly believe the best trading lessons come from the market… and the best of the best trading lessons come from your own work and trading.

Let me share some recent trades we published for our MarketLife clients. Below, you’ll find every trade we published as part of our weekly TradeLab series in October.

The idea behind TradeLab is that I’m illustrating a market concept in the context of actual, tradable setup. This way, we get to see patterns as they play out, for better or worse, win or lose, and also get to see the interactions of complex, real world relationships.

Here are the trades with the original charts on the left, an update on the right, and both original text and my recent comments below each trade:

From the original note (edited):

  • US stocks are in a clear uptrend (bull market) with no significant technical warning signs.
  • …objectively, correct trades are placed aligned with longer-term bullish potential. (Shorts certainly can be taken, but must be treated as very short-term, countertrend trades.)
  • It is certainly possible to take long positions in major ETFs for indexes such as SPY, QQQ, or IWM. These positions are fully diversified, which is good from an investment standpoint, but probably bad from an active trader’s perspective.
  • AAPL stands out as an exceptional candidate. Look to enter longs on further upside, with stops in the 215-219 range. Look to take partial profits at 1R and trail a stop on the rest.

Update:
Realistically, this turned out to be the wrong trade at almost exactly the wrong time. AAPL broke to new highs the next day, and that’s as high as it’s been since then. However, note the failure was “polite”–despite the fact the market collapsed in early October 2018, this stock did not participate in the downside volatility. A reasonable trade outcome here would have been a less than full-sized (full-sized = original, intended risk on the trade) loss. This trade is a good example of a picture-perfect setup that simple did not work out. Many of your trades, over the course of a trading career, will look like this.

 

 

From the original note (edited):

  • Markets move in alternating waves of strength and rest. Two inside bars in a row (i.e., an inside bar following an inside bar) is one sign of consolidation or rest….
  • Recent action in US stocks sets up a good opportunity for a breakout trade. Though this trade may have longer-term significance, short term traders can treat it as a 1-2 day trade.
  • Look to enter on a breakout of the small inside day (Monday 10/15). The trade is long above Monday’s high, and short below the low. Use the other side as a stop.
  • Take partial profits at 1R…

Update
This trade was set up in the aftermath of the October 2018 collapse. This is an example of a very short-term breakout trade: trading strong momentum off of an inside bar (or two inside bars, in this case.) This type of trade is only based on a few bars, so it’s not reasonable to expect long-term followthrough–you’re just looking for a quick, “hit and run” trade here. The market gave us a long entry, easily hit the 1R profit target, and showed failure a day or two later. If you were a short-term trader, you were very happy. If you were a trader looking for that longer-term significance, you were disappointed, but you still should have booked a winning trade–that takes some of the edge off the disappointment! 

 

 

From the original note (edited):

  • Gold has a technical setup that could support a further advance: a recent break from a nearly 2 month long trading range, followed by a shorter consolidation above the previous resistance at the top of that range.
  • This trade could be executed either in futures or GLD.. .expect to see immediate confirmation; if the trade is not profitable within 2-3 trading sessions, consider adjusting or exiting.
  • Note that higher timeframe patterns are, at best, neutral to perhaps slightly bearish and that silver does not confirm this setup. This does not necessarily contradict the setup, but perhaps should be considered in trade management.

Update:
This is a good example of why it’s so important to avoid confirmation bias–the nasty tendency to only see data that supports your trade. We were looking for “immediate confirmation”; the market did trade higher, but it did so without any momentum and quickly stalled. The correct course of action is to radically tighten stops and walk away with a very small loss from this trade. Most developing traders will hold on, hoping for the best, but, in my experience, hope kills even more surely than greed. Always look for reasons your trade is wrong. Focus on contradictory information, and be prepared for even the best setup to go from hero to zero in one bar! A reasonable outcome for this trade was a very small loss.

 

 

From the original note (edited):

  • Crude oil has extended in several recent selloffs on the daily chart, but is just now coming into the lower Keltner channel.
  • The recent consolidation is consistent with a bear flag: a pattern setting up another wave of selling.
  • Look to enter shorts only on a breakdown (unless using options) below recent support in the pattern. Use stops just above the high of the pattern, and one solid profit taking plan is to take at least partial profits at 1R.
  • Weekly chart is still at least moderately bullish…

Update:
Not much needs to be said here. This was an easy trade, which played out in textbook fashion. (And another chapter in my ongoing saga of trading crude oil!) There are other lessons from this trade, but let’s just highlight the most important: you still gotta take disciplined profits. Even when a trade plays out exactly as you expect, follow your plan exactly. Don’t hope for more. (Hope kills.) Don’t get aggressive when a trade is working–just follow your plan.


These trades are part of our MarketLife Plus service. What does it cost you to get trades like this? Less than a dollar a day.

We priced this tier of our service to be accessible to everyone, as a service to the developing trader who maybe has a small account but still needs reliable lessons drawn from current market action (and, oh, the occasional opportunity to make a good trade or two!) Check it out. We have a no-risk, no-obligation trial, an ironclad “more than 100% moneyback guarantee”, and I stand behind everything we produce.

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