{"id":67538,"date":"2017-05-28T01:08:00","date_gmt":"2017-05-28T08:08:00","guid":{"rendered":"https:\/\/brookstradingcourse.com\/?p=67538"},"modified":"2021-05-27T04:42:03","modified_gmt":"2021-05-27T11:42:03","slug":"china-futures-daily-questions-answers-2","status":"publish","type":"post","link":"https:\/\/www.brookstradingcourse.com\/es\/ask-al\/china-futures-daily-questions-answers-2\/","title":{"rendered":"Ask Al: China Futures Daily Q&A Part 2"},"content":{"rendered":"\n

China Futures Daily Q&A: Part 2 \u2013 Q8 to Q12<\/h2>\n\n\n\n
\"China<\/a><\/figure><\/div>\n\n\n\n

Al Brooks leaves for his China lecturing trip later today. Sadly, the exact schedule is still not finalized and details will be published as soon as available for anyone interested in joining Al.<\/p>\n\n\n\n

Here is the second part (Q8 – Q12) of Al’s China Futures Daily News website<\/a> question and answers, with audio recording and transcript below.<\/p>\n\n\n\n

 <\/div>\n\n\n\n

Audio recording – Questions 8 to 12<\/h3>\n\n\n\n

Keeping good mental attitude<\/h3>\n\n\n\n

Going into any trade, I\u2019m always thinking about whether I\u2019m going to be taking a scalp or a swing profit. If I\u2019m taking a scalp, it\u2019s simple: I know what my profit target is going into the trade, and if it hits my target, I take my quick profit and exit. If I\u2019m taking a swing trade, my intention is to hold on for a minimum profit of at least two times my actual risk.<\/p>\n\n\n\n

I distinguish actual risk from initial risk because there\u2019s a mathematical difference between the two. For example, if I\u2019m buying and I put my stop below my signal bar, that is my initial risk. But if the market only pulls back 2 or 3 ticks after I enter the trade and then strongly rallies in my direction, my actual risk may have only been 3 or 4 ticks.<\/p>\n\n\n\n

The mathematics of all trading is based upon actual risk. A trader should always go for a reward that is equal to at least two times his actual risk. However, that is the minimum goal. The minimum goal is rarely the best goal. In general, when I\u2019m swing trading, I stay in the trade until the trade is no longer valid \u2013 for example, if there\u2019s a signal in the opposite direction or I\u2019m at the end of the trading session.<\/p>\n\n\n\n

If a trade goes two, three, four times the actual risk, I usually take at least partial profits. A lot of beginners lose frequently. When they finally have a win, they\u2019re so afraid of watching it turn into another loss, they take very quick profits. And that is unfortunate. If a trader has a low winning percentage, then he needs rewards that are much bigger than the risk.<\/p>\n\n\n\n

If you think about the trader\u2019s equation, it\u2019s a balance between risk-reward and probability. If you lose most of the time, then your probability of success is small. The only way you can trade profitability then is if your reward is much bigger than your risk. You need a very high, a very strong risk-reward ratio. That means you need a very big reward.<\/p>\n\n\n\n

I understand that if a trader loses most of the time, it\u2019s natural to panic and be so happy at any small reward that you grab that reward. However, that is scalping. If you lose most of the time, you cannot scalp. A scalper needs a very high probability to be profitable. A good scalper is going to win 70%, 80%, or 90% of the trades. But remember, there\u2019s a trade-off: the higher the probability of success, the worse the risk-reward ratio. In general, a good scalper is going to win 70%, 80%, or 90% of the time. However, his risk-reward ratio is lousy. His reward is usually very small and his risk is relatively big.<\/p>\n\n\n\n

A beginner cannot win 80% or 90% of the time; therefore, a beginner cannot scalp. That means a beginner cannot take a small profit. If a beginner is going to be losing most of the time, he needs a very strong risk-reward ratio. That means he needs a very big profit. That means he has to stay in the trade until the premise of the trend is no longer valid.<\/p>\n\n\n\n

For many traders, that is emotionally difficult to do. The key to success is trading the \u201cI don\u2019t care\u201d size. That means you have to trade so small that you really do not care if you lose money. I understand the argument that if you trade so small that you do not care if you lose money, you\u2019ll never get rich; however, you will get practice doing the right thing. Over time, you can then increase your position size, and at some point you might be surprised to find that you\u2019re making an incredible amount of money.<\/p>\n\n\n\n

Question #9: Is trend trading always effective anywhere? What will the technique analysis be in the future, in your opinion?<\/p>\n\n\n\n

Trend trading<\/h3>\n\n\n\n

Markets are the same now as they were 100 years ago, 200 years ago. I\u2019ve looked at a lot of charts from 100 years ago and longer, and if I remove the date at the bottom of the chart and the price scale at the right of the chart, I cannot tell whether the chart is a weekly chart from 1910 or a 5-minute chart from 2017.<\/p>\n\n\n\n

Why is that? It\u2019s because markets move based upon rational human behavior. Markets are controlled by genetics<\/a>. As long as we are the same species, we will behave the same. Trading is just a reflection of rational human behavior.<\/p>\n\n\n\n

Most of the American markets are dominated by computer algorithms, yet the markets trade the same as they did 20 years ago when there were no computers and 100 years ago when there were no computers.<\/p>\n\n\n\n

Why is that? It\u2019s because the computers are doing what is rational. Well, good traders have been doing what is rational for hundreds of years. The difference is computers just do these things faster. The result is they\u2019re doing the same thing as excellent traders have been doing forever, and therefore the charts look the same.<\/p>\n\n\n\n

The result is that trading will always be the same going forward. The computers will not change things. All they do is trade faster, and that makes a difference if you\u2019re trying to make a trade that lasts 1000th of a second and trying to make one penny in a stock. However, that has no bearing on what I do. I do day trade and I sometimes hold a trade for as short as 10 or 20 seconds, but most of my trades are for 5 minutes to an hour. Those computers have no effect on what I am doing.<\/p>\n\n\n\n

Question #10: Will you please forecast the macro situation of the investment market in the future? What\u2019s your opinion about the trend of gold and oil?<\/p>\n\n\n\n

Market and commodities forecast<\/h3>\n\n\n\n

I talk about this regularly in my chat room and on my website. It\u2019s interesting. Let me just say one thing that you may not have considered. That is that if you look at any market \u2013 any market, even gold, crude oil \u2013 and you look at a chart that goes back 100 years, the price today is more expensive than it was 100 years ago. That\u2019s especially true in the stock market. The price today is hundreds of times greater than it was 100 years ago, 150 years ago.<\/p>\n\n\n\n

How can that be? A lot of traders believe trading is a zero sum game, that every dollar that I make is a dollar that somebody else loses. That is flawed logic. There\u2019s a fundamental flaw to that. That might be true over the next 5 minutes or 10 minutes, but it\u2019s not true over the next 5 years or 10 years. Look at the price of the Hang Seng index today versus 10 years ago or 20 years ago. Look at the price of the stock market today versus 10 years ago or 20 years ago.<\/p>\n\n\n\n

For example, the S&P 500 today is about 2,000. Back in 2009, it was at 700. So right now it\u2019s about three times greater than it was just 10 years ago, not even 10 years ago. Now why is that? It\u2019s because the market is not a zero sum game.<\/p>\n\n\n\n

The world is creating more wealth. So it\u2019s not a zero sum game. There\u2019s more money being made. There are more people in the world, and more people means more people earning money. The total GDP of the world is increasing. The productivity of all of the people in the world is increasing. Technology is allowing people to make more money per hour all over the planet. All of this means that the total wealth of the world is increasing. That means there are more dollars to buy stocks. It also means that people who are investing have more opportunity to make money.<\/p>\n\n\n\n

Trading is not a zero sum game. The world is getting richer. As long as the population is increasing, you\u2019re creating more producers, more people contributing to the gross national product of every country. Technology is also making people more productive.<\/p>\n\n\n\n

The result is all markets are in a bull market over the course of years. No matter how bad the market is, how bad a bear market is, the market\u2019s always going to be more expensive 5 years in the future, and that is because the total net worth of the world is increasing.<\/p>\n\n\n\n

What do I think the stock market will do 10 years from now, 20 years from now? I think it\u2019s going to be higher. Thirty years from now, it\u2019s going to be higher. I\u2019ve been trading for 30 years. I started trading back in 1987, and the market is much, much higher than it was back then. Back then I remember hearing a lot of people on television talking about how the stock market was going to go down to zero. It fell to about 200, and now it\u2019s 2,000, so it\u2019s 10 times richer than it was back then.<\/p>\n\n\n\n

Do I think the stock market is going up in the future? Of course. What do I think is going to happen over the next few years? I think the United States bond market has put in the high for the next 20 years. I think the sell-off over the past year is overdone. I think the result is the bond market is going to rally over the next several months. However, I think it\u2019s never going to go back to the price it was last year, and I think it\u2019s going to continue to go down over the course of the next 20 years. Sideways to down for the next 20 years.<\/p>\n\n\n\n

That means interest rates are going to rise. A lot of traders in the United States like to have some of their money in relatively safe investments. Traders have not been putting money in certificates of deposits (CDs) because the rate of return has been so small. If interest rates go up \u2013 which I believe they will \u2013 traders will discover that the rate of return from savings accounts and certificates of deposits (CDs) will be acceptable, and they\u2019ll begin to transfer money from stocks into safe investments that have good returns.<\/p>\n\n\n\n

As a result, as the bond market goes down and interest rates go up, the stock market will be pressured to go down. Therefore, what do I think is going to happen to the stock market over the next several years? I think the stock market can go a little higher, but I do not think it\u2019s going to go a lot higher over the next several years.<\/p>\n\n\n\n

I think the S&P 500, for example, had a huge buy climax over the past year. It\u2019s at measured move targets based upon the monthly chart. So it might go up another 3% or 4% from here over the next year or so; however, I think it\u2019s going to fall at least 10% or 15% over the next 2 or 3 years, and over the next 4 or 5 years I think it\u2019s probably going to fall 30% or 40%.<\/p>\n\n\n\n

That means that the upside over the next few years is small relative to the downside. So maybe over the next few years it\u2019ll go up 3% or 4% or 5%, but I think it\u2019s going to fall 10% within the next couple of years and probably 20% or 30% over the next 5 years. Yet, since it always has rallied 3 \u2013 5 years after even the worst selloffs, it will be higher again 3 \u2013 5 years after any selloff.<\/p>\n\n\n\n

Talking about gold and crude oil, gold had a huge rally and a big, big buy climax that ended in 2011. It\u2019s given back about half of that. Very often when there\u2019s a huge buy climax like that, the market pulls back about 50% and then goes sideways for a long, long time. That\u2019s what gold has been doing for the past 5 years. It\u2019s now deciding whether it\u2019s going to go back up to the 2011 highs or all the way down to the 2008 lows.<\/p>\n\n\n\n

I think it\u2019s slightly more likely that it\u2019s going to go up than it is that it will go down, but there\u2019s no compelling evidence that it\u2019s going to go up anytime soon. It\u2019s been in a trading range for 5 years. It could easily be in a trading range for another few years. Yes, it rallied strongly at the beginning of 2016, but only up to the top of the channel that began after the sell-off in 2013. To me it looks like it\u2019s in the middle of a trading range, deciding whether it\u2019s going to go back up to the 2011 highs or continue sideways indefinitely. To me there\u2019s no compelling reason to buy gold right here, other than to trade the swings within the $400 range. Between 1,100 and 1,500 or so.<\/p>\n\n\n\n

Crude oil? Crude oil has had two huge moves down from the highs in 2008. It sold off strongly into 2009, went sideways for about 6 years, and then had another leg down in 2014. The sell-off was climactic, and the market\u2019s probably going to be sideways here. It might get back up to the $70 or $80 level at some point in the next few years, but I think there\u2019s no evidence that it\u2019s going to get back up to $100 anytime soon. It probably will have to go sideways for years \u2013 2 years, 5 years, I don\u2019t know. It probably needs several years of sideways move to build a base before it can get back up to that level, if it ever gets back up to that level.<\/p>\n\n\n\n

Question #11: What do you think about the Chinese financial markets?<\/p>\n\n\n\n

The Chinese financial markets<\/h3>\n\n\n\n
\"China<\/a><\/figure><\/div>\n\n\n\n

I frankly wish that I was living in China. I say that \u2013 obviously I\u2019m very happy where I am, but from a trader\u2019s perspective, I think the Chinese financial markets are excellent. The GDP is very high. I think it\u2019s like 7% right now. It\u2019s low for China over the past 10 years, but based upon American standards, a GDP of 7% is extremely high.<\/p>\n\n\n\n

The result is a lot of things are going up. I don\u2019t care if things go up or down because I can always sell and make money when they go down. However, I\u2019m interested in big moves, and the Chinese market moves a lot \u2013 which is good for a trader. That\u2019s pretty much the only difference between the Chinese market and the American market.<\/p>\n\n\n\n

\"Hong<\/a><\/figure><\/div>\n\n\n\n

I\u2019ve looked a lot at Chinese stocks in the Hang Seng index, especially on the 5-minute charts. If I remove the price and time scales on the charts, they look just like American markets. They\u2019re very good trading markets. I wish the yuan was trading freely in the Forex markets because it probably would be the most popular market for Forex crosses. I think it would be fantastic to trade. I assume at some point it will be available, it will trade freely and traders will be able to trade it.<\/p>\n\n\n\n

But for trading as a day trader, I think the Chinese markets are excellent, and if I was a young person living in China, I would be really excited about the prospects for making money as a trader.<\/p>\n\n\n\n

Question #12: Can you please give some suggestions to traders who are looking for the trading way of themselves?<\/p>\n\n\n\n

Finding your trading self<\/h3>\n\n\n\n

I think the most important suggestion is Laertes\u2019 advice to Polonius in Hamlet: \u201cTo thine own self be true<\/a>.\u201d<\/p>\n\n\n\n

I think it\u2019s really important to develop confidence in your ability to analyze markets, and that takes a lot of time. You have to study charts a lot.<\/p>\n\n\n\n

You also have to be very objective and humble. I think that is a really important quality that traders \u2013 that really good traders \u2013 have. I\u2019ve received a lot of emails from students who have told me that they\u2019re consistently making money, and what do they do to make more money? My answer is always the same: Stay humble. Don\u2019t try to do more than what you\u2019re doing. Just try to do better what you\u2019re doing.<\/p>\n\n\n\n

I think the most important thing for any trader to become profitable is to get rid of losses. Most traders starting out realize that, \u201cHey, I won over here, and then I won again over here, yet I lost over there and I lost on this other trade. I lost money.\u201d If they look at their performance, what they\u2019ll discover is they probably won enough to begin to make a really good living as a trader \u2013 if they could get rid of those losses.<\/p>\n\n\n\n

I think that is really important: not taking bad trades, and if you\u2019re in a trade that looks bad, getting out early. A lot of times traders will hold onto bad trades far too long, hoping that the market will turn around. A really good trader, when they make a mistake, they say, \u201cHuh\u2026 I made a mistake. I\u2019m wrong,\u201d and they just take the loss.<\/p>\n\n\n\n

That\u2019s really, really important. Whenever your premise is not valid anymore, for whatever reason \u2013 if you took a trade and you decide that you made a mistake, or if you took a trade and the market quickly does the opposite \u2013 get out. Just get out. Whenever your premise is no longer valid, never hope.<\/p>\n\n\n\n

People are naturally hopeful. I think that is an evolutionary thing. Thousands of years ago, if you\u2019re trying to feed your family and you\u2019re out looking to kill a deer for some meat and you don\u2019t find anything and you just quit \u2013 you do that often enough, you and your family will starve, and your genes will disappear from the gene pool. However, if you\u2019re always hopeful that you\u2019re going to find a deer and you keep hunting until you get that deer, you and your family will have food and you will survive. Those hopeful genes will survive and get passed on to future generations.<\/p>\n\n\n\n

There are all kinds of examples of that. Being hopeful is a quality that is genetically advantageous. However, it\u2019s a big problem for traders because they often will take a trade, it goes against them, and they stay in the trade hoping that the trade will suddenly go their way and they\u2019ll end up making money or avoid a loss. That\u2019s a terrible problem for traders. Being hopeful is a very bad thing for traders. Being objective is very important.<\/p>\n\n\n\n

I talked about the importance of trading the \u201cI don\u2019t care\u201d size. That is just very, very true. You have to trade objectively, and the only way you can do that is if you really do not care if you lose money. That means that your losses have to be small. You have to trade small enough so that if you lose, you will not be upset, and when you have another signal you can go ahead and take that signal.<\/p>\n\n\n\n

That\u2019s why I think it\u2019s very important to trade so small that you do not care if you lose. You need to stay objective. If you decide that your premise is no longer viable, you get out.<\/p>\n\n\n\n

Another, I think, very important thing that traders have to do is develop confidence in their ability to make decisions. If some trader on television says that a stock is going up or that gold is going up and you have to buy, do not buy. The key to making money is a combination of an appropriate entry and management. That guy on television is not going to be there to help you manage the trade.<\/p>\n\n\n\n

I already told you that 90% of the time, a trader can make money buying or selling if he manages the trade correctly. If some guy on television says to buy, that doesn\u2019t tell you anything because you already know you can make money buying or selling at any time. The key is money management. That person on television is not telling you what to do tomorrow or next week or the week after. Unless you have that other information, you will lose money.<\/p>\n\n\n\n

The key to trading is managing your trades appropriately. You have to learn to spot a reasonable setup. You then have to decide where your stop should be. You then have to plan on what is a reasonable profit target, and then you have to stay objective and you have to follow your rules. As long as your premise is still valid, you stay in your position. If the market does something that makes you think your premise is no longer valid, you have to get out. It sounds simple, and it is simple, but it\u2019s difficult to do. And that is one of the keys to trading.<\/p>\n\n\n\n

I got an email this past week that I get from traders every now and then. It goes something like this: \u201cAl, thank you for teaching me how to trade. I now consistently make money. I no longer can remember why it was for years that I was losing money. I look at the charts and I don\u2019t see how I can lose money. I cannot imagine what I was doing for all those years when I was losing money. Now when I trade, I only see profitable ways to trade.\u201d<\/p>\n\n\n\n

That\u2019s really interesting. When a trader is starting out, first year or two or three, he\u2019s losing money and he doesn\u2019t understand how to get consistently profitable. After he\u2019s traded consistently profitable for several years, it\u2019s hard for him to imagine all the mistakes that he was making that prevented him from being profitable just a few years earlier.<\/p>\n\n\n\n

That is, I think, the key turning point for every trader. You have to move into consistent profitability. It\u2019s not a matter of getting lucky and it\u2019s not a matter of suddenly getting one or two big trades. It\u2019s a matter of consistently doing the right thing and consistently making good money, never worrying about making a huge amount of money.<\/p>\n\n\n\n

When I\u2019m trading, my 1st goal is never to make money. My 1st goal is always to do the right thing. To get into the trade, to get out of the trade, manage the trade correctly. That\u2019s all I think about. Did I do what is right? Obviously, I want to make money, and obviously I want to make a lot of money, but I never think about that. All I think about is, \u201cAm I doing what is right?\u201d If my answer is yes, then I know I\u2019ll make money, and I know I\u2019ll make a lot of money.<\/p>\n\n\n\n

I hope that you found this helpful. I\u2019m Al Brooks. Thank you for listening.<\/p>\n\n\n\n

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China Futures Daily Q&A: Part 2 \u2013 Q8 to Q12 Al Brooks leaves for his China lecturing trip later today. Sadly, the exact schedule is still not finalized and details will be published as soon as available for anyone interested in joining Al. Here is the second part (Q8 – Q12) of Al’s China Futures […]<\/p>\n","protected":false},"author":6,"featured_media":0,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_genesis_hide_title":false,"_genesis_hide_breadcrumbs":false,"_genesis_hide_singular_image":false,"_genesis_hide_footer_widgets":false,"_genesis_custom_body_class":"shadow","_genesis_custom_post_class":"","_genesis_layout":"","footnotes":""},"categories":[159],"tags":[],"class_list":{"0":"post-67538","1":"post","2":"type-post","3":"status-publish","4":"format-standard","6":"category-ask-al","7":"entry","8":"has-post-thumbnail","9":"override"},"featured_image_src":null,"author_info":{"display_name":"BTC Admin","author_link":"https:\/\/www.brookstradingcourse.com\/es\/author\/richardhk\/"},"_links":{"self":[{"href":"https:\/\/www.brookstradingcourse.com\/es\/wp-json\/wp\/v2\/posts\/67538","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.brookstradingcourse.com\/es\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.brookstradingcourse.com\/es\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.brookstradingcourse.com\/es\/wp-json\/wp\/v2\/users\/6"}],"replies":[{"embeddable":true,"href":"https:\/\/www.brookstradingcourse.com\/es\/wp-json\/wp\/v2\/comments?post=67538"}],"version-history":[{"count":0,"href":"https:\/\/www.brookstradingcourse.com\/es\/wp-json\/wp\/v2\/posts\/67538\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.brookstradingcourse.com\/es\/wp-json\/wp\/v2\/media?parent=67538"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.brookstradingcourse.com\/es\/wp-json\/wp\/v2\/categories?post=67538"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.brookstradingcourse.com\/es\/wp-json\/wp\/v2\/tags?post=67538"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}