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Market Lab Report - Premarket Pulse - Risk Management 7/31/17

Major averages finished mixed near the top of their respective trading ranges on lower volume. In remains to be seen whether Thursday's mini-correction worsens or whether markets have already found a shallow floor. 2017 has been the year of the shallowest floors with QE at full mast and Trump's economically favorable policies waiting to pass. It is important to maintain a fluid, open approach to the markets which could provide favorable entry points, long or short, as we have seen numerous times this year. This has been a market of small baby-stepped gains in the indexes that can be reversed in a day so always have stops in place.

Risk management is the most important rule when it comes to investing. If your average reward:risk is 3:1, you can lose 3 times for every win to breakeven. Our Wyckoff undercut & rally entry points discussed here keep risk to a minimum, typically less than 2%. Meanwhile, the gains in leading stocks of which our Focus List is mostly comprised (as opposed to our Voodoo List which focuses on very low risk entry points) are typically high single to low double digit percentages as stocks often slingshot back after a brief period of market weakness, thus the average reward:risk can far surpass 3:1 using this buying strategy. Further, using any of our buying strategies as shown in our reports section can yield a couple strong wins in the stocks where you're able to sit in the position for a number of weeks or longer. Such recent examples include SQ, BZUN, BABA, and/or AAOI and can make all the difference to your account.

Futures are up despite tensions with North Korea who launched another intercontinental ballistic missile (ICBM) on Friday, marking its 11th ballistic missile test this year. Japan's Prime Minister Shinzo Abe and U.S. President Donald Trump held a phone conversation and agreed to take additional action against North Korea following Friday's missile launch. 
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