When Trump Speaks, The Markets React

When Trump Speaks, The Markets React

This past week of the Donald Trump presidency in the books, the markets had looked strong. The Dow Jones Industrial Average crossed the 20,000 and held and on Friday the market was sitting at 20,100 before the Opening Bell.

When Trump Speaks, The Markets React
When Trump Speaks, The Markets React Getty Images

On Monday, January 23 his first full week got started. What was going to happen? Pulling up the charts for the US Tech 100 Index, the market was breaking out of sideways movement and building an uptrend going into the Opening Bell at 9:30 am EDT. This gave a bullish bias, in part on technicals, but also on the belief that the markets would continue the Trump rally.

At 9:26 am, the decision was to look at placing a Daily Spread trade with a bullish bias. The USTech was trading just below 5054, and I decided to jump in and take a trade before the Opening Bell in four minutes.

When Trump Speaks, The Markets React

The following trade was selected:

BUY US Tech 100 (Mar) 5040.0 – 5080.0 (4:15 PM). This is a 400 Tick Daily spread, where every Tick = $1.00 per contract traded.
Entry Price: 5054.6
Maximum Risk per contract: $146
Maximum Reward per contract: $254
No. of contracts Traded: 10
Mental Stop/Loss: 25 Ticks, or -$250. This means I’m prepared to manually exit this trade if it moves 25 ticks against me.
Mental Take Profit: 25+ Ticks, or +$250. I’m prepared to manually exit the trade and take profit if this target is reached.

At 9:30, the Opening Bell rang, and the market continued its uptrend on strong volume. And then Donald Trump went live on TV, announcing he was going to kill the TPP, renegotiate NAFTA and create American jobs.

These first statements from the new president juiced the markets, and the US Tech 100 blew past my Take Profit target (25 ticks) and briefly flashed a 92 Tick gain. Within 15 minutes, this trade was up $920 and I decided to exit the trade and take the $920 profit (exchange fees not included).

Then Trump finished his morning speech. And the market turned on a dime and tanked.

When Trump Speaks, The Markets React

The market dove sharply and hit 5034 just before noon. But the Spread “Box” had a floor of 5040, which represented the maximum loss for this Daily trade. If I had remained in the trade, my brief $920 profit would have been showing a maximum loss of $1,460 by noon.

The market ultimately recovered and settled at 5063.4 at the 4:15 trade expiration. If this trade had been held  until expiry, the profit would have been $880, excluding exchange fees.

Trump’s first day in office resulted in a wild ride on the markets, and when you trade Nadex spread products, it’s very important to manage both your profit and loss targets.

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