How to Trade the "New Normal"
I suspect that you know that most of the trading now is done algorithmically. Everything from interest rates to the stock markets themselves are controlled by a few large entities naked shorting or longing the market controlling the price. I am not saying it is right or wrong only this is simply the way it is and to ignore it is to ask for problems.
There is a way to control your positions and to take positions that make sense. If you look at the chart below you can see that you can follow the trend when a market decides to make a move. No, you won't catch the top or the bottom because you see all those lines on the chart?
Yes.
They are volume areas in higher time frames.
Yes, there are that many so if you trade volume or order flow alone you are going to have a serious problem knowing which one is the turning point.
You can see from the chart that the markets haven't really done a hell of a lot since early August and if you are a day trader in September it has been no easy task to find trades in this anemic market. In truth, there really is no trades. It is all market noise and the price can easily move against you by the liquidity providers. This is for the most part why I give you longer-term signals and trades.
First of all, they work. I have been short oil since it hit 63 for example. I know that this ramp won't hold at the moment. So far it has been rewarding.
Now once again trading the markets is not easy. Leverage, as you know, is not your friend. It never has been and it never will be. You have to control it and the only way to do that is to use proper position size in relation to your account.
Say for example you have a 30,000 dollar account. Most people are lucky if they have ten thousand accounts but say that you do. Say you are trading the futures market. Each contract is worth 100,000 in funny money.
The question is, should you be trading using this sort of leverage? The answer, in short, is "No". The temptation will get you to do what most of these guys try to trade like which is to take three contracts with tight stops. That is ten to one leverage. Too much. First of all we know that tight stops do NOT work. The evidence and studies have long since been done that state it is a waste of your time. Eventually, you will blow out your account. Now the problem with this sort of leverage is you can't use proper money management. The bigger problem is you are going up against a machine that can outexecute you, out-think you, and generally outperform you over time. It is that simple. So stop trying to wrestle something you have no chance at winning at.
The trick is to find a spot where imbalance exists on a larger time frame. Then take a position. For example when oil is at 40 that is a time to go long. No, it doesn't happen often but that is the spot. Or when the stock indexes sell-off. Buy the dips. It is that simple.
You won't be trading much this is true. However, what are you trading for when there is no chance of beating the market makers? Then when a good trade comes along you will have no money to trade it.
Get it?
Wait for and be patient. Cheers!
There is a way to control your positions and to take positions that make sense. If you look at the chart below you can see that you can follow the trend when a market decides to make a move. No, you won't catch the top or the bottom because you see all those lines on the chart?
Yes.
They are volume areas in higher time frames.
Yes, there are that many so if you trade volume or order flow alone you are going to have a serious problem knowing which one is the turning point.
You can see from the chart that the markets haven't really done a hell of a lot since early August and if you are a day trader in September it has been no easy task to find trades in this anemic market. In truth, there really is no trades. It is all market noise and the price can easily move against you by the liquidity providers. This is for the most part why I give you longer-term signals and trades.
First of all, they work. I have been short oil since it hit 63 for example. I know that this ramp won't hold at the moment. So far it has been rewarding.
Now once again trading the markets is not easy. Leverage, as you know, is not your friend. It never has been and it never will be. You have to control it and the only way to do that is to use proper position size in relation to your account.
Say for example you have a 30,000 dollar account. Most people are lucky if they have ten thousand accounts but say that you do. Say you are trading the futures market. Each contract is worth 100,000 in funny money.
The question is, should you be trading using this sort of leverage? The answer, in short, is "No". The temptation will get you to do what most of these guys try to trade like which is to take three contracts with tight stops. That is ten to one leverage. Too much. First of all we know that tight stops do NOT work. The evidence and studies have long since been done that state it is a waste of your time. Eventually, you will blow out your account. Now the problem with this sort of leverage is you can't use proper money management. The bigger problem is you are going up against a machine that can outexecute you, out-think you, and generally outperform you over time. It is that simple. So stop trying to wrestle something you have no chance at winning at.
The trick is to find a spot where imbalance exists on a larger time frame. Then take a position. For example when oil is at 40 that is a time to go long. No, it doesn't happen often but that is the spot. Or when the stock indexes sell-off. Buy the dips. It is that simple.
You won't be trading much this is true. However, what are you trading for when there is no chance of beating the market makers? Then when a good trade comes along you will have no money to trade it.
Get it?
Wait for and be patient. Cheers!
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