Brandon Wendell, CMT
Brandon Wendell
Many people have the misconception that trading has to be complicated since so few people are truly successful at it. Truthfully, people fail at trading because they over-complicate trading. Trading is not easy by any measure. However, it is simple. Online Trading Academy’s core strategy depends upon a simple, proven approach that works by trading the way that institutional firms trade.
Take the trend identification for instance. Successful traders are aware of the importance of identifying the dominant trend for your trading time frame as well as the larger time frame. In our courses, we use the definition of a trend to help decide the direction in which trading would be most profitable. Identifying and trading in the direction of the dominant trend will put you on track for more profitable trades and reduce your risk.
Looking at the chart of the Qs, you can see that the trend was easily identified as downward as prices plummeted at the open. Price opened at a supply zone offering an opportunity to short. If you did not exit as prices started to turn upwards from $100, the higher lows and higher highs signaled a trend change that would have told you to book your remaining profits.
The day’s trend had changed. The introduction of higher lows and higher highs changed the direction to bullish. Traders should not have looked to short again until the trend told them to. That trend change did become apparent later in the morning when prices made lower highs and lower lows. This made it possible for the trader to look for shorts. If you had identified this, you would have been able to short the mid-day supply zone for an additional $1.00 per share profit.
Some of you may have been worried about the larger daily trend and how it would affect the intraday trends. In our courses, we also teach the proper way to use multiple time frames in trading. Even though the daily trend may not change, the smaller time frames can experience many fluctuations throughout the day.
This same technique can be used on longer term trading or investing. Looking at the S&P 500 index on a weekly chart, using the definition of a trend would have helped to identify major changes in the market trends and also protected your money in times of economic downturn.
Looking at the current trend of the S&P 500 on a monthly chart, the bullish trend that began in 2009-2010 has not only appeared to have ended, but the lower highs and lower lows suggest a new bear trend beginning. This has not occurred since the market crash in 2008.
Trend trading like this will not allow you to enter at the extreme tops or bottoms. To do that you will have to practice at identifying supply and demand zones in conjunction with multiple time frame analysis. To learn more about this, come take one of our courses at Online Trading Academy.
Neither Freedom Management Partners nor any of its personnel are registered broker-dealers or investment advisers. I will mention that I consider certain securities or positions to be good candidates for the types of strategies we are discussing or illustrating. Because I consider the securities or positions appropriate to the discussion or for illustration purposes does not mean that I am telling you to trade the strategies or securities. Keep in mind that we are not providing you with recommendations or personalized advice about your trading activities. The information we are providing is not tailored to any individual. Any mention of a particular security is not a recommendation to buy, sell, or hold that or any other security or a suggestion that it is suitable for any specific person. Keep in mind that all trading involves a risk of loss, and this will always be the situation, regardless of whether we are discussing strategies that are intended to limit risk. Also, Freedom Management Partners’ personnel are not subject to trading restrictions. I and others at Freedom Management Partners could have a position in a security or initiate a position in a security at any time.
Editors’ Picks
EUR/USD climbs to daily highs near 1.1820
EUR/USD now picks up pace and advances to the area of daily peaks north of the 1.1800 barrier at the end of the week. The pair’s decent move higher comes against the backdrop of a generalised lack of direction in the FX galaxy and the mild offered stance in the US Dollar.
GBP/USD trims losses, retests 1.3460
After briefly challenging its key 200-day SMA near 1.3440, GBP/USD now manages to regain some balance and revisit the 1.3460 zone on Friday. Cable’s pullback comes as the selling pressure on the Greenback gathers traction, reigniting some recovery in the risk-linked space.
Japanese Yen gives back half of early gains against USD ahead of US PPI data
The Japanese Yen (JPY) surrenders half of its early gains against the US Dollar (USD) during the European trading session on Friday. The USD/JPY pair rebounds to near 155.90 as the JPY falls back, but is still 0.15% down.
Editors’ Picks
EUR/USD: Fed calm, ECB steady, but the Dollar still leads Premium
EUR/USD is still struggling to find real traction. The pair has tried to stabilise, but momentum keeps fading, leaving the door open to further weakness.
Gold: Falling US yields, geopolitics help XAU/USD hold ground Premium
Gold (XAU/USD) gained traction and climbed above $5,200, ending the fourth consecutive week in positive territory. The next round of US-Iran talks and crucial macroeconomic data releases from the US will be watched closely by market participants in the short term.
GBP/USD: Will Pound Sterling defend key 1.3450 support ahead of US jobs data? Premium
The Pound Sterling (GBP) entered a bearish consolidation phase against the US Dollar (USD), after having tested critical support near the 1.3450 level on several occasions.
Bitcoin: Another month of losses, and it’s been five
Bitcoin (BTC) price is stabilizing around $68,000 at the time of writing on Friday, but the Crypto King is poised to close February on a fragile footing, marking its fifth consecutive month of losses since October and a rare start to the year with back-to-back monthly corrections.
US Dollar: At a crossroads; Fed steady, tariffs in flux Premium
The US Dollar’s (USD) upward momentum from the previous week seems to have encountered a tough nut to crack in the 98.00 region, as measured by the US Dollar Index (DXY).
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