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: US Dollar to remain pressured until uncertainty fog dissipates
Unimpressive European Central Bank left monetary policy unchanged for the fifth consecutive meeting. The United States first-tier employment and inflation data is scheduled for the second week of February. EUR/USD battles to remain afloat above 1.1800, sellers moving to the sidelines.
GBP/USD softens to near 1.3600 as BoE hints further rate cuts
The GBP/USD pair loses ground to near 1.3610 during the early Asian session on Monday. The Pound Sterling softens against the Greenback amid growing expectations of the Bank of England’s interest-rate cut. Traders will take more cues from the Fedspeak later on Monday.
USD/JPY drops back below 157.00 on Japan's verbal intervention
USD/JPY has come under moderate selling pressure below 157.00 in the Asian session on Monday. The Japanese Yen lost ground to near 157.70 following Japan’s ruling Liberal Democratic Party's outright majority win in Sunday’s lower house election, opening the door to more fiscal stimulus by Prime Minister Sanae Takaichi. However, JPY buyers jumped back and dragged the pair southward on FX verbal intervention by Japan’s Finance Minister Katayama.
Editors’ Picks
USD/JPY drops back below 157.00 on Japan's verbal intervention
USD/JPY has come under moderate selling pressure below 157.00 in the Asian session on Monday. The Japanese Yen lost ground to near 157.70 following Japan’s ruling Liberal Democratic Party's outright majority win in Sunday’s lower house election, opening the door to more fiscal stimulus by Prime Minister Sanae Takaichi. However, JPY buyers jumped back and dragged the pair southward on FX verbal intervention by Japan’s Finance Minister Katayama.
Gold eyes acceptance above $5,000, kicking off a big week
Gold is consolidating the latest uptick at around the $5,000 mark, with buyers gathering pace for a sustained uptrend as a critical week kicks off. All eyes remain on the delayed Nonfarm Payrolls and Consumer Price Index data from the United States due on Wednesday and Friday, respectively.
AUD/USD: Buyers eyes 0.7050 amid upbeat mood
AUD/USD builds on Friday's goodish rebound from sub-0.6900 levels and kicks off the new week on a positive note, with bulls awaiting a sustained move and acceptance above mid-0.7000s before placing fresh bets. The widening RBA-Fed divergence, along with the upbeat market mood, acts as a tailwind for the risk-sensitive Aussie amid some follow-through US Dollar selling for the second straight day.
Top Crypto Gainers: Aster, Decred, and Kaspa rise as selling pressure wanes
Altcoins such as Aster, Decred, and Kaspa are leading the broader cryptocurrency market recovery over the last 24 hours, as Bitcoin holds above $70,000 on Monday, up from the $60,000 dip on Thursday.
Weekly column: Saturn-Neptune and the end of the Dollar’s 15-year bull cycle
Tariffs are not only inflationary for a nation but also risk undermining the trust and credibility that go hand in hand with the responsibility of being the leading nation in the free world and controlling the world’s reserve currency.
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