To an investor having enjoyed one of the best bull markets over the recent years, the markets current vulnerability must be disconcerting.
To a trader, the market is providing excellent opportunities.
But a trader has to be vigilant. The oil price disruption as we viewed the markets early Monday morning of this week necessitated a change.
That change was not a conscious decision, but rather one that followed the market structure.
With unusual price movement (big ups, followed immediately by big downs) we were pleased that we had decided not to be in the market over a weekend. During which time gap bars (where the market opens at a significant difference in price to where it closed) would be prevalent.
The oil price movement and the effect it had on our currency pairings meant we could not find a structure on the hourly charts and above. But the 15 minutes (day trading chart) did.
We provided a 1.3% increase in the fund since Monday. Not bad for a four-day week!
What I mean by structure can be seen below. Although this is a one-hour chart to provide context and include the oil spike, we conducted our actual analysis and trade management on the lower time-frame picture.
It is easy for an analyst to put structure annotations on a chart after the event. My analyst (James) provided these calls and more as, and often slightly before, the market developed. Through technical analysis, James is exceptional at accurately telling the market story ahead of time.
You might think that all the trader then needs to do is trade. I wish it were that easy.
Even with an excellent market analysis, the job of trader (entry, stop and target position, amount to risk and assessment of probability) takes a long time to perfect. Not to mention a perfect understanding of what the analyst is providing topped with an ability to make quick, rational decisions.
How does a day trader get started? Price action and context traders’ course that we recommend has over 100 hours of instructional videos.
Then a fledgeling trader is ready to backtest the lessons for a similar amount of time. After which paper trade in real-time and then trade lightly for as long as it takes to be consistently profitable. Only then does a trader’s account increase.
To graduate as an analyst, however, a more magnificent natural adaptation to the world of price action is needed.