July 8, 2015

How to Trade Anything on the Planet

You've probably noticed the stock market has been going nuts lately. Up down, up down, up down, up down! Additionally, the Chinese stock market is imploding and the EU ECB can't seem to get Greece to agree to any austerity measures in exchange for more bailout money with better terms.

Many traders are complaining on Twitter, trading forums, CNBC, etc., that their trading strategies just aren't working like they used to. The market is just acting too volatile right now and shaking everyone out of their positions and racking up losses. Well I'm here to tell you that you can trade any market in any market condition if you know how to apply the right trading strategy for the current market condition, not the past one.

First off, let's get some market principles straight and then I'll break them down in more detail afterward:

1. Every trader's/investor's #1 priority is to protect the bankroll. Fight FOMO relentlessly by trading ONLY the best chart patterns and doing something else if boredom creeps in. NO trade is far better than a BAD trade!
2. Trading is fractal, only the time frame changes, not how you trade it.
3. Markets/stocks tend to trade like they have been trading (Newton's First Law of Motion).
4. Trading ranges (buy low, sell high, bet breakouts fail), Trends (bet breakouts succeed, buy high, sell higher and vice versa).

Now let me break down each market principle so we can navigate these choppy waters with ease and profits:

1. Every trader's/investor's #1 priority is to protect the bankroll. Fight FOMO relentlessly by trading ONLY the best chart patterns and doing something else if boredom creeps in. NO trade is far better than a BAD trade!

A losing trader becomes a winning trader when she begins to fear loss more than she fears missing out on a trade. Once this cognitive shift happens, the winning trader is much more comfortable sitting on her hands and waiting until she recognizes a clear edge on the price chart in front of her. Takeaway: relentlessly set goals to improve patience and waiting for the right time to strike, and that time is when you have a clear edge in the markets. If you're not sure when that edge reveals itself, it is essential to find a trading Guru to work with or at least spend some time studying trading systems in books or online. My resources page has a ton of info. to help you out (Gurus, Gurus on Twitter, books, videos, blog posts, etc.).

2. Trading is fractal, only the time frame changes, not how you trade it.

And now we get into how to trade anything on the planet. Trading anything of value (stocks, options, futures, forex, items on eBay, etc.) is fractal. In other words, pick any time frame for your price chart for said trading vehicle and I'll show you another time frame from a completely different trading vehicle and you will not be able to tell a difference on the price chart. Who cares you ask? Who CARES? That's amazing if you think about it for a minute. If you learn how to master one time frame, you can master any time frame of any trading vehicle, period. You can trade Apple, then switch to the EUR/USD currency pair, switch to Oil futures, then end with scalping some options. That's amazing flexibility baby! And not to mention peace of mind knowing that no matter what's thrown at you, you know exactly how to trade that beast!

3. Markets/stocks tend to trade like they have been trading (Newton's First Law of Motion).

Okay, this is one of the most important principles in technical analysis. The market has inertia and tends to keep doing whatever it has been doing and defiantly resists any change to what it's been doing. What does that mean? It means most breakouts of anything fail (especially trading ranges), it means trends last longer than anyone thinks possible, and it means channels last longer than anyone thinks possible (just look at a monthly chart of SPY, veterans call it "the wall of worry"). The powerful point here is to strengthen your trading arsenal with advanced technical analysis abilities. Learn to look at any chart and quickly identify what the market is currently doing. Then bet that it continues doing what it's doing (at least in the short term) because most attempts to change it will fail, period.

4. Trading ranges (buy low, sell high, bet breakouts fail), Trends (bet breakouts succeed, buy high, sell higher and vice versa).

Now I'm going to end with the mother of all trading advice. The market is either trending or in a trading range. When you see a trend on the price chart in front of you, bet that it continues by trading with the trend and buying pullbacks (bull trend) or selling pullbacks (bear trend). When you see a trading range on the price chart in front of you, bet that it continues by buying low, selling high. Like I said above, trading is fractal so you have to pick a time frame that suits your personality then learn to master it by getting better and better at identifying trends and trading ranges. The better you get at identifying a trading range and switching to a buy low, sell high trading system, the better your P&L will get, the better your peace of mind will get, and the better your ability to rise to the challenge of any market condition will get.

As always, let me know your thoughts in the comments below.

Take care and don't sweat this crazy market, you've got this, I believe in you. Take some time to study my resources page if you still feel uneasy about this market.

Jory

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