Submitted by Michael Radkay
Steph and I were having a conversation about what side of the market you typically favor. She was saying that she has more confidence in selling a market than she does in buying. How you do feel about it? (Take our one second survey at the end of this article!) Maybe you don’t even know. Pay attention to what you are saying when you talk to your friends about the economy. Do you find yourself talking negative about our economy or are you talking positive? Maybe you have been like most, which is reading the economy as half-empty.
Don’t worry if some of your friends think you are a “gloom and doomer”. Turn what others think is a negative into a renewed strength. As you already know, you can play either side with ease while trading forex currencies or commodity futures. Unfortunately current market trend doesn’t always match up or coincide with your personality.
To explain this concept further let’s say you are a day trader and you love to play the market from the short side (sell first or “gloom and doomer” mindset). When you are right, it is sooo much fun as prices seem to drop faster than they rise these days!!
In order to get started, you need to find a barometer that informs you if the trend is bearish. We get this information very easily by adding the high and low prices of a particular time frame (let’s say the week, for example) and divide this figure by two. This gives you the fifty percent or mid-point of the week. If current price action is below the mid-point, odds are favoring a re-test of the low before a re-test of the high, a bearish sentiment.
But before we jump into the pool, let’s add another timing layer to this thought. One of our daily confidence indicators (RDS Rule 1) is the previous session close price. If price action is below this mark, we favor short positions first. If price action is above the previous close we favor long positions first. The reason for this is two-fold: 1. Every open position in the market (long or short) is marked to this price at the end of every trading session. Clearing firms need to balance every trader’s account daily and make sure that a trader has enough margin (capital) to hold their position in the market. As price moves from the previous close it becomes a nice barometer that lets the trader know if their investment is better or worse as the new day proceeds. 2. Almost every technical study used by professional traders depends upon the previous close to calculate their chosen indicator.
To conclude, if price action is below the weekly mid-point and the previous day session close price, as a short side player and “gloom and doomer”, you are getting a green-light to short the market. Entering at or near these prices would be optimal. Playing a sound strategy might just turn your friends into “gloom and doomer” disciples.
Take a look at our recommendations (right) and possibly zoom in on those bearish markets. Use your strengths wisely. Don’t play a market that doesn’t fit your personality. Prosperity is at your finger tips Go grab it!!
One Second Survey
(are you a bull or a bear?)
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