Don’t Fight The Tape In Bear Market

2020-04-06 | Simpler Trading Team

Just a pinch of good news sent the market rallying Monday to gains that erased last week’s losses.

Hopes of more stimulus help and a potential slow down to the pandemic sent the Dow up more than 1,600 points and the other indexes followed suit. All gained more than 7 percent on the day.

But traders are cautioned to work within what the market gives while being wary of false “bottoms.”

Simpler Trading’s veteran traders, many who saw what happened in the 2008 real estate crisis, know the market can quickly take away what it gives.

The market in 2008 had a tough cycle of puking, then retracing 50% over a couple of weeks, and then repeating that pattern for weeks longer. Seasoned traders in Simpler’s online trading rooms know this is actually normal for a bear market.

Simpler’s traders aren’t pinning the session’s surge as a signal the bottom has been found.

Traders here take what the market is doing — drop or surge — and don’t fight the tape

Ignoring any false hopes portrayed by the news is a standard operating practice at Simpler. 

Today the market surged and traders here followed the internal signals and charts to take advantage of trade setups.

The goal is to stay with a trading plan that takes gains when presented and doesn’t risk withdrawing a profit at the end of the week.

We Saw: a market environment desperate for gains — 

  • Oil hit with another price setback on production uncertainties
  • Positive action all day that closed with an upward explosion
  • Coronaviurs hopes, but more news of dire totals

We’re Watching: … cycles of opportunity like in 2008 —

  • Businesses scrambling for government loans
  • How next round of stimulus will affect markets
  • Fast-moving opportunities to trade throughout the day

Discover more about trading volatile markets -- learn how the “squeeze” guides traders.