‘Fading’ Chaos For Consistent Wins

2021-01-14

There is a subtle strategy allowing traders to “walk up” the market’s choppy rally higher.

Watching smaller time frames and not staying in trades for extended periods opens up opportunities to “fade” price after a rise into resistance.

Catching these subtle pullbacks allows traders to create consistent wins as the market continues its climb “up the escalator” while avoiding any fast losses “down the elevator.”

Simpler’s traders constantly evaluate how to take advantage of these regularly recurring small retracements without going “full on” short. They balance this with maintaining a bullish plan moving forward.

This isn’t all a bunch of trading “code,” but a casual way to assess how the market is moving and identify key trades. These conversational views of market movement happen daily in Simpler Trading online chat rooms.

Market chaos — with influence from news media, politics, economic stimulus, and a pandemic — has traders dancing between a market that appears determined to continue rising while at the same time readying itself for potential collapse.

The market continues with elevated volatility which can create fast gaps up (big stimulus package) or down (vaccine distribution fails).

With any play the market presents, Simpler’s traders have reduced the number of active trades while limiting risk and position sizing. The goal is to not extend trading “too far out there” until the market delivers clearer signals of strength, direction, and momentum.

Pursuing a plan of “two steps forward, one step back” (more wins than losses) presents limited-risk profit potential within the ebb and flow of market “retracement.”

This dance through the new year is all about risk management.

We Saw: Fed promotes optimism, market sinks — 

  • More people paying attention to retirement, investments
  • Growing interest in real estate
  • Next administration promoting $1.5 trillion stimulus

We’re Watching: Subtle retracements with profit potential —

  • Exercising our market “two-step” trading plan
  • Relaxing our minds, bodies, and trading expectations
  • Setups in: AMZN, MSFT, NFLX, JPM, TXN