Read Stock Charts To Find Wins On Both Sides Of Trades
At Simpler Trading, we talk often about working both sides of a trade and learning how to read stock charts for setups and opportunities in either direction.
While no trader has a crystal ball, charts can be revealing and Simpler’s traders rely on them for maximizing trade opportunities. Our traders spend a great deal of time establishing a solid trading strategy that can be adjusted to this volatile market.
Establish a trading range in choppy market
When stocks and prices are up-and-down, traders first need to establish within which range of market chop a stock or index is clinging. Is the chop occurring in the snowline on the charts? The treeline?
When a stock is chopping and retaining a particular range of price action, traders can establish a setup within each end of the expected moves.
Even a look back at the one-year chart for a stock can identify regularly occurring, trending events. When a trade hits the snowline, does it hold or bounce back up after these events?
Chart patterns, time frames and performance
Chart patterns paint a picture of market behavior. Expanding to longer time frames gives traders a better view of what drives market activity.
Also, when a trader is unsure of current price action of a particular stock, taking a look at the index for the stock can give traders insight about historic performance.
In this whipsaw market, Simpler’s traders are trading the indices heavily — even though they are not trading a high number of individual stocks. Traders look where there is increased volume – like the S&P 500 – which is showing potential to recover and rally.
Unique strategies counter market volatility
Market volatility provides opportunities to engage in unique trading strategies — such as double calendars and diagonals (and of course, the squeeze). These setups are designed to trade in both directions and are scalable, even within an uncertain market.
Simpler’s traders are scaling back the amount of capital risked for trades in this market. Less capital, less risk… likely an appropriate strategy. And, Simpler’s traders take profit when they can instead of “holding on for more.” This market can take wins away just as fast as they pop up on your computer screen.
Trading in market chop is not easy, but with chart patterns, proven indicators, and successful strategies, volatility can be on your side — even in an ever-changing market.