Step Back To Review Overall Market, Opportunities

2022-03-29

Let’s take a step back after a positive session and review the overall market environment.

Like any time in the world of trading, the current market environment presents opportunities… and caution.

(Check out the free video, above, for insight into trading this changing market.)

Overall market environment challenges

The overall market poses a challenge with breakouts in momentum that get slammed by geopolitical headlines. For example, how long will the ongoing European war threaten stock market stability in the United States and commodities worldwide?

Inflation – which continues to push higher – could have far-reaching consequences, magnified further by the invasion of Ukraine by Russia.

With Europe as a strong consumer of Russian oil production, the energy market functions as a barometer that signals a broader impact. While the S&P 500 fluctuates from correction territory to new highs, crude oil has crossed the milestone of $100 per barrel – a number not seen since July 2014.

The market has revealed how the war in Ukraine also impacted other goods such as grains and metals. Russia is a major global supplier of wheat, aluminum, nickel, and palladium.

Simpler’s traders are taking time to evaluate their trading plans in a market that is volatile, yet presents opportunities.

Follow established trading plan

Ultimately, a good day in any market means an already established trading plan was followed. As long as the plan in place works out, no revisions are necessary. Traders need to spend time understanding how their trading plan relates to the current market environment.

This is a good time for traders to review trades that went well and trades that were missed. Traders should study any missed opportunities for any factors that were under their control. If a trader lacks an understanding of their ability to read the market, this is the time to improve skills.

Limiting exposure for risk management

Simpler’s traders are picking their spots when trading by limiting exposure – risk management by not taking on too many trades and limiting use of capital.

In a whipsaw market, there are opportunities such as shorts in the S&P 500 as it moves back up for a bounce or a long trade in the Nasdaq before it tumbles back down. The same could apply in commodities markets. Traders can look for breakouts to occur in the charts by monitoring the support and resistance levels.

As this market rips and roars, traders can take advantage of the moves while applying risk management fundamentals. If the opportunity with potential for reward presents itself and the technical patterns are there, traders can look to pursue the setup. 

If the opportunities don’t present themselves, it makes sense to wait for something better. Just because an opportunity exists does not mean traders should take it when they don’t feel comfortable. Staying in cash is a trading strategy.

Caution: Avoid exaggerated news headlines

As another caution, traders should be careful of news headlines that exaggerate economic and world events. Consider the news and back it with technical analysis, but the markets don't stop for any news deadline. Understanding how to trade the market puts the odds in your favor.

The potential of a “big win or a big loss” is always there, but the team at Simpler Trading prefers a “moderate win or a moderate loss” in their long-term strategy for any asset or commodity.