Find Path Of Least Resistance In Volatility


Simpler Trading Team

2 min read

At Simpler Trading we’re always watching for certain market patterns and trend setups as part of an established trading plan.

No matter the planning or skill of the trader, the market can suddenly change and send all plans into disarray.

So how do you trade in a volatile market that is breaking decades-long records in a cycle of spiking and cratering?

Simpler’s traders search for signals that stand out to determine bullish or bearish direction and these can change by the minute or extend into hours, days, or weeks.

No matter the signals or the time, Simpler’s traders work to identify the path of least risk and resistance.

If the market is bullish across a particular time frame, traders want to determine if a possible setup fits an established risk plan, and what’s the  path to profit?

When the market shifts, Simpler’s traders let it lead and find the path of least resistance on the downside.

This requires a trading plan that can adapt in a volatile market.

Last week expectations were the market was setting up to follow record-setting gains with a sharp pull back this week.

Expectations were challenged when volume spiked to 90% on back-to-back days last week. This scenario has only happened 21 times in the history of the stock market, and all have occurred since 2007.

These back-to-back spikes are followed by a market uptick in two to three weeks – 83% of the time.

The adjustment this week is to identify tickers showing an upward tendency, even though the market was down sharply to open the week.

This countertrend adjustment has traders searching for strong tickers that lead in a way that follows the “back-to-back” trend.

If the market is shifting too much for comfort, a strong trading plan is to bide time while executing trades, taking any gains, and getting back out to watch for more.

We Saw: stocks faltering on a Monday, struggling to push to the upside – 

  • Oil not able to get much going despite production cuts
  • Officials considering a graduated return to business
  • Weak indexes not offering much to trade

We’re Watching: … for key directional indicators –

  • How will “back to work” policies affect the economy?
  • For the countertrend stocks that produce trade profits
  • Setups in: APPL, AMZN, NFLX, ZM, WORK, MSFT