How To Trade Choppy, Neutral Stock Market


Simpler Trading Team

Jun 09th 2022  .  6 min read

In this article:

  • “Plugging edges” during market “pops” and “drops”
  • Expect more fast-paced market moves
  • Traders need more tools in their toolbox

Having trouble trading a neutral stock market?

When the market won’t definitively push one direction or the other – bullish or bearish – traders find themselves in a neutral, or sideways, trading environment.

This choppy channel can be tough to navigate. Finding an edge to track shorter moves within the chop becomes a necessary skill for traders.

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

Targeting ‘pops’ in a neutral market

Navigating the choppy range of this stock market requires more targeted setups and willingness to adjust as quickly as price action shifts.

When looking at the charts, Simpler’s traders are waiting for “pops” higher that can be sold with the idea that price will turn back lower in this bearish market.

An example of this was a setup on Wednesday at the open to sell the Nasdaq futures at about 12,675. As the market broke, the setup required covering at about 12,635. The setup looked to pocket about $1,400 on the combined moves.

The goal of these types of setups is to “plug the edges” of a market that isn’t revealing sustained directional moves. The edges of “pops” and “drops” can provide short-term opportunities for profitable trades.

This pattern can be followed across indexes, i.e. Dow, Nasdaq, S&P 500, so when one is turning traders can switch to the “edge” of the index starting to move.

For traders willing to develop longer term strategies that follow this index pattern, setups can be developed across larger time frames. Keep in mind that current market conditions make this a riskier play because of constant, sudden shifts.

Trading futures in a neutral market

Futures trading is a strategy to expand a trading portfolio as the market chops along in neutral.

Traders who are learning futures trading or are seasoned veterans can always use extra insight to apply strategies to navigate an uncertain market.

Gain access to live-trading sessions where you can trade with a professional, get real-time trade alerts, and study the learning center to build personalized strategies in the futures market.

There are futures trading learning opportunities at Simpler Trading. 

Change tools to manage risk, scale wins

When there are few clues on which way this market will move – up or down – what do you do?

Change your game, and plan to work a little harder.

Bruce Marshall, Senior Director of Options and Income Trading, is on track for another winning year despite a volatile, uncertain market.

Neutral markets – choppy, sideways price movement – are tough for traders because finding points of entry and exit for setups often are not as clear when compared to trending or directional markets.

Traders must be prepared to target potential profits whichever direction the market suddenly shifts – up or down – over a shorter period of time.

How is this done?

“We’re doing things differently,” Bruce stated. “We’ve tightened up our (trade) expirations from going longer term to going shorter term, and we’re doing some scalping. This is the wild, wild west where we’ve been getting price action of chop, chop, chop, and then the market goes straight up or straight down.

“Still, every market is tradeable.”

That mentality has helped Bruce maintain a profitable trading account so far this year, and he is expecting more of the same through the summer and into the end of the year.

He doesn’t let market uncertainty derail his commitment to his trading plan.

“Maybe we break out or maybe we break down, there is no way to know,” Bruce stated. “This is why traders must be flexible on trades and shift gears mid-stream if necessary.”

“Don’t be married to the long side or the short side of the market,” Bruce added. “News changes daily and things may change dramatically a week from now.”

He’s watching Federal Reserve events and key market pressures – jobs reports, inflation, rising interest rates, geopolitical concerns.

“Expect volatility next week, so get your seat bell on, it’s probably going to be a fun ride,” Bruce stated.

Are you ready to learn more about trading?

This market can leave traders questioning whether they want to start trading or even continue trading.

Sometimes you need a little insight into trading without a long-term commitment.

If you are curious to see “how traders trade,” then come join us for FREE. Simpler Trading has opened the Simpler Free Trading Room, where traders can take a peek behind the veil to better understand what it’s like to trade with professional traders.

Sign up today and get access to our live online chat room, recorded live sessions, and free classes that might just open new doors along this trading journey.

Fear pushes markets to bleed further

The stock market spiraled further down on Thursday for the second consecutive day of losses.

Market participants appeared fearful of the Consumer Price Index (CPI) data set to be released Friday morning. The CBOE Volatility Index (VIX) – or “fear index” also pushed higher to above 26.

Leading the losses on the day was the Dow which dropped 638 points. The Dow closed at 32,272.79 points to fall 1.94 %. The Nasdaq tumbled to 11,759.45 points for the highest drop among the three major indexes, losing 2.70%. The S&P 500 was not far behind, falling 2.37% to 4,018.41 points.

Expect market to keep shifting quickly

Bruce is navigating fast shifts in the market by applying strategies and trade setups that can work as the market moves. These include butterflies, iron condors, diagonals, and calendars.

These trading tools allow him to actively work setups at a smaller scale while managing risk.

Bruce is actively targeting trade setups that may make less than $100 per day. No one expects to get rich that way, but several trades each week can add up to hundreds of dollars weekly in wins while limiting risk against larger losses.

Over the course of the summer, when trading tends to slow down, these scalped trades – taking gains before the trade expires – can add up.

“That’s the way to trade a market like this,” Bruce stated. “You have to scalp it, you have to take smaller profits with different types of trades. We’re going through our toolbox of trading tools to figure out what works best in each different market scenario.”

Tracking indexes for market direction

There is still movement in the market, just range-bound without commitment up or down.

Simpler’s traders continue to watch for validation of a stronger directional move while working setups within what the market delivers. A key to trading ahead is following closely movement in the indexes.

Until this market breaks one way or another, managing risk and taking profits if available are the heart of trading strategies among our traders.

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