More Market Chop Has Traders Braving Storms


Simpler Trading Team

4 min read

This market has many traders making an effort to get their bearings in the midst of rough seas.

While continued market chop has not been easy, Simpler’s traders have survived and thrived. Our team maintains focus on finding setups in any kind of market.

(Check out the free Simpler Trading video, above, for additional insight into trading the stock market.)

Market chop continues

This market has endured much recently. Non-farm payrolls are in the rearview mirror. The Central Bank is set to hike interest rates in less than a week. There is an ongoing geopolitical crisis in Eastern Europe.

It’s no small wonder the technology-laden Nasdaq index is retesting the bottom – this bearish environment fueled by ongoing market chop is difficult.

Simpler’s traders understand that how they look at the market is important. Traders should prioritize the trends, although this market does not have the trends seen in 2020 and 2021. The market has experienced more of an uptrend for the past 16 months, so this recent weakness of indexes in the red is a new wrinkle in the volatility.

Finding trend signals in chop

It’s important to recognize that any market will exhibit signals of trends – both up and down.

This current unsteady environment may be the first time for a trader to deal with a market during a geopolitical crisis and a bear market lurking. Traders should remember that the market has been here before. By looking at historical charts during similar events, traders gather additional information for planning trading strategies.

A downtrend has more volatility than an uptrend, but Simpler’s traders still approach trades the same way. They study the technicals and the charts for guidance on setups. When the signals are right, even if a trend has not yet formed, traders use proven tools to determine directional bias that leads them to trade possibilities.

In this environment, traders can look at the daily chart to see if an asset is above or below the 200 exponential moving average (EMA) – also known as the equator. Bullish movement or bearish movement is reflected in relation to the equator. Market sentiment below the 200 EMA is very different from movement above this level.

Commodities can reveal trends

While the indexes are trending down, some commodities are holding up in the volatility. It is important that traders take time to learn and understand the sectors that are experiencing strengths and weaknesses – and why.

Gold has risen above the 200 EMA, but it doesn’t appear to be in a position for traders to get short in an environment where this asset is primed to move higher.

Another commodity, corn, also experienced moves higher above the 200 EMA. These are the types of assets to watch when the rest of the market isn’t doing well.

An important insight traders should understand is how to separate market chop from trends.

In market chop, Simpler’s traders look to sell into ceilings and buy into floors using the technical analysis tools that measure trends and rising volume.

Once traders have the basics down, they can trade with the trend and are able to find tops and bottoms. Understanding the chart signals helps traders better identify the difference between chop and a trending market.

View trades within broader market

It’s also important to understand where an asset lies in relation to the broader market.

For example, crude oil has been north of the 200 EMA since December. Geopolitical events have accelerated price movements in the market – reminding traders that even a captain relies on technical analysis to chart the course.

Simpler’s traders are using this market as an opportunity to sharpen trading skills. They focus on adapting trade strategies to enable them to use proven tools and follow timeless strategies. This allows them to trade in any market environment.