The Daily Market Forecast... Trade Plan Part 5

Friday’s Blog Results: The suggested buy level and the subsequent breakout lower both failed. What you didn’t see were two other immediate losers that our team experienced. Losing streaks and drawdowns happen. In tomorrow’s blog we’ll propose some risk management rules to help you weather these storms. 

Quick Tip: Trade Plan Part 5 

You’ve made four decisions so far, time devotion, style, capital investment, and asset class. It’s time to think about your strategies. 

Dozens of different methods of trading can be profitable. If you doubt this statement read any of Jack Schwager’s “Market Wizards” books. In fact, you should read his books before you finish your trade plan. You’ll get plenty of ideas. 

In each book he interviews top traders from around the world. Dozens of them. What you’ll find is that almost every trader has a different take on how to trade.

Some use technical indicators successfully. Others focus on algorithms. Still others use fundamentals and macroeconomics. Some are systems traders. Others are discretionary.

They don’t share the details (rules) of how they trade but offer enough that you know how differently they trade. What they ALL have in common is profitability.

Entire books are written on trading strategy so this blog is a simple overview of the popular trading strategy types and where they may fit in your trade plan. 

Trend Following: Good for Position traders with sizable capital. Works with any asset class.

These strategies tend to have a smaller win % with much larger wins than losses. This can be difficult psychologically for some. One key to success is trading multiple non-correlated assets simultaneously (thus the need for big capital). In so doing you’re likely to have a few winners running while you’re getting stopped out on many others. 

Reversals & Breakouts: Good for Swing and Day traders. Works with any asset class.

These strategies look for strong price moves that are likely to reverse and narrow price ranges that are likely to expand. Bollinger bands is a popular indicator for finding setups, but there are many others. These strategies tend to have a higher win % and smaller wins than trend following. This can be attractive psychologically for some. The key to success here is the math that creates the setups and the exit rules. 

Spread Trading: Good for Swing and Day traders. Works with all asset classes but excels with options and futures.

These can be directional or non-directional. You can trade spreads based on asset correlation (Ford & GM, gold & silver, etc.), time (different contract expirations of the same asset), and price (credit spreads on options contracts for income). 

As mentioned, this is huge topic with dozens of alternatives to choose from. Study them all and you’ll likely find what resonates with your personality. Our trading room focuses on reversals, breakouts, and spreads. Click the button below to watch a recording of a live trading session to get a better feel for those strategies. 

Today’s Best S&P Futures Turning Points:

Short Level: Sell 4322.00 stop 4325.75. Consider a wider stop at 4328.00 with less size. 

Long Level: Buy 4181.25 stop 4175.50. 

Trade well,

Mike Siewruk

P.S. Tired of trading alone? Need more quality setups? Join our team of great traders and accelerate your performance. Copy down this coupon code WINTER2022 and save 100 per month for life on your membership. Click here for FREE video training and details.