While teaching a Professional Futures Course in Philadelphia last week, I was discussing the importance of identifying the dominant trend for your trading time frame and also the larger time frame. Many people have the misconception that trading has to be complicated since so few people are truly successful at it.
Truthfully, people fail at trading because they overcomplicate trading. Trading is not easy by any measure. However, it is simple. Online trading Academy’s core strategy depends upon a simple, proven approach that works by trading the way that institutional firms trade.
Take the trend identification for instance. In the class, we were using the definition of a trend to help decide which direction trading would be most profitable. We were focused on the NASDAQ futures, but the same applies to the ETF, QQQ. Identifying and trading in the direction of the dominant trend will put you on track for more profitable trades and reduce your risk.
Looking at the chart of the Q’s, you can see that the trend was easily identified as downward as there were lower highs and lower lows and impulsive movements down. A trader would have more success in trading the short side of the market on rallies to supply.
Yet, throughout the day, the trend changed. The introduction of higher lows and higher highs changed the direction to bullish. Traders needed to shift into buying pullbacks to demand in order to make quality trades. Some of you may have been worried about the larger daily trend and how it would affect the intra-day trends. In our courses we also teach the proper way to use multiple time frames in trading. Even though the daily trend will not change, the smaller time frames can experience many fluctuations throughout the day.
This same technique can be used on longer term trading or investing. Looking at the S&P 500 index on a weekly chart, using the definition of a trend would have helped to identify major changes in the market trends and also protected your money in times of economic downturn.
Trend trading like this will not allow you to enter at the extreme tops or bottoms. To do that you will have to practice at identifying supply and demand zones in conjunction with multiple time frame analysis. To learn more about this, come take one of our courses at Online Trading Academy.