Take Advantage of the Equity Market Volatility!
With the equity index markets experiencing high volatility, we will look to take advantage of that volatility in the coming week with proper supply and demand analysis. If you have any questions about the various global markets or any of these trading ideas, I can be reached by email at sseiden@tradingacademy.com. Typically, I will respond to emails quickly. On weeks where I am teaching an Online Trading Academy class, it may take a bit longer to respond.
Education
At any given moment, there are tons of financial information being created and passed on around the planet. This information can be in the form of all the examples listed here and many more that are not listed. All this information creates thoughts and perceptions that are different for everyone depending on their personal BELIEF SYSTEM. Most people assume their belief system is the same as their own. This is certainly not true. Each of us has our own set of filters that turn the same information into different "perceptions" for everyone.
These beliefs lead to ACTION and in trading and investing, action is either buying or selling. Each action to buy or sell takes place at a specific price. Therefore, price is all the consistently profitable trader and investor needs to focus on. Adding any other information will distort your perception of what is real according to the laws and principles of supply and demand.
Lesson: Any and all influences on price are reflected in price.
Trading Ideas
DOW Mini (CBOT Futures)
The DOW Mini has declined significantly from the all time highs. There is however plenty of room below for further declines. We would not look to be a buyer until prices reach the demand level on the chart (green demand lines). Why is this a demand level? Notice the area where the level originates (where the green lines start on the left). Price appears to be in balance for a couple candles but then gaps up from that level. This gap higher can only happen because there are many more willing buyers at the demand level than sellers. If and when price revisits this demand level, we will have sellers selling after a decline in price and at a level where demand exceeds supply. Day traders and swing traders would ideally be waiting to take the other side of the novice seller's trade and buy when price revisits the demand level. We will watch for this in the coming week.
DOW Mini Intra-day (CBOT Futures)
While we are set with a demand level in the Dow should the market decline further, we must also have a supply level to trade off of this week as volatility is very high. The steep decline from this supply level suggests there are many more willing sellers than buyers at the level. Day traders can look to take a short position at this level. While the supply level may appear far away, the recent volatility suggests price can get there very quick. If it does, we will have buyers buying after a rally in price and at a price level where supply exceeds demand. This would be very novice action according to the laws of supply and demand. We simply want to take the other side of the trade and take advantage of the novice action of the buyers at that level.
QQQQ (ETF)
For those who don't trade the futures (yet), here is a similar shorting opportunity in the QQQQ. The QQQQ (ETF for the NASDAQ) has a supply level not that far above the current price. Traders can look to take a short position should price reach this level this week. Notice the significant decline from the supply level. This suggests a strong supply and demand imbalance at the level meaning there are likely many more willing sellers than buyers in that area.
US Dollar / Yen (Cash Forex)
This supply level in the USD/JPY is a bit far from current price however the currency markets are extremely volatile as well. This opportunity offers a very large profit margin as it is well placed on the supply and demand curve in the big picture. If and when price reaches the supply level, we will look to take a short position as a swing trade. Make sure you always adjust your position size to an amount that ensures you are only risking whatever percentage of your capital you are comfortable with. If you have any questions on this, please email me. Have a great week.
- Sam Seiden, sseiden@tradingacademy.com
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Sam brings over 15 years experience of equities and futures trading which began when he was on the floor of the Chicago Mercantile Exchange. He has traded equities, futures, interest rate markets, forex, options, and commodities for his personal interests for years and has educated hundreds of traders and investors through seminars and daily advisory services both domestically and internationally. Sam has been involved in the markets since 1991 both on and off the floor of the Chicago Mercantile Exchange. He has served as the Director of Technical Research for two trading firms and regularly contributes articles to industry publications. Sam is known for his trading, technical research, and educational guidance.