Stocks & Commodities V. 32:6 (16-19): Measured Income by Gareth Burgess

Measured Income by Gareth Burgess

Uncharted Territory

When trying to make trading decisions, we often find ourselves staring blindly at a chart. Here’s one way to logically look at the markets and make trading decisions based on your own findings.

Making a position as a day trader in your chosen market is often like a walk down the stairs in the dark — you know the next step should be there, but only when you place your foot there will you know for sure. Trading is much the same. Until the price reaches your anticipated target, you never know for sure that the market will get there. You hang in there with a certain degree of fear because experience and charts tell you that big moves happen and therefore your profit should be greater. You want to hang on, you have a profitable position, and that position is protected by your stop. Time passes, and for no apparent reason, you cannot wait for the market to move any further. Uncertainty strikes, and you close out your position only to see the market eventually continue to move up in the expected direction. On the flip side, you know from experience that profit can turn into a loss.

FINDING THE BALANCE

Where do you draw the line between profit, bigger profits, and no profit? The one thing that is certain is that the battle with uncertainty remains constant. Some traders use cycle analysis to try and anticipate market turns. Banks and institutions know, through research, that some companies and hedge funds transfer money around the globe at certain times on the same day each week or month, causing the markets to move in one direction. The futures markets often see gaps in prices. Chart patterns also cause markets to move toward the so-called measured target. Whatever the reason, global markets experience days with larger moves in one direction than on other days.