Written by A.J. Brown

Is Now a Good Time to Trade?

With the markets swinging as much as 1,000 points in a single day, quite a few readers are wondering whether or not it’s a good time to trade.

Gerard asks: “What should one do during this wild market? Sit back and wait for the market to calm down before we do any option trades?”

Wayne asks a similar question: “How can I make money on options in this volatile market, and do you give some symbols from time to time?”

Right now the market has been horizontally channeling (although in the last two days we have broken down through the channel’s horizontal support.) Horizontally channeling is much different than a converging channel.

Converging channels (which typically result in a predictable breakout) generally happen when there is something scheduled in the future to look forward to.

A horizontal channel, on the other hand, tends to form when there is uncertainty on what is coming next — and investors are content to sit on the sidelines and wait and see what happens.

Is this a good time to trade options?

For sure. Our Trading Trainer Apprentices are posting amazing gains on their trades. However, please realize that our trading practices are not centered around trend following strategies, as I can’t seem to find any reliable trends in the short term to follow at the moment.  In the last two days, I have seen a few stock charts take on trend continuation patterns, where price movement once again goes the direction of the long term trading bias, but these seem more the exceptions.

Instead, for the most part, we are trading based on channeling strategies (setting up Fibonnacci price retracement lines between support and resistance and using those in conjuction with a 3- and 5-day SMA crossing is an example) and breakout strategies.

We are trading more reactively. We’re setting up to catch trades based on threshold crossing followed by validation.

Most of us are automating alerts that trigger us by email or cell phone SMS text message to get into and out of our trades after examining potential setups each prior evening. If the setups “pop,” we are alerted and evaluate it. If it’s valid, we enter the position and automate the exit alert. When the exit criteria “pops,” we get another alert and evaluate it. If it’s valid, we exit the position.

These reactive trades are working well. Very well.

Looking through the apprentice log tool, I see the following daily ROIC results: 14.04%, 47.57%, 4.07%, 7.41%, 17.26% and so on.  (Daily ROIC = Closed position ROIC divided by total number of days in the position).

We have our system and the tools that support that system that can ultimately create for us daily pick lists…  but, as the Trading Trainer system goes, those picks need to be analyzed, confirmed, validated and tested against your own personal style and constraints.

The picks that are right for me, or another Trading Trainer community member may not be right for you. If I were to just hand out picks, it would be a disservice to you, not to mention it would defeat the purpose of teaching you how to fish, which is my primary goal.

Best regards always,

A.J. Brown

P.S. If you’re up for learning how to do some analysis, you can get access to our daily pick lists here.

3 Responses to “Is Now a Good Time to Trade?”

  1. mike @ 1:46 am:

    I have also been dabbling in FOREX using the same 3-5 day analysis timeframe, using linear regression channels to get a feel for the trading range, as well as watching the crosses on a 2 line SMA, along with the MACD and Volatility. FOREX is not so flinchy, save for the USD/JPY, which seems to correlate to SPY, and is very volatile these days. I have never done it before, but it is working, and of course, liquidity is no problem. But the executions are slower and stingier. Just my two cents worth

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  2. Online Option Trading @ 9:54 am:

    How bad the financial market is, it’s always a good time for options trading, if we know how.

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  3. William @ 7:02 pm:

    I’m the new kid in the community and I do not yet understand what your 3ma-5ma cross is.

    So, my comment is about the right/wrong-ness of sharing picks. I am in the low-rent district and my goal is to learn to extricate myself and at least move up to modest financial independence. My trade acct is too weak to trade effectively, so while I am being taught to fish it would be a compassionate blessing to be nourished enough to have the strength to fish for myself.

    Of course, I would need to begin to do my own TA on them to validate them for myself…and I still have much to learn on how to do that.

    This is why I am greatly interested in your community. And also why I am cautious whether to join or not.

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