Watching the financial markets the past few years has certainly been entertaining. The intra-day volatility has made daily cash flow a possibility for short term traders; the intermediate term traders have been able to find the strongest sectors and stocks to ride the trend; and of course the long term visionaries have certainly been rewarded as they've stayed their course.
Obviously it’s extremely difficult to simultaneously be a short term trader (trading intraday volatility) and being a macro trader (looking to hold positions for months or years), but it is important as a trader to have a trading plan that suits ones temperament and style.
Regardless of the time frame one trades, it is imperative to keep the big picture in perspective. Whether your horizon is short term or long term, one thing remains constant when looking at the markets: Bullish thinking dominates all markets. That statement does not simply suggest that I am always LONG side the market or always looking to place buy orders, this is simply a mindset I use to help decipher the psychology of the market players at any given time.
The markets are designed to be a long side vehicle to create growth and income. If a market is attempting to bottom then we normally are examining a bullish base building area; if a market is creating a top, then normally that can be seen as bullish profit taking. These initial stages of profit taking will eventually turn to concern if accumulation is not confirmed (which can take some time), as every dip is considered a buying opportunity.
Bears are opportunists and cannot cause a bear market. Bears can pile up on bulls at perceived tops (shorting), but if the shorts keep finding buyers below, then the market will not go lower. The shorts may continue to try and overwhelm buyers, which can result in a few weak hand longs being shaken out (especially those that bought too high to stay in the move), but the entire thought process has to change from greed to fear before the bulls let go of their positions.
Bears will enter the market when they see the commitment level of bulls waning: failed accumulation at tops or failed accumulation at bottoms. In either scenario, bears look for opportunities to exploit disappointment at failed accumulation. (this occurs in every time frame; particularly interesting to watch on shorter timeframes).
In upward bound trends, bulls become bold and cavalier-like with their buy-the-dip mentality; this continues until enough failed accumulation attempts causes them to give up a particular area.
Early success in accumulation makes bulls less fearful. As the accumulations struggle to take hold later on, the bulls become more cautious. It's the failed accumulation that turns cautious bulls into fearful bulls.
The market can only go lower if the bulls fail at confirming accumulation; if the bears fail at confirming distribution it's because the bulls are absorbing sell orders.
Look at a chart and see if you can determine where the Bullish commitment level started to waiver. What happened? What happened when the bulls turned from fearful to greedy and started a base building effort? Keep this perspective in mind in the coming weeks and months as the battle for control starts to take shape. Follow the storyline and "Think Like A Bull."
Follow me on Twitter and Stocktwits @ ES_Fred
Obviously it’s extremely difficult to simultaneously be a short term trader (trading intraday volatility) and being a macro trader (looking to hold positions for months or years), but it is important as a trader to have a trading plan that suits ones temperament and style.
Regardless of the time frame one trades, it is imperative to keep the big picture in perspective. Whether your horizon is short term or long term, one thing remains constant when looking at the markets: Bullish thinking dominates all markets. That statement does not simply suggest that I am always LONG side the market or always looking to place buy orders, this is simply a mindset I use to help decipher the psychology of the market players at any given time.
The markets are designed to be a long side vehicle to create growth and income. If a market is attempting to bottom then we normally are examining a bullish base building area; if a market is creating a top, then normally that can be seen as bullish profit taking. These initial stages of profit taking will eventually turn to concern if accumulation is not confirmed (which can take some time), as every dip is considered a buying opportunity.
Bears are opportunists and cannot cause a bear market. Bears can pile up on bulls at perceived tops (shorting), but if the shorts keep finding buyers below, then the market will not go lower. The shorts may continue to try and overwhelm buyers, which can result in a few weak hand longs being shaken out (especially those that bought too high to stay in the move), but the entire thought process has to change from greed to fear before the bulls let go of their positions.
Bears will enter the market when they see the commitment level of bulls waning: failed accumulation at tops or failed accumulation at bottoms. In either scenario, bears look for opportunities to exploit disappointment at failed accumulation. (this occurs in every time frame; particularly interesting to watch on shorter timeframes).
In upward bound trends, bulls become bold and cavalier-like with their buy-the-dip mentality; this continues until enough failed accumulation attempts causes them to give up a particular area.
Early success in accumulation makes bulls less fearful. As the accumulations struggle to take hold later on, the bulls become more cautious. It's the failed accumulation that turns cautious bulls into fearful bulls.
The market can only go lower if the bulls fail at confirming accumulation; if the bears fail at confirming distribution it's because the bulls are absorbing sell orders.
Look at a chart and see if you can determine where the Bullish commitment level started to waiver. What happened? What happened when the bulls turned from fearful to greedy and started a base building effort? Keep this perspective in mind in the coming weeks and months as the battle for control starts to take shape. Follow the storyline and "Think Like A Bull."
Follow me on Twitter and Stocktwits @ ES_Fred