OF COURSE YOU PICK ON THE LITTLE GUY
I wrote recently about how I thought Heating Oil was setup for a rally due to COT stuff and a few other reasons, but I also said I would be doing longs in Unleaded Gas if I did them. Here is a perfect example of why I always buy the strong and sell the weak. If we are looking to short, of course we want to pick on the weakest guy. He is the easiest to push over. This is equally true on the long side. Why not bet on the strongest guy to win and the weakest guy to lose? Here you can see how choppy Heating Oil has been since I posted those comments.
As it is with anything so it is with this concept, it does not always work every single time. However, if you study complexes of commodities you will see more often than not this will save your bacon trading with this in mind. Here is Unleaded Gas during the same period of time.
If you just look at these two charts it is a no brainer deciding which one to buy and which one to sell. There has not even been a pullback at all in this chart during the same period of time that Heating Oil has chopped sideways.
Here is the most painful lesson I have learned over the years and keep learning over and over. As a dude who likes to fancy himself as being smart, I constantly am tinkering with new ideas for indicators. I think this profile describes most of us. Of course we get proven constantly what dumbbell's we are the minute we start thinking about how smart we are. Indicators can be intoxicating. We can craft them so they pick out every wiggle in a chart then something funny happens. Once we start trading them the wiggles waggle and we get our butt kicked. Every time I go through bad periods and there are never ever any exceptions to this, I always find most of the bad trades are against trends in the markets. Oh but the indicator said to sell etc... yada yada yada.
Look at this next chart, that of Soybeans. I have been looking to get long in this market based on the weekly setup that I think is bullish. However, look at this chart. Is it really screaming out buy?
If you look at this chart where I have all the arrows, where are the best trades? They are in spots with an obvious trend in place. The recent sideways price action is just an invitation to get whipped back and forth. If we fly out of here from this chop, I will just miss the trade I suppose. I do not mind that though because for every one of those I miss, there are going to be several stop out losses that would occur trying to catch them. What I am hoping for is a move up then a retracement that gives me a possible entry to get on board. If I do not get that I will sit on my hands and wait or look elsewhere. If you are going to trade counter trend make sure you do it on a daily trend that is against the weekly trend. In that way you are really not trading against the trend as much, and are betting on the underlying trend reasserting itself. We have certainly seen this happen over and over in the last couple of years.
I wish I had setups, but I have no futures trades or stock trades on at the moment. I had a few stocks that I exited this morning picking up a little change here and there. I do not see a setup for a trade in futures today anywhere.
I would go to the golf course, but I am hitting it absolutely sideways right now and that is more aggravating than trading!