In the past few days I’ve noticed a lot of references to “summertime markets” in the media everywhere. Talk of lower volume, lower volatility and drifty nature. Well hells bells alive…that describes financial markets from the start of 2013 all the way thru now, with a few very brief snippets of fast action mixed in along the way.
Has it been summertime straight thru the past 20 months or so?
The fact is that markets are quiet for whatever combination of reasons that they are. Let’s simply chalk that up to an absence of malice and leave it at that. Until financial markets have some reason to panic, they won’t. Very simple.
So with that, futures traders need to temper expectations and tactics accordingly. For me that means focusing on crude oil and S&P 500 futures in order of importance. Russell 2000 futures would be my personal preference, but real slippage and real lack of liquidity in real-time trading conditions make them unsuitable for my purpose. As I’ve repeatedly said, if someone wants to turn 1 – 2 contracts and deal with the constant slippage involved, no worries. If someone wants / needs to work with more than 1 – 2 contracts, Russell 2000 futures are not what you have in mind.
Crude oil futures trade thru good average daily ranges and usually offer several price oscillations for potential profit. They are volatile to the point of outright explosive when making directional moves, so it requires a momentum-trader mentality to prevail. If you are a pullback-type of trader, you will be frustrated and disappointed over time. In my opinion, crude oil trading is more complex to get the hang of and requires the highest degree of mental preparedness in all aspects to succeed.
In my case I’m using a filter chart for trend bias and a faster chart for trade setups and signals. Glance at the filter chart for directional bias, focus on the trigger chart for key levels to trade around… only in the direction of said filter chart bias.
On the S&P 500 side of things, I’m going to focus on more of a “scalpy” type management approach myself. Pull a couple points here or there and settle with that. Try to make that happen in the morning, because afternoon price movement tends to fizzle and fuzz way more often than not.
I had a brief email exchange with an aspiring trader last night that essentially said now more than ever before, successful trading demands the utmost in mental fortitude. Focus, concentration, patience and discipline to greater degrees than any time in the past. This profession is not for the lazy, not for the impatient, not for the instant-success crowd.
If for any reason(s) you have the misconception that trading is easy money made while sitting at home without much effort on your part, the market will soon teach you otherwise. It will show you reality in dollars and cents. If you think some automated “system” or some little-known savant out there somewhere s the inner secrets to easy wealth, the market itself will soon teach you otherwise.
If you are prepared to study hard, focus intently and settle for what your chosen market / symbol has to offer, then you are ready to push forward towards your own goals of success. The only constant in financial markets is change, and the more things change the more they remain the same.
For more daily updates from Austin, visit his blog at Coiled Markets.