Where not here to crow on about that, instead we want use this move as an illustration of how to time a trade correctly. In all markets when they go right great and sure we piled up big profits, but markets can make us all look stupid and they do regularly!
Here we want to go over two ways to cut the risk of trading in energies (and other markets) so lets look at them. Don’t predict. This is one lesson traders never learn.
It was tempting to buy into the support in the crude and unleaded gas, but we waited and used the stochastic indicator to time the entry - when it crossed with bullish divergence, we entered.
Not only does this method help you get in, it also helps you stay out, until the time is right.
We are extremely bullish of natural gas and wanted to get in and waited when prices approached support for the stochastic to give us the buy. It didn’t.
Prices have since dropped. We will get an opportunity, but won’t trade natural gas until support holds and momentum picks up. The lesson is always buy strength and don’t try and pick a bottom, that’s a mugs game.
Pay no attention to the news
Energies (and most other financial markets) are driven by trader psychology. Let’s look at the supposed fundamental reasons for the move today.
Three bits of news that are supposed to be bullish, there are more but check these out:
In Nigeria the world's 12th-largest oil producer and eighth-largest oil exporter unidentified gunmen on
Tuesday kidnapped two Filipino oil-industry employees of Petroleum Geo-Services, a Norway based company
In Norway the world's seventh-largest oil producer and third-largest oil exporter an oil service strike that began Wednesday threatens production.
Exxon's Baytown refinery is having problems restarting earlier this week, and an oil spill in a Louisiana channel affecting some refinery operations also encouraged traders to buy.
Big deal and this moved the price of oil? Don’t think so.
News is always around and most of it has no influence on prices, so don’t pay attention to it. The only bit of news that’s significant is that Iran and America are at loggerheads, but we knew that anyway.
These markets are driven by greed and fear and there is no better place to see this than in the charts. When you look at the charts be patient and don’t pick bottoms watch for STRENGTH To enter and never enter on weakness.
The stochastic is the best short term indicator to time entry points so check it out.
Do we think these energies are going higher? The answer is at present yes, they could test new highs but rather than predict we will let the market action tell us.
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