A few weeks back, I kicked off the Intelligent Investor Series as part of my weekly commentaries. Th...
Don't Make Market Incredible Hulks Angry. You Wouldn't Like Them When...
12/29/2016 12:33 pm EST
Citing the futures market's version of the Incredible Hulk to illustrate his point, Ken McGaha of Ninjacators.com outlines how traders who stand in Hulk's way are often forced to bear witness to their trades being ripped apart while those who get out of the monster's way can stand to reap scary profits.
You might not realize it, but the futures markets are ruled by their own version of the Incredible Hulk who is capable of ripping your trades apart. The market Hulks are the powerful and elite institutional traders and their massive order volumes are what drive those markets.
The Hulk was a terrifying creature, except to those who were on his side. The powerful institutional traders in the futures markets are the same. They can tear your account apart or become your most profitable.
These monsters of the market buy and sell at will. As they conduct their business, they create powerful trends that destroy anything in their path, but leave a trail for others to follow.
Retail traders who stand in the way will stare in horror as their trades are ripped apart. Those who learn to follow the monsters of the market will reap scary profits.
What Creates These Powerful Trends in The Market?
Imagine the institutional traders as the Incredible Hulk. They are big, powerful, and intimidating. They are powerful enough to lift market prices high above their heads and throw them even higher when they buy. They can also smash prices to the ground when they sell.
Just like the Hulk, the institutional traders are going to crush anything in their path. But, the powerful trends they cause can also be used profitably by retail traders who know how to get on their side.
Just like those who learned how to befriend the Incredible Hulk, traders who find the institutional rampages can get out of their way and avoid the carnage. They can even take advantage of it when they follow along.
How Do You Identify Them?
Virtually all charting software available today provides traders with the tools needed to identify market trends. They are also easy to learn how to use.
As the price reverses direction and then reverses again, a line drawn from the top price to the high of the reversal establishes the trend. The more times the trend line is touched without being broken, the stronger the trend.
Trends are established when an asset price traces a line drawn on a price chart. The line can be moving upward or downward. The important thing for traders is to see when the existing trend is changing.
The simple moving average is another tool that helps retail traders spot changing trends and price momentum in the market. This tool is generally displayed as a smooth flowing line that follows the price higher or lower. It represents the past average price of an asset over any period of time you choose to select.
It is an excellent tool to use in conjunction with trend lines to provide a confirmation of what you think the trend line is telling you. When they are both moving in the same direction at the same time, opportunity to get help from the institutional Hulks might be at hand.
How Do You Use the Trends to Increase Trading Profits?
Don't we all want the Hulks of the futures markets on our side? How sweet to have those powerful forces working for us rather than destroying our trading accounts. To read the entire article, click here...
By Ken McGaha, Contributor, Ninjacators.com
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