When it comes to trading there is a common belief that most behavior in markets can be explained by assuming that market participants make ‘logical’ trading decisions. In reality we know it’s not that easy. However there are market movements that are predictable because they repeat every year. These patterns are created by the collective actions of market traders themselves and can be used to predict the market.
The trend following model by Kaufman says that trading by the direction of the trend is a conservative approach to the markets. Kaufman’s Market Efficient Model states that longer trends are the most reliable but they respond rather slowly to changing market conditions. The main argument of the Market Efficiency Model is that an adaptive method must be applied to the markets for proper trend following.
Volume can help us in confirming breakouts. Let’s examine how we can implement a proper volume trading strategy. First of all what we need is an indicator that gives us a better understanding of what the current volume levels tell us about the state of the market. To accomplish this we need an indicator that compares the current volume of a market to the relative values during the last couple of days.
The commercial net positions are a mirror of the large trader net positions. Most of the time commercial net positions mirror the funds trading patterns but there are some important exceptions to this rule. In rare circumstances the commercials need to cover their positions and this can lead to significant price moves. These price moves can be predicted in advance by using the correct set of tools.
We gonna show you something really interesting and when done correctly it can be exploited. We are talking about imbalances. You can basically do this with any time frame and any contract especially those with rising volatility and severe directional price changes for a prolonged period of time.
How to implement a ranking system for trend following strategies. Analyze the probabilities and trade the commodity with the odds in your favor and the highest risk-reward potential.
In today’s uncertain markets, traders who want to spot major market moves and protect themselves against large losses should consider using spread trading. Spreads are one of the most powerful market indicators. The two major ways looking at them are the price premium structure and the strengthening/weakening of the spread.