A few days ago I mentioned that the market volatility was regressing and that an apex or triangle could form, though at the time it was a bit early to tell. You can see that comment in this post here. In any event, the daily chart is highlighting market contraction.
How does one trade in a contracting market? Many wise traders will simply stand aside until the market reveals its direction. For most traders, this is probably the best choice. For those who still want to trade first and formost manage risk carefully; be aware of the key levels of support and reistance; look to the intraday for momentum direction; trade small both in terms of position size and profit objectives. When the market is contracting like this, it is much more difficult to read and direction can change quickly, so be prepared to quickly cut a trade that isn’t working. Don’t get chopped up!
Leave a Reply