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How To Identify Trends When Trading The S&p 500 Mini Futures Contract
How do you figure out if the market is going to go up or down for the time frame that we choose? If you blindly take a side... let's say you think that the market is going to up your chances of getting a winning trade are 50/50. Not very good odds if you are trading one contract at a time, or 1000 contracts at a time. You could have 5 or 6 loosing trades in a row before you get a winner. By then you will be so frustrated that you will be afraid to take the next one. Remember that if you loose $500 it will take you a winning trade of $500 just to be back to break even! So trend identity is extremely important to the overall success of a trader. Your only friend in this business is your mentor and the trend of the market. The guy that has been a great mentor to my trading has been a fellow by the name of Larry Williams. Larry has a tremendous passion for the business and for teaching his work. What Larry taught me about the trend identity was to use the right tool for the right job and to keep it as simple as possible. The tools that we need to identify the trend are the 18 bar moving average, ADX (Average Directional Index), and an oscillator. Let's take a look at each one. The 18 bar moving average indicator takes today's price action then puts that action into an average of 18 days ago. It is then placed into a solid line on a chart right through price sometimes. The next two indicators will be placed below price and will be working together. ADX is a measurement of price action and trend integrity. When the indicator is above 40 the trend is very strong. If the reading is below 25 the trend is weak and about to change direction. Then we add an oscillator to this indicator and buy or sell when the ADX is at 40 and the oscillator is in the buy or sell zone. That is as simple as it gets to identify trend and where price action is in conjunction with the overall trend of the market. This can also be applied to intra day charts as well. Remember... The trend is your friend until the end. Article Directory: http://www.articledashboard.com If you fail to plan, you are planning to fail. Don't make another move until you find a proven stock trading system to follow. With my system you can make money from the stock market, even during a recession and no matter how bad the economy gets. Become a stock trading pro today by going to StockTradingProSite.com |
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