Futures – a much more difficult to understand tool than, say, currencies or securities. But they become even more interesting as a trading instrument, as they involve a wider application of the knowledge. Strategy phase of the market is the simplest tactic, which in general shows some tricks of the trade in the futures exchange markets.
Futures are often chosen by professionals, because their value can change dramatically depending on the period of time at a stable price of the underlying asset. Example: January 2016, the instrument: oil futures for delivery in February and April. In April, a meeting in Doha, where it is decided that plays into the hands of oil. This means that the February futures are quoted at a low level, and the April high. Despite the fact that the oil price will play its growth in April, futures on the prospect can be bought in January.
Strategy on phase of the market: basic knowledge for beginners
According to most traders, the most simple and intuitive strategy are often find themselves winning. A successful strategy must not be too clever, but rather simple to understand. The difficulty is that for all its simplicity, you need to be able to recognize the point of entry and exit that is able to apply it correctly.
Strategy for the market phase determines the point of entry into the market depending on what its current state at the moment. Before you consider the different phases, we will give two pieces of advice:
- when the phase directional trend there is a sense to open positions in the direction of the trend after pullbacks;
- at a certain trading range positions are recommended to open around range boundaries.
Now more about each phase.
Phase of accumulation
On the picture you can see a definite trading range. In this case, it is recommended to open positions in the following cases:
at the end of “spring” on the bottom of the resistance point;
at the point of pullback and consolidation after the resistance level is broken.
Phase of distribution
It is recommended to bet on the opening short positions, since it says about drop-down trend. The best entry point:
- localization zone (low frequency movement of the price trend along the level of the range) at the level of the resistance level (if localization zone before that was accompanied by a false breakdown of the output trend for the level of resistance is even more accurate entry signal);
- a pullback after a breakout of support level and consolidation at this level.
It is important to remember that the accumulation (localization zone on the resistance level of the uptrend) and the distribution is only possible in the final stages of a trading range. Open positions near these levels (as shown in the figure) is possible only after confirmation (strong signals, talking about the potential of the trend direction). Strategy phase of the market although simple, but requires a guarantee. Better to enter when price will test the level range.
Phase of the uptrend (“bull” market).
Involves the use of tools of technical analysis. The best opportunity of the opening of the position of the point after correction, when the down trend stops and the price is fixed at the support level. This strategy phase of the market is dangerous because to recognize further uptrend is quite difficult. This can help in moving averages or a strong factor of fundamental analysis.
The downtrend (“bear” market).
Here everything is by analogy with the previous strategy: the position is better to open after setbacks on the resistance level. Suggest to use additional indicators or faster to install a small risk size per trade.
And some general tips applicable to all strategies in the current market phase:
- opening positions are recommended only at the level of support or resistance – the price is supposed to fix its position;
- not to enter the market against its movement (its current phase in accordance with the weekly and daily charts);
- the direction of the price movement should be supported by trading volumes, causal connections and logic. Doubt should not arise;
- no one can predict the exact movement of the price trend. If there are doubts about his behavior, do not enter the market;
- not to risk the deposit, being in the zone of acceptable risk, even if it seems that the position is extremely reliable.
We hope our tips will be useful. If you have questions, ask through feedback!