What To Do …And Not Do… In A Confused Market

What Is A Confused Market?

A confused market has several symptoms.  A confused market is more than just observed volatility.  It also ranges, has no clear trend, or no clear price action.  In a confused market, price may also get stuck between our traditional exponential moving averages (EMAs).  Think of someone spilling rum on your best nautical chart while you are preparing to get underway  …you can squint at it all day long but still won’t be able to make out the channels from the currents.

Observed volatility leads to expected volatility.  This is the thing investors may not like, financial salesmen do not like, but what the calm, patient trader needs to pay the bills. A  confused market has none of that.

In a confused market, patience is key.  Be patient, Stay up-to-date on fundamentals, update your risk model, calculate your probabilities, reconcile your accounts, wait for price action to cross the proverbial line in the sand, but do not make any hasty trades and gamble client accounts.

Remember, capital is one of the three key factors to economic prosperity and capital preservation is number one rule.

That all leads up to my recent trades –which have all been purely technical with a short holding period (and less than 2.5% gains).  I am currently holding a PLN and CHF long which will probably play out before Sydney opens.

The greatest challenge I face in a confused market is holding a trade for too long.  I use many off-chart market indicators that guide me on when to close a trade.  Those indicators are just not very accurate in a confused market.  Again  …p a t i e n c e.

A little bit goes a long way in times like these.

If you want to make sense of a confusing market, go visit the fine folks who taught me how to read a chart:  Infinite Prosperity, a Corp. Authorised Representative of Alpha Equities & Futures Ltd ABN 76131376415

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Author: Alexander Zhang's Blog

The ocean is my home, although I don't miss living on a ship! Risk Manager & Author from San Francisco.