Flexibility is the key in these markets: you can win on falls as well as rises
Smiles have returned to traders’ faces with the markets rallying more than 7 per cent in the last two weeks.
But be careful. It’s easy for the bulls to get too optimistic.
During a spread betting seminar last week, people kept asking, “Are there any buying opportunities in the markets?” My answer is that there are always opportunities in the markets. But remember that you can find opportunities not just in “buying” but also “selling” the markets. In order to make money, you must be flexible, and not just fixated on the long side.
Take, for example, my open position on the Dow Jones Index. After the waterfall decline, the market itself had me on board net long after the index bottomed out at 10,827. I did not catch the exact bottom, but by using smart orders on a spreadbetting platform, my order was triggered and got me long at 11,245. Currently the index is at 11,632 which is an open profit of £3,870 and my initial target is 11,700 for the Dow Jones index.
I went on air at CNBC on 14 July and said that “I am a big seller of oil.” Emails flooded in asking, “Why sell oil if it is rising sharply?” The following day oil fell 4.4 per cent and subsequently a further 8 per cent.
Markets frequently move in three and five wave structures. In Oil had formed a five wave pattern right into the price target of $147-$149. This warned me that we might be approaching a resistance level and to get ready to short it. Using smart orders, that’s what I did, and I am currently in profit of £5,780 simply by following the market down.
Last week in this column I forecasted “A big move down – possibly towards $123.27” and look at where Crude traded on Wednesday… $124.44. I am getting ready to bank profits very soon and also to possibly reverse the position.
That’s what flexibility is all about. As the old Chinese proverb says, “Crisis equals opportunity.”