April 2021
Hello and welcome to the April edition of the Safety in the Market Monthly Newsletter.
As I’m sure you’re all aware, the temperature in Australia has become somewhat cooler of late. The 40+ degree days of mid-Summer are well and truly behind us, and even on sunny days with no clouds, the temperature struggles to get much higher than the mid-20s on the thermometer.
As the seasons change from Summer into Autumn and then into Winter, we make changes to the way we behave, starting with what we wear. This all makes perfect sense to us because we’ve been doing it for all of our lives.
However, when it comes to trading, most people simply ignore the changes of season, even though David Bowden teaches us about the Spring, Summer, Autumn, and Winter of a trade. Instead of changing behaviours or acting differently when the season changes, many traders seem to assume that the trend is going to go on for a lot longer than it usually does.
This is why in the Active Trader Program Online Training, we assess each swing chart range, such as daily, weekly and monthly swings, and we ask, “which season are we in?”. If we are in the Springtime of the move, there is a chance to potentially enter a new position with a high Reward to Risk Ratio. If we are in the Winter of the move, however, it might be time to be thinking about taking profits or at least locking in some profit. It is certainly NOT the time to be adding to your position.
Many students ignore this basic teaching from the Smarter Starter Pack because they just want to get into a trade. I understand that. And let’s be honest – reaching the 75% milestone, which signifies that we are now in the ‘Winter’ of the trade, doesn’t mean that the market is going to stop dead in its tracks. But here’s the key. The Season of a Trade is not a filter to get you out at an extreme top or bottom of the market. It’s not even a filter to tell you a trend is even remotely near its end. The Season of a Trade is simply a filter to tell you that the time for taking a trade with a high Reward to Risk Ratio is gone.
There are many things that we can do to increase our profitability as traders, however, one of the simplest is to focus on trades with a high Reward to Risk Ratio. And you’re not going to be taking those in the Winter of the move.
Moving on to our articles now, this month Aaron takes you through a ‘Wheels Within Wheels’ approach to the swing charts on the Nasdaq while also setting you up for some Price Forecasting work. Then, Andrew looks at holding into a trade for the very long term on Soybeans, and Rob takes a look at the Australian Dollar.
