Trade Example #1
In this Track 'n Trade Trading Training video, I want to take you through and just quickly show you how we can use the seasonal nature of markets, to help us make our trading decisions.
So, here we are looking at Natural Gas. Now, Natural Gas, through this time frame as we notice is from September through into January, is generally quite flat. We don't see a lot of trading activity, no extremes in here. Nothing going down into a lower trend, or up into a higher area.
So, if we come in here to the Settings for the Seasonals Indicator, and we set our thresholds, we don't see anything, really getting us excited about trading this market right here. Of course, we look at the market, and seasonally speaking it seems to be doing the same thing. It's kind of in a low, flat mode that doesn't really get us all excited. So, this is what the Seasonals Indicator can do for us. It can help us keep us out of a market that doesn't really trend during any certain times of the year.
Now, if we slide the market over, look at what's happening: the market is going to change or the has the tendency to change. Now, just because it has done this in the last 10 or 15 years, doesn't mean it's going to do it again this year. That's very important for you understand. Past performances not indicative to future results. But, it's the best we have. So, we have a tendency to do it over, and over again, so it's the closest thing that we have. So, we use it as a guide. Now, I make to make sure you use it as a tool, not as crutch.
So, now as we come along, we're going to look for and anticipate a rise in price, starting right here, relatively soon, aren't we? Right here looks like the very lowest point.
Now, I like to come in and draw a couple of lines in here. I like to identify the lowest point of that seasonal trend. This looks like on the 10 year one, is what I like to go off of. So, I'm going to turn off the horizontal line. From that point, to this point is my time frame. So, it's right through this time frame, right in here that I want to be able to look to take advantage of this market, a possible rise in price.
Now, I don't want to just go and jump into the market randomly, and say, well the market has a tendency to go up during this time frame, so I'm just going to get in with a market order. No, I still want to use my other Indicators, and I still want to look for an opportunity to get into the market. I need some kind of a trigger. Something that sets me off, that says the market is about to rally, and about to rise. So, I sit still, and I wait.
Another thing I like to do is like to scale it out. I like to look at it from a longer scale. Notice that if you scale the market out a little bit, you can see the more exaggerations, of the different types, of trends. You'll notice that this has a had a nice little rally, here. A nice little down trend, here. Notice that falls in nicely with our seasonal average. So, the markets actually fall in the seasonals quite well, here. So, I feel like there's no reason why it shouldn't continue. Notice a little rally here, we have this nice little rally right in here.
Because the market has been following the seasonal nature so strongly over the last 6 months, there's no reason for me to anticipate a change from that. Now, if it was going wildly strange back there, I would be a little bit more cautious, but because it's going quite strongly, I feel like there should be some kind of a rally coming during this time frame. Seasonally speaking, that's what we generally see.
We want to start looking for a setup and a trigger, so that we can then follow through with the seasonals. Now, I'm going to zoom this back out just a little bit, so we can see a little bit better. We're looking for an opportunity for the market to rise, so let's step the market forward. Yellow, yellow, yellow, green, that's a Buy Signal. That's a Buy Signal coming in right at about the right time from our Bulls 'n Bears Indicator. The Bulls 'n Bears is my favorite Indicator, it's the one I like to use it in combination with the Seasonals. To me, I think they go hand in hand with each other. I don't know how you can use one without the other, you need both. So, this is the trigger that I like to use, when trading the seasonals trend. I like to find a trigger. Now, this is my trigger... going from yellow to green is a Buy Signal.
Now, I'm going to come in here, and if this market continues to rally, I'll get in the market. So, I'm going to Buy 1 contract. Right now, let's just get in with 1, we won't get too fancy. I'm going to put a Stop in there. If the market rises, I'm going to get in. Now, the market dropped back down, and since I use a Stop Order I didn't get into the market. I'm going to step the market forward, again. It didn't get in, and we're still sitting there with our order. The market is going sideways, a little bit. If it continues to break above that green spot, I'm going to get in. Nothing happens...notice the seasonals, it says not until this day, do we start to see the rally start to take place. We have our Stop in, now we're into the market. Now we can come in, and we can place a Stop. I'm just going to place the Stop, right back here below this lowest green. We could put it behind the yellow, or clear back here, but for me I like to have it. Well, looks like a good spot would be right behind that first green, that lowest green Price Bar. I like to put to my Stops back behind areas of support and above resistance, things like that.
So, we're going to come in here, and we're going to say Sell 1 Stop, if we're wrong. As that market moves forward, we can make our decisions on what we're going to do with our Stop Orders. We can either move it up, or hold it where it's at. We might want to move it up a little tighter, or just leave it right here. Notice that the market has a tendency to move a little bit up and down. We have a little down spot coming in here. We have another, then continued a big rally up in here. We're seeing kind of a little spike up in here. So, as the market moves forward, now starting to come back against us, a little bit. We're pulling, pulling back, and there it's gone back up a little bit. There it's gone, OH! Now, we've gone back to yellow. Yellow is back to a neutral position on the Bulls 'n Bears. So, we're going to hold still, hold still, hold still, did we get stopped out? No, we didn't get stopped out. We had our Stop held right behind the lowest point of that green Price Bar. This yellow Price Bar came down and tested that area. We didn't get stopped out. Had we been, held our Stop up a little tighter, we could have been stopped out, up in here. Had we pulled it up a little tighter, even though we might have taken some profit. This probably would have been a loser, had we been stopped out. Notice it went yellow, turning back around to green; that's another Buy Signal.
If we wanted to, we could actually come in here, since yellow to green is a Buy Signal, we could say I want to Buy another one. We can come over here and look at our Accounting. Now, as this market starts to rally forward, we're in good shape. We have 1 Stop, let's see, what we need to do is we need to put another Stop Order in here, to protect ourselves with this other contact. We're now long, Sell another one. So, now I have my 2 Stops broken apart. I can suck this one up a little closer, and maybe this one here. Now, as this market starts to rally, OH! Came back, and stopped us out.
Now we're coming back again, why is not taking right off, just like the seasonals? Well, maybe it's following the seasonals a little bit more closely. Notice it has a little room to go sideways. Notice right through this time frame, here it goes sideways a little bit, doesn't it? We have a little bit of a sideways market, so maybe we're a little bit early. Maybe a little premature before the big run starts out here maybe. These are things that we can watch for. We can use this as a...as a guide to help us, but we're using the Bulls 'n Bears.
Look this is, actually let's back up one. Yellow to green, that's another Buy Signal. If we wanted to, we could come in here, we could drop another order in here. Buy 1 on a Stop, get in, and as the market begins to rally, now we're in again with another Stop. So, we need to come in here, put another Stop Order down here, Sell 1. Let's remove this one. Now, move our Stop, up in there. We're long 2 contracts.
We're still doing pretty well, we're up $7,000.00 on this trade. We've been stopped out a couple times, but that's okay. We hold our Stops tight, take very tiny losses, and let our winners run. That's the name of the game, right? We're not going to win every single time, everything is not going to take off beautifully for us. So, we have to realize this, and we have to use this information to help us make our trading decisions.
So, now as we move the market forward, we can rally up with it. Now, there's a number of different things we can do at this point. As this market starts to rally, and it looks like it's going to start following the seasonal trend; we can start using some different tools, some different overlays. You know, with the Bulls 'n Bears, of course comes the Blue Light System. We can go in here with the Blue Light System, and we can turn that on, or we can go in with the.. there are a couple different overlays. We can come in here, and we can turn on the Parabolic SAR. The Parabolic SAR is a mathematically calculated point, where we can place our Stops. I'm going to come and look at the Parabolic SAR Settings. Let's see, I want to go to Overlayed Parabolic SAR, and that looks good!
Let's come in here, and turn on the Bulls 'n Bears Settings, let's see, to the Bulls 'n Bears. I want to see the Chart Properties, so I want to go to Overlay Properties Bulls 'n Bears. I want to turn on the Blue Light. Lets turn on the Bullish and Bearish, there we go! You can see I have two mathematically calculated Stop Placements. One is a blue Light, and one is on this red light. I like to keep them, so they're separated, but they're both mathematically calculated.
Now, as the market moves forward, I can move my Stops up with these mathematically calculated stop placements, because I'm in the market. I had a couple of rough starts, there, but that's okay, that's kind of what we anticipated. We would get into the market, we would take our position, and now as this market starts to rally a little bit, we're going to take advantage of this move in the market. Hopefully it'll continue to follow up that seasonal trend.
I'm going to come in here, and I'm going to go Settings on this order, and I'm going to tell it to trail the Parabolic SAR. Hit Okay. On this one, I'm going to come in here, and I'm going to go to Settings: I want this one to trail the Blue Light System.
So, now as I step the market forward, as that market moves, you'll notice that it will automatically re-calculate for us where we're supposed to be placing our Stops for each trade. Those numbers, of course are listed right up here. You can use those to talk to your broker, to place your Stops and where to put your Stops. Also,you can enter them on your electronic order entry platform; whichever you may choose.
Now, as that market rallies, notice that we have two different Stop locations. If this one pops back down, and takes us out, we're not all the way out of the market. We're still in the market, still making some money that has pulled a little bit further back. Of course, it's broken, it's above break even. So, it's actually in the money, and making profits as well, at this point. So, now as the market continues to rally, we use our trading strategy to take advantage of this opportunity. This one bar got us out of both positions. It rallied up through the time frame, in which we anticipated. We took our profits, of course in this market with two contracts. This is a relatively large market natural Gas, so that's a $25,000.00 profit on this nice little setup and run, right up through here. Which was given to us through the Bulls 'n Bears combination with the seasonal trend.