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Track 'n Trade Bulls 'n Bears Trading System
Learn to Identify Whipsaw
Video Transcript
Neutral Markets, by knowing and understanding the nature of markets, helps us, as traders, compensate for the less than optimal trading times. When a market runs in a strong Bullish trend, or even a strong Bearish trend, these types of markets are easy to trade. It doesn't take much explanation to see how easy it can be to profit these good times, or through well trending markets.
Much of our discussion is going to be focused on how to handle Whipsaw or Sideways Markets. Being able to handle Sideways market scenarios is key to our success as traders. It's where the markets generally "chew up and spit out" other, less prepared trades. Another one of the strengths of the Bulls 'n Bears Trading System, is that it helps us recognize when a market is trending sideways.
Generally speaking, we get excited when we see Yellow Sideways Markets. Because we know a new trading opportunity is about to present itself. As long and strong trends, generally happen after a time a Sideways consolidation.
Unfortunately, markets are not always quite that predictable. Sometimes we see periods of time where markets will trend sideways through a yellow channel with multiple false starts. Where the market bounces up to green or down to red, then quickly returns back to its yellow state, once again.
If we know, and understand these weaknesses, we can then prepare for them, deal with them, and maybe even profit from them. If not profit from them, at least reduce our losses.
When trading the markets, losses are inevitable. We're going to have losing trades. There is no way you can be a trader, without incurring losses, it's the nature of the beast.
Our goal is not to only minimize the number of losses but to also limit the amount of money those losses accumulate. Keeping our losses small, and letting our winners run, is the key to our success. Without a strategy to help negotiate neutral markets, we quickly give up our holdings, to someone else.
One very popular strategy used by many Stock investors, is to simply buy and hold. Letting the market take away everything it just gave. It hopes of having it give back again, sometime in the future. In my opinion, this is like spinning donuts in the church parking lot. It's fun while you're doing it, but when you're done, you're embarrassed to tell anyone and you didn't really accomplish anything or go anywhere.
This is why we must incorporate a trading plan, that accommodates false starts and very short trends; and not allow them to trick us into giving up our holdings.
We handle this situation by using several tried and true trading strategies. Which is what makes this trading method so very powerful.
Remember the old adage, "Where Systems Fail, Methods Prevail." This is why the Bulls 'n Bears Trading Strategy is a combination of system trading and method trading. You have to combine the best of both worlds to accomplish our overall strategic goals.
There are several market entry and exit strategies that we'll be discussing. I'll show you the advantages and disadvantages of each. This way, when you begin trading for yourself, you'll be ready to handle almost anything the market can throw your way.
Take a look at the example I've drawn, here, called, Neutral Markets. Notice in this example, that this market moved just enough to take the market out of it's yellow light position and move it into a green Bullish trend. The market then quickly turned around and dropped back down into the yellow position, once again. The market then dropped out of the bottom and the lights all turned Red, indicating a Bearish market. It then turned around, again, and repeated the process all over again.
This is the downside to trading. Markets have a tendency to do what we call Whipsaw- back and forth. Giving us a string of false starts. It's the entry methods we use, and a series of rules or filters, that help us rule out the majority of these false starts. In an effort to reduce the number of losses that we incur.