Futures trading blog

blog

Navigating the Complicated Bear Market as a Trader

Michael Singer - Monday, January 25, 2016

The year 2016 is turning out to be an extremely ‘intriguing’ year for financial markets. The calendar year is turning to be its worst nightmare for long term investors. All of the major benchmarks in the U.S. have lost substantially. This year the Dow Industrials index lost over 5 percent. In addition, the NASDAQ has lost over 5 percent, whereas the S&P 500 lost over 4 percent. Those figures are huge, particularly to anybody involved within the financial market. The rout, in Asia, within the financial market has been enormous. The circuit breaker in China has activated two times prior to the Chinese authorities deciding to do away with it. The circuit breaker suspended trading automatically if any induces dipped by 7 percent. The Nickel in Japan also has lost over 8 percent. All of the major indices in Europe also have declined by as much as 10 percent. Those losses couple to the truth that the majority of those markets actually experienced losses in the year 2015.

The majority of long term Bulls, as a result, have experienced enormous losses. Recently, Bloomberg placed the number at over $600 billion. Bill Ackman, billionaire investor, has continued to make losses in his fund that has lost over 11.5 percent this year. In addition, David Einhorn experienced a similar fate. The exact same case has occurred for the majority of major mutual funds and hedge fund managers. In this post, I am going to explain a variety of strategies that traders are able to use to benefit from those market conditions.

Reasons for the rout

Market conditions presently have been facilitated by a variety of reasons. First, China is viewed as the top reason why world markets have declined to the bear territory. The Chinese market, as the second largest economy worldwide, is extremely important as far as consumption and production is concerned. China is the top consumer and producer of all of the globe’s commodities. A slow down on the economy, therefore has substantial impacts. The next primary factor is oil. For 2015 alone, oil prices around the globe have fallen by over 10 percent. Crude oil is now trading at the lowest levels within 13 years. It therefore, has impacted the oil generating countries. And lastly, the fed determination to hike interest rates contributed to the uncertainty within the financial markets.

Available Strategies

As these underlying factors led to massive losses within the financial markets, the truth is that smart day traders haven’t suffered those losses. It’s due to day traders having the opportunity to trade in either directions. In addition, they’re in an excellent position to close and open trades within an extremely brief time. It’s an important advantage to bring in a trader than to invest for the long range.

Using the Asian markets

You may trade a variety of instruments as a day trader. Those instruments involve: indices, currencies, stocks and commodities. On the other hand, global financial markets open within various times of the day with markets in Asia being the first ones to open. Those markets are highly correlated such that what occurs in Asian markets typically will have a spillover effect to the European and American markets. For example, if the markets in Asia fall, European and American markets also will fall. Thereby, a day trader easily can shirt the S&P, Dow, or NASDAQ. A day trader also easily can purchase treasuries or gold with the expectations that they’ll rise. It’d be smart to work out correlation research to establish what asset classes have those correlations and then accordingly allocate capital.

Technical analysis

Technical analysis is very important for intraday traders. Thankfully, there will include hundreds of technical signs which have the ability to assist you in entering and exiting trades. The advantage of making use of technical analysis is that it aids you in identifying positions to exit and enter trades. Even within a bear market, there always will be an opportunity open buy position. In addition, vice versa is true. The best technical signs I recommend using are: parabolic SAR, moving averages (in particular exponential averages), stochastic, as well as relative strength index. However, there will include more indicators a trader has the ability to use to decide when to leave and enter positions.

 

Trackback Link
http://quantsavvy.com/BlogRetrieve.aspx?BlogID=18136&PostID=788577&A=Trackback
Trackbacks
Post has no trackbacks.
 

Other Blog Posts You May Enjoy: