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Lesson 34: Trading Choppy Markets

Mrs. B took her position in soybean oil, she raised her stop/loss order to the "break-even" point and she was stopped out.  Of course in the real world she didn't actually "break-even".  There was a commission to pay and there was slippage to suffer when her order did not fill at the exact price where her "stop-loss" was located.  Still, Mrs. B didn't lose very much money on her position.  For the sake of these lessons, we will assume she lost around $100.00.  It could have been a little more, depending on the commissions she paid, or it could have been a little less.  Most likely, it was less than $100.00 but for the purpose of these lessons, $100 is a nice round figure and we will use it.  Since that time, Mrs. B has not taken any additional positions.  The soybean oil market that she was trading advanced, declined, advanced and declined again and she continues to watch it.  It is what traders call a "Choppy Market" looking for a bottom. Soybean oil shows signs of strength and then signs of weakness.  It is a market that a trader cannot yet trust to sustain a trend over time.  In fact, most commodity markets trade in patterns that cannot be trusted to continue trending.  Most markets trade in non-trending "choppy" patterns.  It is true that every so often a market will race upward non-stop, or so it seems to those who hold short positions, and every so often a market collapses toward the bottom of the chart page like it had fallen off the Eiffel Tower.  This does not happen often, however.  Most markets trade in these steady reliable "choppy patterns". 

It is often suggested that the best way to raise revenue is to tax the rich and let the rest of the people alone.  The reason that this tax plan doesn't work is due to the simple fact that there are more "rest of the people" than there are the "rich" taxpayers.  Most people are middle-class.  One way to trade commodities successfully might be to trade only the major trending markets.  This would appear to be a great trading method, just like taxing the rich seems to be a good idea, if every market was a major never-ending trending market.  Unfortunately, like the middle-class, there are more "choppy" non-trending markets in commodities than there are major trending markets.  If you trade in commodity futures or in options contracts you will trade more choppy markets in your lifetime than you will ever trade trending markets.  That is a fact of life and everyone who has ever traded in futures or options knows this to be so.

I have written a 165-page manual on the best way for trading "choppy markets".  This method retails for a rather high price both because there is a lot of material in the manual and also because there are twenty years of trading history behind the material.  I personally consider this "choppy market manual" to be the second most valuable trading publication that I have ever written.  I would recommend it to anyone who seriously wants to learn a method for trading futures and options markets that are experiencing a "choppy" phase price pattern.  I am now offering my subscribers a discount on the price of this manual in order that my subscribers might be better able to understand the principles behind trading in markets that do not trend. This manual should be extremely useful to those traders who want to closely follow Mrs. B's activities in the coming weeks.  To order this 165-page manual online at this discounted price, click here.

The next market that Mrs. B is going to look at is the wheat market.  She is going to examine the December wheat contract for the year 2001.  While Mrs. B is waiting to get back into soybean oil, which she will surely do, she just may also take a position in wheat futures. She will trade wheat as a non-trending "choppy" market, a market that is trying to make a bottom and yet returning to test that bottom from time to time.  This up and down movement in the price of wheat results in many stops being hit and many traders shaken out of their positions.  How will Mrs. B trade this "choppy" market?  Click here for the next lesson and see for yourself.

      Bruce Gould

 

Always remember that stock, options, and futures trading may involve substantial risks and that past performance is no guarantee of future performance.