Two Types Of Markets

There are two types of markets we are trading. One is a trending market ,and the other is an inside market. A trending market is what we had on Tuesday afternoon, where the market goes up sideways and up. You want to just get on board and go with the flow. This is the most ideal market for the Epiphany style. Then there is what I will call an inside market which is what we had yesterday. In this market you have either choppiness back and forth or large swings back and forth. Yesterday we had large violent swings back and forth. Before I left last ThursdayI told you I would describe reverse scaling. Reverse scaling is for use only in an inside market which I described above. Reverse scaling for example on the short side is when you enter an order to to sell 200 shares when you decide a stock should be sold. If the stock comes in you take a small profit and move on. We all know you can not pick tops, so if the stock continues up you would then sell 400 share, then 800 shares and finally 1600 shares. When the stock comes in your goal is to cover the short in the same manner, ie... 200 shares ,400 share, 800 shares and finally when the stock is at its worst 1600 shares. This type of trading is sometimes called contra trading. It is a double edge sword as you are looking for a change of direction of the market. Reverse scale trading must have a stop at some point to limit your losses. The secret to trading trend markets or inside markets is recognizing which market you are in. This is the tough part. Inside markets usually occur after trend days. If you have several inside market days you eventually get a trend day. Keys to recognize which are : Vix, Volume ,Ticks, and Fundamental factors such as earnings, economic announcements, and surprising news ie... news shocks such as unexpected events the market could not see untill it happens. The decline of Europe has been an event that the media has not covered much at all this week . I believe it is a main aspect of the weakness we continue to see in the markets this week along with the banks. Google and Apple had good earnings yet the stocks have not taken off in the ways that you might think. This is worrisome for the market . A close below 870.00 in the S&Ps at the end of the day today could predict more downside next week. GE has kept the dividend but the earnings were less then stellar. You have heard a lot of talk on site about Hammers, Shooting Stars, Bearish Engulfings, and Bullish Engulfings. These are terms used in Candlestick Charting. Some of you may undestand these terms others may not. I urge you to buy Steve Nissans Candlestick Charting Book so you can recognize high odds plays. Trading is a Discipline were you must commit yourself to learning everyday. There is no perfect in Trading. All we can do is try to not to make the same mistakes over and over , but learn from them. By the way I and you will make the same mistakes over and over, its part of trading. You must stay positive and control your emotions. Limit your losses and let your profits run. I live by the words sell half and hope your wrong. Put a stop in on the balance. Remember many retracements on a trade go back to where you are long or short so your stop may have to go above or below your entry price. Have a good day ,and feel free to email me with any questions. Good Luck . Stay Positive and Place Yourself in a Positive Environment, Regards, Frank PS Epiphany style is the most profitable type of trading I have seen. It is consistant profitable trades where you take profits quickly. The other styles I described have more risk yet are more profitable trades. Using the Epiphany style taking profits on half your position and using stops on the balance are a way to increase profitability. You will be stopped out often on the other half of your position but when it continues in your direction let it run.