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Three Ways To Trade This Market

Adam Hewison - MarketClub

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Hello traders and MarketClub members everywhere. Yesterday certainly was a rout to the downside, decimating many stocks across the board. The Trade Triangles gave a major trend change sell signal on the NASDAQ index. Now with all three indexes in a negative mode and confidence and perception dramatically waning, I expect to see further downside price action in the markets.

So what are those three ways to trade the market?  

Well, simply put you have three options when it comes to trading (I am not talking about options trading) you can be long a stock, short a stock or out of the market, which in and of itself is a position.

With all three major indices headed lower, it would appear as though the odds favor being short stocks at least certain stocks. The easiest way to find stocks to short is to look at the Trade Triangles and the Smart Scan technology. These tools will quickly show you which stocks are the weakest and heading lower. In fact, given the current mood of the market this could be an excellent weekend to short some stocks that are making 52-week lows and buy back those same stocks on Tuesday's opening.

Another more conservative strategy would be to short a stock that's making a 52-week low and buy a stock that's making a 52-week high. You would do this with equal amounts of money invested in each stock. Depending on the value of the stock, you may own more or less shares than the other stock that you would be trading. The important thing here is to be neutral in this spread and looking for a percentage change as opposed to one huge winner.

You have a third strategy and that's just to be out of the market this weekend. Many people will be looking at stocks in their portfolios over the weekend and making some difficult decisions about whether they should stay in a stock or get out of it next week.

One thing about bear markets that you will learn if you haven't learned already is that they are very unforgiving and every rally from now on will be met with good selling. The reason why they call it a bear market is because a bear tends to maul and pull you down when it attacks, contrary to a bull that charges and tosses you in the air.

In the past I've discussed perhaps one of the most important elements of trading and that is discipline. If you're going to be successful, you have to be disciplined. You only get lucky once or twice in trading when you are trading by the seat of your pants, eventually the odds will get you unless you're trading in a disciplined, organized manner. It is just that simple. 

In today's video, I will be looking at all the major markets and giving you some assessments of the downside potential for the major indices and the upside for gold.

Stay strong and stay disciplined.

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