Index Trading in Volatile times

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ingot54

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Post Number: 1553
Registered: 05-2004

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Tuesday, August 01, 2006 - 09:47 pm:

The current inability of the market to establish a trend means traders such as I need to move to trading methods that suit the conditions.

A trader either establishes a long term position, and goes fishing, or adapts to the market, and deals with the volatility.

Tomorrow, my personal view is that with the release of the RBA decision (on what interest rates Australians will wear for the next month, at least), a great Index trading opportunity is setting up.

Just for a moment, consider the possibility that the RBA DOES NOT raise rates. You'd then be amongst the 5% who don't think so either.

When an issue that weighs so heavily on markets, (as do interest rates) polarises the trading community to an extreme, I think a clever trader can really capitalise on that.

I will not be trading it, but the XJO, or any major index, particularly the XFJ will have some interesting moves tomorrow, when the RBA releases the cash rate news.

At the moment, a rate rise is largely factored-in, with late-in-the-day sell-offs on Monday and Tuesday this week.

So any decision to keep rates on hold tomorrow will have quite a sling-shot effect on the Indices.

It could be possible to take both long and short positions, with suitably placed stops and benefit from any huge swing that occurs.

The risk : reward ratio for a long trade on an index should be very good indeed in volatile and anxious times like this.

Of course, there would be a bit of a slump if rates DO rise, but a short position would take advantage of that.

Whatever, it is just an idea. But with a BIG swing, a trade both ways with stops has profitable possibilities.

xjo

Keep Smiling

Trading style :CFD's predominantly long term.

ingot54

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Tuesday, August 01, 2006 - 10:06 pm:

Some observations of the behaviour of the XFJ recently ...

xfj

Keep Smiling

Trading style :CFD's predominantly long term.

ingot54

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Tuesday, August 01, 2006 - 10:22 pm:

Another view ...

comparison

Keep Smiling

Trading style :CFD's predominantly long term.

fibonacci

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Post Number: 155
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Tuesday, August 01, 2006 - 10:32 pm:

Or relieved "they" now feel that a 1/2% rise can be discounted. Not that I know which one. As an aside, if no one's able to buy bananas, how is their price inflationary?

Interesting to note that AUDUSD is down 50 pips -confirmatory.

CMC's proxy for SPI is also up 40 since 4 p.m.

All this can change quickly if we take our eyes off it. Must not sleep!

John

You've got to
know when to hold 'em
know when to fold 'em.

holycow

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Post Number: 2559
Registered: 08-2004

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Tuesday, August 01, 2006 - 10:40 pm:

XFJ Daily

1) Ingot, if you don't mind... an alternate view.

2) Today's xfj candle has been quite bearish from my angle... for two days now the index(most bank stocks) were used by the big players to push the index to off load their stocks, resulting in two fake breaks in a row. Today's candle closed right back at the status quo level - smell fishing, kinda indicate the same "money" and people are doing the same thing, like churning...

3) I agree with your view that a hold on rate will see a short burst of rally... over a longer period of time, says 4 days to a week, I'd expect the index to go lower. I would however qualify myself by saying it will depend on the next two days' market reaction to the outcome of the rate.

XAO daily

4) On XAO, last two days + today's candles are quite bearish from my point of view - they were unable to break higher, especially today's candle - squashed and directionless. Today the market has been diddling waiting for the interest rate outcome and was not going anywhere in a hurry... you can see it ended as some kind of doji with closing almost similar to yesterday's. Kinda wait and see posture.

5) Overall, the cluster of last 9 days' candles are less than bullish with a good chance of breaking down, ie, if within the next two days the market does not make an attempt to break away with the interest rate issue out of the way.

6) Looking further than the next two days, we still have the FOMC meeting and the US rate hike to contend with, this, probably has more to do with the indices over there where ASX looks up for leads.

HC

"... if you've got a chart, I have an opinion!"