ArtsAutosBooksBusinessEducationEntertainmentFamilyFashionFoodGamesGenderHealthHolidaysHomeHubPagesPersonal FinancePetsPoliticsReligionSportsTechnologyTravel

Trading The Market

Updated on November 30, 2011
Daily chart
Daily chart | Source
Daily chart
Daily chart | Source
Daily chart
Daily chart | Source

Trading The Market


Trading the market” is the goal of all professional traders.
There are different types of traders.  Traders who trade currencies or commodities, traders who trade futures, stocks and indices.  Despite these differences, the market always leads. Traders always trade first the market before trading individual financial instrument.  The purpose of this article is to discuss:  what is the market and what is the importance of trading the market.

What is the market?

The world’s biggest economy is United States Of America but S&P 500 is the market.
S&P 500 represents five hundreds large capital common stocks actively traded in the USA.
It is the benchmark of the overall market and is considered as the market.
When the S&P 500 is down, the market is down and when it is up, the market is up too.
The market leads.  It leads every other market, every sector, every financial instrument and every major indices ( FTSE 100, CAC40, DAX30, NASDAQ 100).  Most indices are positively correlated to the S&P 500 except the Nikkei 225.  However due to globalization, in recent years, Nikkei 225 has been mimicking the S&P500.  No markets have escaped the S&P 500. Consequently, “trading the market” has become a serious matter to all investor and traders.

The importance of the market.

A stable data is a truth or a constant or something that remains intact during chaotic changes. One of the market stable datum is:  Market controls sectors, market leaders and individual stock. If you consider NASDAQ 100 as a sector, its leaders are Apple and Google. The market will control NASDAQ 100, its leaders ( Google and Apple) and each stock listed on NASDAQ 100. “Trading the market” means: trading first S&P 500, then NASDAQ 100 and paying attention to the direction of the market’s leaders.  The market controls the sector, the sector controls the leaders, and the leaders control each individual financial instrument. “Trading the market” is about harmonious trading.  It is knowing exactly when to sell and when to buy.  As the market is going down, harmonious traders will be busy looking for candidates to sell, and when the market is going up, they will focus on financial instruments to buy.  On the other hand, when the market is consolidating, smart traders will select financial instrument that are mimicking the market.  “Trading the market” is simply about “flowing” with the market. Bullish high probability trade set ups are excellent bullish trade set ups when the market, the sector, the leaders and the individual financial instrument are all in an up trend.  On the other hand, bearish high probability trade set ups are excellent bearish trade set ups when the market, the sector, the leaders and the individual financial instrument are all in a down trend.  To achieve consistent winning trades, it is necessary to first trade the market.

Dow 30 and trading the market

When trading an individual financial instrument that belongs to a sector or to an index, it is important to consider its leaders.  For Dow 30, the two leaders are: Exxon Mobil and Caterpillar.  Best bullish set ups when trading Alcoa .
1/ S&P500 is trending up but not too close to a major resistance zone or it is trending up during early stages of the third Elliott wave.
2/ Dow Jones is also trending up but not too close to a resistance zone or it is trending up during the early stages of the third Elliott wave.
3/ Both Caterpillar and Exxon Mobil are trending up but outside a resistance zone or at early stages of the third Elliott wave in an up trend
4/ A bullish set up appears on Alcoa chart and Alcoa is fundamentally sound business with no warnings or losses.
For bearish financial instruments to sell, we will sell if the S&P500 is bearish but outside a support zone, and both Dow 30 and its market leaders are in harmony with the S&P 500.
Trading the market” is about trading financial instruments in the direction of the market, the sector and its leaders.

Forex and trading the market.

The leader in the forex is the EURUSD.  All positively correlated currencies to the EURUSD
( EURGBP, AUDUSD, NZDUSD) should be traded in harmony with the EURUSD.
On the other hand, currencies negatively correlated to the EURUSD, (USDCHF, USDCAD) must be traded in the opposite direction to the EURUSD.  Please note that, very often the EURUSD  moves in the same direction like the S&P 500 and all major indices.  There are times when they diverge but very often there they will rise, consolidate and fall in unison.

Market indicators and trading the market.

Market indicators are Gold, Crude Oil and EURUSD. Traders focus on these instruments
to understand the general market and the S&P500.  Market’s indicators allow traders to
forecast the market and to make smart trading decisions. It is possible that a trader may substitute the market (S&P500) to a market indicator when trading the market. In this case, the market indicator is used as a leading indicator but one must always wait for the confirmation or for the validation of the signal.


Trading the market” is not an exact science but a common sense trading.  Look for bullish financial instruments when the market, the sector, and its leaders are trending up and look for excellent bearish financial instruments at times when the market, the sector and its leaders are going down.  The market does not always trend, therefore, give priority to financial instruments that are consolidating.
Trading the market“ is about trading the S&P 500, the sector and its leaders.  It involves technical analysis but also fundamental analysis.

This article is written by Georgetrio

Comments

    0 of 8192 characters used
    Post Comment

    No comments yet.

    working

    This website uses cookies

    As a user in the EEA, your approval is needed on a few things. To provide a better website experience, hubpages.com uses cookies (and other similar technologies) and may collect, process, and share personal data. Please choose which areas of our service you consent to our doing so.

    For more information on managing or withdrawing consents and how we handle data, visit our Privacy Policy at: https://hubpages.com/privacy-policy#gdpr

    Show Details
    Necessary
    HubPages Device IDThis is used to identify particular browsers or devices when the access the service, and is used for security reasons.
    LoginThis is necessary to sign in to the HubPages Service.
    Google RecaptchaThis is used to prevent bots and spam. (Privacy Policy)
    AkismetThis is used to detect comment spam. (Privacy Policy)
    HubPages Google AnalyticsThis is used to provide data on traffic to our website, all personally identifyable data is anonymized. (Privacy Policy)
    HubPages Traffic PixelThis is used to collect data on traffic to articles and other pages on our site. Unless you are signed in to a HubPages account, all personally identifiable information is anonymized.
    Amazon Web ServicesThis is a cloud services platform that we used to host our service. (Privacy Policy)
    CloudflareThis is a cloud CDN service that we use to efficiently deliver files required for our service to operate such as javascript, cascading style sheets, images, and videos. (Privacy Policy)
    Google Hosted LibrariesJavascript software libraries such as jQuery are loaded at endpoints on the googleapis.com or gstatic.com domains, for performance and efficiency reasons. (Privacy Policy)
    Features
    Google Custom SearchThis is feature allows you to search the site. (Privacy Policy)
    Google MapsSome articles have Google Maps embedded in them. (Privacy Policy)
    Google ChartsThis is used to display charts and graphs on articles and the author center. (Privacy Policy)
    Google AdSense Host APIThis service allows you to sign up for or associate a Google AdSense account with HubPages, so that you can earn money from ads on your articles. No data is shared unless you engage with this feature. (Privacy Policy)
    Google YouTubeSome articles have YouTube videos embedded in them. (Privacy Policy)
    VimeoSome articles have Vimeo videos embedded in them. (Privacy Policy)
    PaypalThis is used for a registered author who enrolls in the HubPages Earnings program and requests to be paid via PayPal. No data is shared with Paypal unless you engage with this feature. (Privacy Policy)
    Facebook LoginYou can use this to streamline signing up for, or signing in to your Hubpages account. No data is shared with Facebook unless you engage with this feature. (Privacy Policy)
    MavenThis supports the Maven widget and search functionality. (Privacy Policy)
    Marketing
    Google AdSenseThis is an ad network. (Privacy Policy)
    Google DoubleClickGoogle provides ad serving technology and runs an ad network. (Privacy Policy)
    Index ExchangeThis is an ad network. (Privacy Policy)
    SovrnThis is an ad network. (Privacy Policy)
    Facebook AdsThis is an ad network. (Privacy Policy)
    Amazon Unified Ad MarketplaceThis is an ad network. (Privacy Policy)
    AppNexusThis is an ad network. (Privacy Policy)
    OpenxThis is an ad network. (Privacy Policy)
    Rubicon ProjectThis is an ad network. (Privacy Policy)
    TripleLiftThis is an ad network. (Privacy Policy)
    Say MediaWe partner with Say Media to deliver ad campaigns on our sites. (Privacy Policy)
    Remarketing PixelsWe may use remarketing pixels from advertising networks such as Google AdWords, Bing Ads, and Facebook in order to advertise the HubPages Service to people that have visited our sites.
    Conversion Tracking PixelsWe may use conversion tracking pixels from advertising networks such as Google AdWords, Bing Ads, and Facebook in order to identify when an advertisement has successfully resulted in the desired action, such as signing up for the HubPages Service or publishing an article on the HubPages Service.
    Statistics
    Author Google AnalyticsThis is used to provide traffic data and reports to the authors of articles on the HubPages Service. (Privacy Policy)
    ComscoreComScore is a media measurement and analytics company providing marketing data and analytics to enterprises, media and advertising agencies, and publishers. Non-consent will result in ComScore only processing obfuscated personal data. (Privacy Policy)
    Amazon Tracking PixelSome articles display amazon products as part of the Amazon Affiliate program, this pixel provides traffic statistics for those products (Privacy Policy)