Trading Quality Over Quantity

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By James Helliwell, Chief Investment Strategist

Hello traders,

I hope you’ve had a good week.

With our Monthly Checklist Report now updated for October, I thought it would be interesting to share a few thoughts from this week’s Trading Club video analysis. Whilst I cannot reveal all the new scores here just yet, you can of course access them right away as a Club member at www.milliondollartraders.com. Let’s get started!

In terms of how I am planning to approach the market this month, one of the key things I emphasised on Wednesday was to be selective with your trades and patient in waiting for the better quality setups to appear. There seems to be a lot of complication on the horizon in terms of the response to the second wave of the virus, and the outcome of the 2020 US presidential election. And the surprise headlines this morning (UK time) demonstrate just how tumultuous the next few weeks could prove to be:

(The stock market did not respond favourably to the news).

Competing signals between our USDJPY and equity market Checklists further emphasise the importance of really thinking about which trades you want to be in, and have the conviction to stick with.  Fortunately the breadth of our cross-asset analysis helps make things a little clearer, with confirmation provided by other market Checklists. Nonetheless, I don’t expect October to be an easy month for trading, particularly for those who trade a greater number of setups, rather than the focusing on the right ones. Without yet being able to reveal the accompanying Checklist scores, here are the key markets that I am watching most closely for a setup…

Firstly, US equities. Last month saw the Checklist turn down to a neutral position of zero, which favoured trading the range at extremes as signalled by the short term oscillators. This month the Checklist shows a clear directional score, which suggests that we should see a trend emerge in the coming weeks.

Here’s how things looked when the report was updated on Wednesday.

I mentioned the conflicting score in USD/JPY, which tends to have a positive correlation to equities, but has a competing score this month.

This is the trade that I will likely overlook, in favour of the setup in the S&P 500. Time will tell whether this proves to be the right call!

One of the reasons for this is the score seen in gold this month, which also has a strong historical correlation to the Yen.

Here’s how the chart looked earlier in the week when I recorded the video analysis for our members. This is becoming quite an interesting setup as the break towards the bottom of the range might prove to be the beginning of a new down trend (or a false break, starting a rally!). Whilst technicians may be scratching their heads here, our process provides clarity on which is more likely.

I hope you found this summary interesting – albeit, without revealing the latest scores just yet (though I hope to do so in the coming weeks, as we usually do). Its certainly setting up to be another exciting month, and only time will tell how things unfold from here.

If you would like to join us for our analysis in real-time including new insights each week, or learn from the ground up with online tuition from Lex in our MDT online course, then head to milliondollartraders.com and take your financial knowledge to the next level right away!

Have a great weekend,

James

Disclaimer: For educational purposes only. Even though we do our best to provide reliable data, you should not trade based on this information. For more information go to www.milliondollartraders.com

© Copyright 2020 Lex van Dam Financial Education. Further distribution prohibited.

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