It’s tough to uncover profitable opportunities in a market without a defined direction, which is why finding market patterns is one of the most crucial aspects in developing a good trading strategy.
While markets differ, the facts that underpin market trends are universal.
We’ll have the best chance of making a winning trade if we can find the proper market with the right conditions.
And no matter what you’ve heard, anticipating market direction isn’t that complicated…
Finding the Direction
To find the long-term direction of a market, we look at the monthly timeframe to see if a particular market is in a positive or negative trend.
While there are ups and downs within a market, we can still see if there’s a general, long-term trend.
This is one of the most important actions we must take before discovering opportunities to trade.
We use trend lines to see the overall direction of a futures market. Then, with our trendlines in place, we can see if a market is moving up or down.
A market with a long-term upward direction is likely to give us good opportunities to buy low and sell high in the short term.
But before we do that, we need to establish two more important parts of our trading plan…
The Buy-In Strategy
Once we find a market with a long-term upward trend, we move to our daily timeframe to confirm the high and low prices.
If the daily timeframe shows the market at a low price within a positive trend, it’s time to look at the one-hour timeframe to prepare our buy-in strategy.
The one-hour timeframe is where we look for buying opportunities within a market. It’s how we decide if it’s time to buy the market at a low price and wait to sell it once it reaches our high price limit.
The individual details vary depending on the market we’re trading, but our monthly, daily and hourly timeframe charts always guide our trading plan!
For a full picture of how futures trading actually works, be sure to check out this bonus article I wrote!
The Bottom Line
Understanding long-term and short-term market directions allows us to plot a course toward the next buying opportunity for almost any market.
Thus, while we adjust our charts to individual trading conditions, the core principles are essentially universal.
Our monthly timeframe tells us if a market is in an up channel… The daily timeframe lets us know if the market is at a high or low price… And the one-hour timeframe helps us decide when to buy or sell the market.
As you can see, finding market direction is the most important part of a successful trading strategy.
With this information, you’re ready to start plotting a course to trading success!
Now, before you go, look for my invite below to learn more for free about what I call my Chandelier strategy…
Then, for more on the markets as well as trading education and trading ideas, look for the next edition of Josh’s Daily Direction in your email inbox each and every trading day.
I’ll be bringing you more of my stock and futures contract trading tutorials as well as some additional trading ideas.
And if you know someone who’d love to make this a part of their daily trading routine, send them over to joshsdailydirection.com to get signed up!
Keep On Trading,
P.S. With the markets continuing to provide what might appear to be mixed signals in terms of setting up longer-term trading entry opportunities, I’ve been working diligently on my newest trading analysis tool that can identify both near-term entry and exit levels as well as longer-term major targets.