How To Manage Sentiment Changes When Trading Part Time?

Try to focus on longer term trade ideas rather than short term day trades. This will make you less exposed to any day to day shifts in sentiment.
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Daniel Marks
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Trading Part Time – Managing Sentiment Shifts

Horatio, was wondering if we had advice for traders that have full-time jobs, especially during the main trading hours.

Yesterday this was a NZDCHF trade and what you’ll notice is the big focus here was we were looking at those historic levels.

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So, just quickly, you can find this under April 2nd and it was just the first post from that day, “Short NZDCHF” and ultimately the main reason for this trade is because what we had noticed is the market’s bias was still very clearly risk off, we know that’s the case because we knew of viruses, that spread of the virus is still increasing and we know that pairs such as NZDCHF, that we trust quite a bit because that market selloff subsided but we have met a real key level of resistance just at that 0.58 handle, and you’ll notice our stop was just above 58 and where we entered was on 0.5775 to that 0.58 handle.

So the focus here was the fact that what we’ve been seeing is so we had that massive sell off in mid-March and then the sell off subsided and we saw that increase, but again it’s only marginal compared to the big scope of things, but what we were seeing is the market begin to move sideways and, you know, this isn’t just NZDCHF, this is most of your high-beta / safe haven currency pairs, but we were consistently hitting resistance just around that 0.58 handle.

So in this kind of environment we know that we’re continuing to see a shift from risk on to risk off, the market’s a little bit tentative at present and we know we’ve got a key level of resistance at this level and we know at present, until we see that material change, it’s unlikely we are going to see a big break higher above this level because ultimately nothing’s changed.

I’d be looking for scenarios where you’ve got a key level of resistance over a considerable period time, so you know this isn’t a day trade, we know we’re looking at a medium term-based trade which you can get in and hold with a high level of conviction. At the same time you can then just looking, you can look at playing the lower bound like we did, where we had our target at 0.57. And that was a reasonable target, but if you wanted to you could be a bit more ambitious and you could look at the lower swing lows as well, but ultimately that’s what you’re looking for.

Again, we are trying to post these trade ideas when they come to us so keep an eye for ideas in the feed, but ultimately what you’re looking for is you’re looking at trading with that medium term outlook, again, that medium term outlook at present is the market is still very much leaning risk off because the spread of the virus is continuing to do so at an increasing rate and we’ve got a timeline, which is we expect that to be the case until the virus peaks and we know we expect the virus to peak potentially at some point probably more towards the later end of April.

So we’ve got a timeline, we’ve got a clear medium term bias and we’re looking at pairs like NZDCHF where we have a very significant level of resistance, which we can consistently see the market isn’t breaking above. At the same time, you know, we’ve got a decent range so we know where we can look to enter. So that’s pretty much what I’d be doing.

I’d be making sure you’re looking at pairs where you’ve got that really clear medium term bias, you’ve got a very clear stop loss location and ideally very clear targets as well.

Again, in this scenario you can be a bit more ambitious with those swing lows targets if you wish, but hopefully, you know, you can get a good idea of what kind of approach I’m suggesting you take here, and that’s what I’d recommend doing. You don’t want to be looking at day trades if because the sentiment is literally shifting from one session to the next, so it’s not just a case of it’s changing one day to the next it’s literally as we go from European session to US session, to US session to Asia-Pacific session, we’re seeing sometimes drastic changes in that risk tone and we’re getting developments come out all the time.

If you can’t be there at the beginning of every session you want to be focused more on those medium term-based trades.

So it’s ideal to just look for those deep retracements into key levels of support and resistance, look at entering at those levels where you can have a high conviction stop loss and a very clear profit target.

 

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