Too Scared to Trade Right Now? Here's What You Need to Know...

Roiling waters, vicious headwinds, 8-foot swells—the sea is angry, my friend.

But today you’re going to learn three trading strategies that’ll help you steer your trades toward safe harbor to ride out the storm. You’ll also learn about one trade due for a strong snapback rally that could bag you substantial gains—even as the chop continues…

World markets are just all over the place right now. The Japanese Nikkei posted a jaw-dropping rally of more than 1,300 points Wednesday, rising nearly 8% in its biggest one-day gain since 2008. 1,300 points! I guess everyone now thinks this whole China crash thing is no big deal after all. Gee, that’s a relief…

The rally in Japan came right at the heels of a big day for U.S. stocks that saw the Dow gain almost 400 points. Yeah, that wave took us for a hell of a ride. But in a storm, waves like this tumble as fast as they rise…

Back in the U.S., stocks also surged Wednesday morning. But that rally was short-lived. By midday, the major averages sank back into the red.

None of this should come as a big surprise to you. Remember, choppy trading—complete with some of the stock market’s biggest upside waves— are standard when the major averages are stuck below their 200-day moving averages.

So you can expect plenty of seesaw action moving forward as traders and investors digest last month’s sharp move lower.

Here’s where we stand right now:

First the Big drop, then Comes the Chop...

According to my friend and technical stat-man Ryan Detrick, if the S&P 500 finishes higher this week, that’ll be 10 straight weeks of alternating up and down action for the big index.  That’s enough up-and-down to make anyone seasick…

You simply have to be more judicious with your trades in this type of market environment. There’s no way around it.

With that in mind, we’re going to stick to our game plan as this trading week chops along. That includes:

  1. Smaller position sizing. If it makes you feel more comfortable, place “half trades” (risking half of what your normally would). This technique is a great way to stay involved with the markets without having to endure too much pain from the choppy action.
  2. Offbeat trades. We’ve been scouring some of the less traveled paths along the market’s borders recently. This technique has paid off with some key commodity snapback trading opportunities that most folks have completely ignored, like our cocoa play…
  3. Ignore predictions. As always, anyone who tells you they know exactly how everything is gonna play out is full of you-know-what. Stick to what matters most: your next trade setup.

Take these steps and you’ll ride out the storm in a safe harbor.

Regards,

Greg Guenthner
for The Daily Reckoning

P.SBe careful out there! If you want to cash in on the biggest profits this market has to offer, sign up for my Rude Awakening e-letter, right here. Stop missing out. Click here now to sign up for FREE.

The Daily Reckoning