Knowing when to enter the market is one of the most challenging areas for all traders.
In today's video, Alistair provides his thoughts on the strategies he relies on the most to enter the market, whether it be Forex, Commodities, Indices or Stocks.
You will discover:
- The most critical fundamentals to assist your entry decision
- The two fundamental criteria you must know before entering
- How to gauge market sentiment and the 'emotion' of the market
- Examples of how you can apply fundamentals to know when to get in
- Timing the market using technical analysis
- Using price instead of always relying on indicators
- The pros and cons of using indicators
- Combining both fundamental and technical analysis
Click play on the video below to watch the full training.
I'm going to be having a look at my preferred ways to make entries into it, docket, hello, and welcome to another ACY Securities market tutorial.
My name is Alistair Schultz, and I'm going to be a host to today's trading journey.
As I mentioned before today, I'm going to be looking at my top three entries. Now this uncovers fundamental analysis, technical analysis, and combination analysis to get right into it. We're going to start off with fundamental analysis as a whole. It is a qualitative process and it really does work off two different elements. There is the sentiment side of things, and then there's the bigger picture that we need to consider as well. It really does rely on you being able to examine the factors and forming an opinion about what is actually going on on the global spectrum. Now, the daughter really does come from only a few different sources. We're looking at macroeconomic industry specific public opinion, and of course, economic opinion. All of these in combination together will enable you to be able to look at different markets in different lights. So this might incorporate looking at stocks, futures, options, commodities, FX, and anything else that you might find along the way.
Now, when we think about these things, they are, like I said before, the big picture or the short term, the short term really looks at more the sentiment or the emotion of the market, how people are feeling and behaving about particular products at that given time, regardless of whether that is a toy or if it is a stock or even if it is something that is going on on a political scale. The bigger picture is really looking at things from a much longer perspective, but it does encompass a hell of a lot more. We're looking at things that might be incorporating what's going on on a geopolitical minefield for a currency. For example, in which case we have to consider what's happening, not only the macro and the Marco economic, but also what's going on within that country as a whole and what some of the exports and imports might be as well.
Now, moving on from that side of things, I want you to think about a couple of different ways that you can actually look at it. So I've given you a couple of choices here on how to think about fundamental analysis. The first of these are going to be hating futures, hating futures, natural gas, oil. They all increase in value seasonally. This means, and it's probably obvious when I say it that when we've got colder months of the year, more people are inclined to use the heating oil. So you can see the demand rise very quickly and therefore the price rises to match the demand. The same thing happens with sugar prices. Sugar prices might rise when a season gets cut short, whether that be because it had plague or they've had a bad season, or perhaps even the weather has just not been suitable to the conditions.
This means that there is less sugar than they would normally be. And we might see some of the prices for sugar increase in value. The other one that we can look at, there's been an example. This year has been crude oil, crude oil prices will fall if production is increased. And if those numbers are really high, then we can see events like we saw earlier in 2020, where we saw a price drop to negative $37 a barrel indicating that due to the pandemic and also a case of there not being any transport and travel. And some of these other factors that are at bay are enabling it to drop the price so low because no one actually wants to buy it. So that's some of the ways that we need to think about things when it comes through currencies, we might, instead of looking at what's happening on that same fundamental scale, we might look at what's happening from central bank action.
We might look at how rights or monetary policy is being modified. And those sorts of things are all the more important to look at. Particularly when you think about how many opportunities in a month you might get on the major trading seven pairs that you would anticipate, you would generally say that central bank action will offer at least once or twice a week, sometimes twice a day, giving us a number of opportunities throughout the month to try and forecast what might happen in the future. Now, looking at things a little bit differently, we have the technical entries, generally speaking, you will say that they have, they are limited in data. They are lagging information, and they generally rely on your ability as individuals to interpret price itself. Now, whilst we might look at the technical entries as being something that are related to price and time only, it's not the only matter that you can have into it.
And the issue that comes with this when it is on this side of things, is that everyone has a different personality and therefore the way one trader interprets the charts might be different to the person sitting next to him. But regardless of that, the data analysis really does come from either the charting type that you're using. Perhaps you're using canvas stick analysis, it might be line charts and some will offer more information than others. There's also price patterns that you can tend to see in there. And there will also be your support and resistance. And of course, indicators at the end of the day to wrap it all up. Now, when I think about trading charts, this is usually what I don't like. Seeing a lot of people that I tend to find that are learning to trade will try and load up their chart with a lot of different indicators, quite often waiting for their optimal moment to try and take a trade.
And in some instance that might mean they have 3, 4, 5, or maybe even 10 different indicators on there at once, which means they actually get less entries than they would like. And the reason behind this is that you might find it three or five entry or three or five indicators might signal for a buyer position. But then by the time all five line up, because they are a lagging indicator, you don't get the accurate information for the exact moment in time that you need it. You really should have taken the trade. When three of the five lined up, not when five of five have lined up when price actually turns around and goes the other direction. It's also not something that you tend to say, professionals using. We don't like indicators as much. You might see them on some quantitative analyst desks, but it's really more as just a go-to guide.
It might only be one or two indicators that are looking there to give an idea of what's going on in price. So my general thoughts are not to really use charts that are over-busy. It does also give you an issue with too much information. And you end up with a situation that you call information overload, where there are so many conflicts impacting prices or indicators that are going on that just don't measure up with one another. It ends up leaving you with a bit of a muddled position, or perhaps just unknowing idea of where things are going. So what I recommend to do is to actually start naked. And I don't mean it literally though, if you do want to do that, then by all means. But regardless of the fact that I'm looking at here, when I say trading naked or starting naked, I mean use a chart that doesn't have anything on it, but price, the advantage of this is that you start to learn things about candle stick analysis.
You can look at those individual patterns and then move on from there into grand, a spectrum of things where you might see more than a grouping of candles that indicate a pattern together. It also enables you to look at your supports and, and resistant points. And also of course, your swing high and swing lows, which are help you read a chart much better in the long-term than any indicator is going to do in the short term. Now looking at how we might use it as professionals. The one thing that I've seen in tier one firms and being a part of a lot of them over the years is that we generally just look for the support and resistance points and we will look for those canvas stick patterns, all the things that match up. And realistically, we try and look for something that might have a little bit of news around it for when we actually do look for that point.
So we might identify on the calendar about when a particular news event is going to occur and then try and find a pattern that might operate in price around that point in time. And that gives us a better idea of where we might consider an entry. Now, of course there is my third method and this is what I do on a daily basis. And this is what I call the combination entries. And this is really when you get all of everything lining up perfectly, it's like the planets actually align. So in this instance, when you're using a combination of both fundamental and technical analysis, in this instance, instead of giving you some charts or some theories, I'm actually going to give you an example of a trade-off down on my own. Now, the idea of, to this section here is I'm not going to give you guys an understanding on a single thing.
I'm going to try and show you a worked example that I've actually conducted in my own trading career. The example I've got here is for you is Lockheed Martin corporation, which is a stock, but the methods that I'm going to show you and how I've conducted, it can really be applied to anything that you would like to deal with, whether that be FX, futures, options, commodities, or stocks as well. And of course, indices and everything else of the, like in this instance, I'm looking at Lockheed Martin. Now, if you don't know, Lockheed Martin corporation are an aviation company that do have some links to defense and military spending. In this instance, the position that I was looking at the news was based off the idea of the F 35 fighter jet that you can see sitting on the screen behind me right now. Now the process that I've gone through is pretty straightforward.
I start off with a little bit of technical analysis just to have a look at what's going on, but I've gotten wind of what's happening in the news about what Lockheed Martin is doing and potentially them getting some cashflow coming in. So the first thing I did was have a look at what was going on on the chart. And I could see that we've had an inverted head and shoulders pattern. And this was after I'd already heard that there was some rumor of them, of Lockheed Martin getting some level of a cash injection. So I had some idea of what might potentially happen. And then I've switched to my technical from a fundamental view and put that hat on to have a look and see if something in price would match up. So in June, 2012, I found this head and shoulders pattern, and I thought this might not be about opportunity.
We've got the news that says, this is likely going to happen, where they're going to get a cash injection. And then we've seen this next step here, which says, we think we have a technical pattern occurring at the same time. So I had a look at it and went for a risk opportunity by taking a very small trade, just to see where it might go to begin with from there, I've moved on and I've watched it all play out. The first thing happens in the United States defense department confirmed orders of the F 35 jet after the rumor of them getting positive testing results at the initial onset of my trade from there, we've had a rumor on what the cost might be, the build numbers and the potential for a cash injection to locate Martin, a very big numbers from there. We've seen a contract gets signed and we've had a cooling off period.
So that means we have a waiting for whilst there's still the cooling off period in effect they could pull out at any moment, but we're all a little bit more confident that they're likely not going to do that. Once that cooling off period expires, we then consider our position much heavier and we go, yes, let's work with that. The head and shoulders pattern has formed. We've entered our position and we're happy to move ahead with the idea of what we're doing is a successful trade in the works. Now, the next steps that have happened here are real results of what have happened with St from June, 2012. And I held this position for four years until August, 2016. Now, why did I actually get out in August, 2016? The reason being was the project wasn't going as planned that were over budget. They hadn't committed enough planes that were going through or manufactured enough to be delivered.
So therefore we were seeing this likelihood of the second part of that contract, which was another cash injection to be fulfilled, was unlikely to happen. In fact, the whole reason I got out in this scenario was purely because I saw a little bit of a double top pattern occurring in price, which is, should be able to say right at the very start of that August 26 box that I've got there for you. And in addition to that, we had a withdrawal on the total manufactured planes by the U S military that they were ordering. So that caused another problem for us to have a look at now, regardless of that, this is how you should be thinking about things. You go through the process of looking for a chart that you might like. You can sit up what some of the fundamental news might be, form an opinion about it. Then go and have a look in price again, see if you can find a pattern forming around that same idea on news and that opinion when it comes out and then look for an opportunity to combine it all together to places successful right
Now, hopefully from today's tutorial, he would've been able to grab a handful of ideas that might be able to help you in your own trading journeys. Of course, if you're new to trading, then please feel free to open a demo account with us here at ACY. And you'll be able to get to put some of these ideas into practice. And of course, if you are already trading, then hopefully you'll be able to have a look at some of the ways that you might be trading and incorporate one or two of these into your own trading methodologies. Now, if you do have any questions from today, please feel free to shoot me an email talktoal@acy.com. And of course don't forget to like, and this video, so you can get more great content from me
And ACY Securities in the future. Have a great trading day ahead.
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