January 6


How To Land An Exit In A Strong Crosswind Trend

By Julia Ellinghausen

January 6, 2021

It was three hours of boredom followed by two minutes of sheer terror. Screams could be heard throughout the cabin and you’re pretty sure you can hear swearing coming from the cockpit. The runway is somewhere below the plane – you’re just not sure if you’ll ever find it safely.

Such is the experience if you’ve ever landed in a strong crosswind. Watch YouTube and you’ll lose your appetite. Despite strong crosswinds, millions of traders make their entries completely oblivious of the larger conditions. In a cold sweat and white knuckles – they try to land a profit.

These account-clearing adventures can be avoided simply by taking a step back and analyzing your market for trending channels. This will give you the verification you need to make a trade that will land with profits – instead of crashing and burning.

Winds that crash trades every second the market is open

Not a cloud in the sky, on the way into Oklahoma City of all places. The video is horrifying, and even more gut-wrenching, it’s considered routine. The Trans States Airlines flight, being operated for United Express, is on final approach. You can see the plane and runway clearly. The two aren’t even close to being lined up.

Every second of every open market, there is a trader on final approach with their entry or exit. Thinking that they’re in the process of landing a sure-thing profit, they’re really just being swept away by an unseen crosswind that’s sweeping the market.

This can be avoided simply by taking a step back and viewing the market from a macro perspective. This will quickly reveal prevailing trends that have the chance to blow a trade wide of its intended target. Easy to do, but for many short-term scalp or swing traders – playing the market like a videogame – this analysis is totally overlooked.

A five-second look that could save your account

Zoom out and take a broader look at the United flight on final approach into OKC and you’ll see the pilot executing a perfect crosswind landing. Sure the plane is at an angle, but it’s completely in line with the runway based on the direction of the wind.

Suspended in mid-air, he’s clearly riding the wind straight to his intended target. The same logic should be applied to your market. Even if price is headed in a short-term direction, these moves always need to be analyzed in the context of the prevailing trend.

Don’t get swept away with a crosswind trend – trade with it and profit!

Take a look at our two ES market views. You have one that’s short term – ideal for short-term 7-minute swing and even shorter scalps. And then there’s a gap. In the context of the 7-minute view, the gap is unnerving – even horrifying. Take a step back to a 300-day, 240-minute chart and you’ll see that you’re in a trend that’s been unfolding since last fall.

A strong crosswind that you want to be aware of if you want to profit – or even better, avoid crash landings.

Pointing your trade into the wind for profits

If it makes you feel any better, planes are designed to land at an angle in heavy winds. Patrick Smith, a commercial pilot, will tell you that ‘skewed alignment’ is the correct technique when dealing with a crosswind. The jet is pointed into the wind to maintain a straight track.

Like a commercial pilot expertly landing a plane with precious passengers and cargo (like your capital) – always know what direction the wind is blowing. Using our ES example, take a step back at the start of your day to monitor the prevailing trend – with the 240-minute / 300-day view.

This will tell you there’s a market bias to the upside. With big news coming out – like the elections in France – you shouldn’t be surprised when there’s a big move up. Instead, keep an eye on any sell positions you take, knowing that they could be subject to strong winds.

When contemplating a longer-term trend trade – point it into the wind and take your profits along the way.

Land consistent account growth by watching the wind

If you think landing at a regular airport in a crosswind is bad – try doing it on an aircraft carrier. Imagine the runway actually angling away from you as you make your approach – oh, and with about a postage stamp for your margin of error.

Take the drama out of your trading by understanding the prevailing wind that’s driving your market. Establish the trending highs, lows and mid-point. This will provide valuable context for your entries – no matter what time frame you’re dealing with.

Monitor the edges of your channel for breakouts. Know that price will have a habit of pausing right at the mid-point. Never be surprised when price goes on a run right in the zone in favor of the trend. If you’re not sure where your market is headed – limit your trade size and play it very tight.

Land profits safely with the trend and take the adventure out of your trading.

Julia Ellinghausen

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