December 15


This Will Be Your Best Friend Or Most Dangerous Enemy

By Julia Ellinghausen

December 15, 2020

You might not realize it. But the futures markets are ruled by their own version of the Incredible Hulk who is capable of ripping your trades apart. The market Hulks are the powerful and elite institutional traders, and their massive order volumes are what drive those markets.

These monsters of the market buy and sell at will. As they conduct their business, they create powerful trends that destroy anything in their path — but leave a trail for others to follow.

Retail traders who stand in the way will stare in horror as their trades are ripped apart. Those who learn to follow the monsters of the market will reap scary rewards.

Imagine the institutional traders as the Incredible Hulk. They are big, powerful and intimidating. They are powerful enough to lift market prices high above their heads and throw them even higher when they buy. They can also smash prices to the ground when they sell.

Just like the Hulk, the institutional traders are going to crush anything in their path. But, the powerful trends they cause can also be used successfully by retail traders who know how to get on their side.

Just like those who learned how to befriend the Incredible Hulk, traders who find the institutional rampages can get out of their way and avoid the carnage. They can even take advantage of it when they follow along.

How Do You Identify Them?

As the price reverses direction and then reverses again, a line drawn from the top price to the high of the reversal establishes the trend. The more times the trend line is touched without being broken, the stronger the trend.

Virtually all charting software available today provides traders with the tools needed to identify market trends. They are also easy to learn how to use.

Trends are established when an asset price traces a line drawn on a price chart. The line can be moving upward or downward. The important thing for traders is to see when the existing trend is changing.

The simple moving average is another tool that helps retail traders spot changing trends and 

price momentum in the market. This tool is generally displayed as a smooth flowing line that follows the price higher or lower. It represents the past average price of an asset over any period of time you choose to select.

It is an excellent tool to use in conjunction with trend lines to provide a confirmation of what you think the trend line is telling you. When they are both moving in the same direction at the same time opportunity to get help from the institutional Hulks might be at hand.

A break of both the trend line and the SMA signal confirms the institutional Hulks of the market have changed direction.

Don’t we all want the Hulks of the futures markets on our side? How sweet to have those powerful forces working for us rather than destroying our trading accounts.

One of the best ways for retail traders to accomplish this is to trade right behind the price trends their trading creates. Two of the tools available to accomplish this are the trend line and the simple moving average.

When the price of an asset breaks through both the existing trend

line and the SMA, it indicates and confirms the price direction has changed. This is where opportunities for retail traders to open positions become clear.

The institutional Hulks are now carrying your trade forward with you rather than getting ready to crush what is standing in front of them.

The signal to take your rewards off the table will come when the trend lines of the SMA and price trend are broken in the opposite direction.

Why Can’t I Just Use One Of These Two Tools?

Almost any of the tools made available by current trading systems can be used alone. The question to ask is — why would you want to use only one, when using multiple tools can be more effective?

Today’s systems make it just as easy to use multiple tools together as it is to use a single tool. All you have to do is set your preferences for the tools you want to display and you are good to go.

Why would you not use all of the information available? Especially when no extra effort is required. Multiple tools give you extra levels of safety and assurance that your trades are not going to be fighting the Incredible Hulks of the futures market.

Now you know how to stay on the friendly side of these potentially dangerous trends. With the proper tools at your disposal, you can access them with a couple of clicks of the mouse.

Just because you believe you have made the trend your friend doesn’t mean it is not still dangerous. The elite institutions can send false signals and you have to constantly watch for these traps. Just like the Incredible Hulk, futures markets can turn on you — quickly. When they do, get out of the way — quickly.

After years of being attacked by the Institutional Hulks of the powerful market trends, you will enjoy having them on your side. There are never any guarantees in trading. However, if you ask nicely, maybe the Hulk will help carry your rewards away.

Even the powerful institutional Hulks of the futures market will be kind to your trading account if you know how to position your trades properly.

Julia Ellinghausen

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