Global strength, the Leading Indicator MYTH & two important decisions

Here are the highlights from the markets I trade over the last week:

  • Stock markets globally were strong over the last week with solid gains in most countries and across all sectors.
  • Renewed strength in US Stocks across the board, large caps and small caps. This strength is not just driven by big tech which is very reassuring as the move has been broad-based.
  • Australian stocks has a reasonable week, but continue to lag behind my other markets in terms of strength.
  • The Canadian market hit all time highs again which is positive and we are looking forward to seeing if this continues into another strong leg up.
  • The Hong Kong market was up strongly and our momentum system in this market is performing extremely well right now.
  • Cryptocurrencies had a soft week as the correction continues

Interestingly looking at the table of performance below the European markets were the strongest last week by far – you just never know where the strength is going to come from. I don’t do a lot in the European markets, but many of my systems from other markets do work well in Europe (both trend following and mean reversion), so maybe it is time to bite the bullet ensure the portfolio is has a decent weighting in European stocks. This is certainly one area I have been too slow to diversify into

Cryptocurrencies 1

SIDE NOTE: I have had a lot of people ask me how I am producing these awesome dashboards of stock market performance. I use the XLQ addin for Excel which allows me to pull a wide range of stock / index / commodity / forex and other financial data into Excel. The cool thing is it can pull data from Norgate Data into Excel(which is what I have used for the table) , Yahoo and a variety of other sources into Excel too. It is hugely useful for tracking your positions, open trade profits and a range of other reporting functions that traders need to do. Check out XLQ here and get a $50 discount.

The correction in the Crypto markets continued this week, I am watching closely to see if the low or late April holds as a potential bottom. We should know in another couple of days. If the low is broken there could be another significant dip, however I am not convinced this will happen. I actually don’t care either way because my crypto systems are mostly on the sidelines waiting for the next rally. In fact, the deeper the correction the better the coming rally is likely to be!

It is worth revisiting the psychology of a correction for a moment here: Market corrections often test the resilience and patience of every trader. These corrections continue until the so-called “weak hands”—investors who are quick to exit their positions at the first sign of trouble—have capitulated and sold off their holdings. This selling pressure intensifies the correction, driving prices down further until a point of exhaustion is reached, where most of those inclined to sell have already exited their positions. It’s at this point that markets typically find a bottom and begin to turn around, setting the stage for the next upswing.

As a trader, the key to capitalizing on these inevitable market recoveries is patience and adherence to a disciplined trading strategy. It is crucial to stay attentive to market developments and consistently check your trading systems every day. This ensures you’re prepared to act when the correction is finally over and you don’t miss your system’s signals to get back in for the ride up.

Remember, successful trading is a long game that rewards those who can maintain their composure and stick to their system, especially during volatile periods. By waiting for clear, confirmed signals before making a move, you position yourself to profit from the market’s recovery, while minimizing the risk of reactionary, emotion-driven decisions

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Trading Tip: The Myth of “Leading Indicators” in Trading

A common misconception among traders is the existence of “leading indicators” that can predict future market movements. It’s crucial to understand that all trading indicators are fundamentally ‘lagging’ because they are calculated from historical price and volume data. No tool or method can foresee market changes with certainty before they happen.

Reality Check: Indicators and Probability

Rather than seeking nonexistent leading indicators, effective traders utilize these tools to tilt probabilities in their favor. This doesn’t necessarily mean being right more often than not; it’s about making the expectancy equation of trading work to your advantage. For instance, in trend-following systems, indicators like moving averages or MACD are used not to predict, but to confirm when a potential trend might be taking shape. By entering trades based on these confirmations, you might not catch the absolute top or bottom, but you can capture significant trends that lead to substantial gains.

The Power of Backtesting

The real strength of any indicator lies in its backtesting. By applying your strategy to historical data, you can gauge how effective your indicator combinations are at identifying profitable opportunities. This methodical approach allows you to refine your strategy, enhancing your ability to manage risks and seize opportunities that present profitable edge over the long term.

By understanding and accepting the limitations and proper applications of trading indicators, you can develop a more robust and effective trading strategy. Remember, successful trading is about managing probabilities, not predicting futures.

Member Wins

This week our member of the week is Jennifer E.  Jennifer started with EST nervously after having invested in several trading courses that did not help her gain the skills of confidence to get consistent trading results. After speaking with me and learning just how different the EST approach is, and that our Trader Success System is the last stock trading course she would ever need she committed to the program.

Since doing so Jennifer has jumped in with both feed and made fantastic progress in both stocks and crypto. Asking great questions and seeking clarity to build her momentum is one thing she is doing well, but she has also been a really strong team player by helping other students, providing guidance and sharing her experience.

Helping other traders succeed is a real passion of mine – I have loved it ever since I started teaching systematic trading over 10 years ago. Because of this I really enjoy seeing my students catch this bug and start helping others.

Well done Jennifer – keep up the great momentum!

News from EST

Two things for you this week…

Which Free Training would You Like to attend?

I need your help for 30 seconds – could you please vote on this poll in my free Facebook group… I am finalising the focus for my upcoming live training and I need your input. Please click this link and let me know which topic you are most interested in.

Refocusing my Free Facebook Group to better serve you

I am also planning to reposition my Free Facebook group to better reflect the EST focus of supporting analytical traders succeed in the markets.

The group is currently called “Enlightened Stock & Crypto Trading Community”. To be honest this is bland and tells people who are new to our world nothing about whether the group is right for them.

Since you are already in my world I would really love your input!

I am thinking of changing it to “Stock Trading for Analytical People” to make it clear who I work with (analytical people who have an engineering type brain and want to master the markets) and what the group’s content focuses on (stock trading).

What do you think?

Would this appeal to you if you found the group on Facebook? Can you think of a better name for my free group?

Comment below and let me know your thoughts – I would love to hear from you.

On the Home Front

This weekend we went to Sydney again for a University open day for my son… we are looking at courses to help him decide what he is going to do after he finishes school. My son has his licence now so he could share some of the driving between Port Macquarie and Sydney – Winning!

Home front

We also had a great morning with my mother on Sunday, which was mother’s day here in Australia), which was awesome. We had brunch of home made waffles (my daughter helped me make these), bacon, maple syrup, ice cream, strawberries and raspberries. It was YYYYUUUUMMMMYYYY!!!!

Mothers day

I am sure there is a reason we don’t have ice cream on waffles with maple syrup for breakfast every day… but I certainly enjoyed it!!!

Have a great week in the markets. Please take a moment to reply to this poll about my free live training and also comment about my Facebook Group’s name too – I would love your feedback.

Adrian Reid

Founder – Enlightened Stock Trading

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