Newsletter: 23 April 2023
What’s Going On:
Is A Recession On Its Way?
It was a fairly quiet week for markets - just look at the broadly sideways moves in US indices and the euro against the dollar over the past few days. I don’t read that much in the way of financial news, but I did notice there was a fair bit of chatter this week about an impending recession.
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It came up a couple of times in the livestream I held on Friday – with more than one attendee asking should we all be looking to sell everything before the economy crumbles?
Let’s qualify this that no-one knows for sure what’s going to happen in the future – although that doesn’t stop plenty of people coming up with all sorts of forecasts. A big part of what I do is follow trends across markets in both the long and short term – for both trading and investing. It doesn’t feel to me that markets are particularly worried about some major recession.
If you look at a broad stock market index like the S&P500, that’s been in recovery for the past six months or so and is trading where it was in the summer of last year.
S&P500 Daily Chart
Admittedly it has not been the most exciting year for stock markets in terms of gains, but the flip side is that if investors were seriously worried about more of a global slowdown, then I think we would be seeing that across stock market indices - and we are not so far. My own take is that last year we did see a significant sell-off in stocks and it is, at the time of writing, past the worst.
NASDAQ100 Daily Chart
Whilst there are still perhaps one or two further rate rises to come, it also seems that we are past the peak for inflation – in the US at least. I think it is too easy to get swayed – in both directions, overly bullish or bearish – by market commentary and forecasts.
Whilst I think it will be some time before we see the old highs tested again in US stock markets, I will continue to trade what is in front of me, and for now that is a market that is still slowly recovering. If things change, then there will still be opportunities in both directions.
Next week gives us more insight into the state of the US economy with Thursday’s release of its latest GDP data – showing just how much the economy has grown (or shrunk). At the moment, the consensus seems to be that the economy will have grown by around 2% over the previous quarter.
Trading Tip:
Trade Well, Not Often
I suppose you could say we are living in a golden age for information. When it comes to the world of financial markets, whatever data you are searching for can usually be found with a couple of clicks.
With trading you have access to real-time prices for all sorts of markets – and you can manipulate that data in so many different ways. But I think this is also something of a double-edged sword and is yet another reason why most people end up losing.
What prompted me for the topic of this week’s trading tip was a conversation that came up in the WhatsApp group I run for those on the course (if you want to, this is now open to those who haven’t completed the course – see here for details).
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It was all about potentially trading all the opportunities out there and how to manage it and he came up with a great line.
“The balance of quality and quantity is hard to master”
I couldn't agree with this more.
I did four trades last week, which is about typical for me. The best performer has been the FTSE100 trade where I bought a dip in the trend. If I look back and review the trades for the week – which I do at the end of every week – then the FTSE was the best “textbook” trade. Don’t get me wrong – the others were not bad at all – it is just the FTSE trade ticked all the boxes.
FTSE 100 Hourly Chart
I think a big part of trading is not so much finding the brilliant trades that really take off – we don’t know really know what is going to happen when we put a trade on. But what changed my trading was eliminating so many of the 50/50 trades; the gambles; the trades I did just because I was sat in front of a screen and wanted to do something.
The shortest time frame I look at is hourly charts – and in all honesty I still prefer trading off daily charts and running a winning trade for weeks and sometimes months. But in this day and age it is so easy to think “I’ll just have a quick look at the really short-term 5-minute chart as there is not much happening on the other time frame”. For me this would be a big rule breaker – and a trade that I really shouldn’t be doing.
The title of this tip is trade well, not often. And it is important to remember that sitting on our hands and deciding to do nothing is as much of a trading decision as clicking buy or sell.
Trading Course:
20% Discount Voucher For April
I've been running my trading course for a couple of years now.
It has received 5-star Trust Pilot Reviews, I cover both short- and medium-term trading approaches – and provide ongoing support via live webinars and a WhatsApp group, updated daily.
To coincide with the launch of this new website, I am offering a 20% discount off any of the course packages, if you join before the end of April.
Just use the code APRIL20 when purchasing. You can see the course packages here.
If you have any questions, feel free to get in touch.
What Am I Trading:
Joining The Natural Gas Bottom-Fishers
As I said above, it’s been something of a slow week for markets and I have ended the week with four short-term trades running.
The best performer for the week has been the FTSE100 – but I also bought Natural Gas. This has been a brutal market for many in recent months – so why do I think an important low might be in place?
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I know from some of the comments on the livestream I do every Friday that Natural Gas has tripped up many people in recent months and it is easy to see why.
Natural Gas Daily Chart
This is a market that has dropped by 80% since the summer highs and the slide since December has been particularly steep. If there is one thing that the average private trader LOVES to do it is trading against a major trend. How much lower can it go, they think? And the answer, in Natural Gas' case at least is – a lot lower than many of us thought.
But from a short-term point of view, it met the criteria I go through on my Trading Course for a trade, so I bought with a relatively wide stop-loss as it is such a volatile market.
Natural Gas Hourly Chart
I’ve got no idea if we have seen the absolute bottom for Natural Gas - I talk about it more in this video from last week.
But I think it is interesting that we have had a rally that has proved to be more sustainable than any others for some time. Let’s see what next week brings.
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As usual, trade examples are for educational purposes only - always do your own research.
Who Do I Trade With?
We are spoilt for choice when it comes to brokers and trading platforms and, on the face of it, there is not much to choose between one company and another. Which is an interesting point – if we are all looking at broadly speaking the same information then why do so many struggle to make money?
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An important consideration for me is the analysis of my OWN trades. Where can I improve, where do I have some possible bad habits - and how can I fix it. I made a short video explaining why I trade with who I do – and you can try them out too.
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You can watch the video here.
That's it for this week.
Good luck with your trading.​
​David
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