In the United States, the FED operates differently than in other countries. While it does report to Congress, it holds a sense of autonomy. That’s arguably one of the reasons why the US has been able to maintain a stable financial system for many years. Yes, that’s true even, despite some of the hiccups that have led to economic crises. In some of these situations, it’s not necessarily the FED that was to blame for these unfortunate situations. 

Undeniably, the decisions made by the FED have a direct and immediate impact on financial markets. Whether you’re a day trader, swing trader, or an investor of any kind, it’s crucial to stay vigilant about the actions of the Federal Reserve System.  

What Is the Fed – How it Impacts the Markets

Posing the question of “What is the Fed?” can provide a long, detailed answer that includes a massive history lesson. What we want to focus on here, however, is how the announcements made by the FED impact traders. These announcements can sometimes blindside investors and cause them to lose quite a bit of money. 

The FED does two main things: control interest rates and decide how much money to print. Naturally, both decisions go hand in hand. It also heavily impacts the country’s economy in various ways, including the prices of stocks in the financial market. The main issue for traders is that if they’re holding a position in a stock when the chair of the FED, Jerome Powell, steps up to a podium, they could be in for a ride.  

While the general consensus dictates that when the FED cuts interest rates, stock prices will go up, this effect doesn’t apply evenly across the market. Some of the blue-chip stocks on the Nasdaq will likely see a positive impact in this scenario. If you’re trading a smaller stock, the price could dip seemingly out of the blue. In some cases, this has to do with the fact that large amounts of money are leaving seemingly “unstable” stocks for the safety of blue chips.      

Learning How to Navigate Rough Waters         

As mentioned, when the FED makes an announcement, it can impact the prices of several stocks immediately. In fact, there are certain days when the market will be rather slow until the announcement is made. When that happens, traders have to be ready to pounce on the opportunities.  

Paul from here at Bulls on Wall Street is going to be hosting a 5-part Master Class on swing trading. He’s going to be going live with the first class on April 8th to cover a multitude of topics. What is the FED, and how to actually trade the cycles it causes is going to be one of the questions he’s going to tackle. Also, the Master Class is going to cover different topics to help traders navigate some of the market’s toughest days. Of course, these days include times when the FED makes an announcement.  

Should You Remain in a Position When the FED Makes an Announcement? 

Admittedly, some traders have a policy of taking their hands off the keyboard if Mr. Powell is getting ready to talk. Is that an effective policy? If you’re trading mostly small caps, that could be the case. As mentioned, these stocks don’t necessarily get a boost when interest rates are cut. Since the days when the FED is going to make an announcement are usually known in advance, it could be a good idea to spend extra time looking at market news these days.   

There could be some subtle hints regarding the announcement itself as well. Many market watchers like to post stories about the stocks you need to follow when the announcement takes place. If you’re confident in their predictions and your own research, you may want to open up a position ahead of time. It is true, however, that this could alter a trader’s daily strategy. Since many traders are creatures of habit, they’d rather miss out on some of these opportunities before they change the way they do things.   

If you want to find quick and effective ways to adjust your strategy for these odd days, be sure to check out Paul’s 5-Part Master Class. Remember that he’s going live on April 8th for the first class. He doesn’t go live that often anymore, and the truth is you can get more from the class when it’s live. 

Although swing trading is going to be the main topic, you can bet that he’ll cover “What is the FED.” Swing traders actually need to be on the lookout for these external events the most. Something like this can easily throw off their projections if they don’t account for it.

The post What is the FED and How do you Trade Around It? appeared first on Bulls on Wall Street.

There are times when the opposite is actually true. The high volume of trades shown on the VWAP trading indicator is happening because the smart money is looking to get out of their current position. As a general rule, if the price is currently above the daily average, it’s a good time to sell. When you see the price below the daily average, it could be a good time to buy. However, as with all of the indicators in day trading, there are exceptions to the rule.

Suppose you find a stock whose price is currently below the daily average. As was just mentioned, the general consensus would tell you that it’s a good time to buy. If there’s not enough trading volume at that point in the day, though, the price won’t go up. On a good day, that could leave you in a position where the stock price doesn’t really go anywhere for the rest of the day. That may allow you to sell it off with a small loss or even earn a few cents.

There’s also a chance, though, that the low volume ultimately drives the price down. That’s why just looking at the average price of a stock on the VWAP trading indicator can be a very near-sighted way to trade. Volume is just as important to the equation as the price. Another important element to keep in mind when using a VWAP is the time frame. Most professional traders will tell you to keep the time frame anywhere between 5 and 15 minutes. What that’s going to do is give you a clearer picture of the current price and volume within a stock. 

Another mistake people make is trying to look at daily time frames to anticipate where the price will go. Remember that the VWAP trading indicator is an average, but a lot can happen within a day. If you’re looking at the daily time frame, you can see that the current price is below the average and the volume of trades is decent. Conventional wisdom, as was mentioned, would indicate it’s a great time to buy. The problem is, the average is higher because the price started out the day on a high and then dropped, and the volume is decent because everyone was getting out! Now, there’s no guarantee that the price will return to a previous high point, at least not within the next few hours or even days. 

The VWAP can be one of the go-to tools for day traders. First, it’s very important to know how to adjust it properly. The key is to read every detail the indicator provides. Once you learn how to do that, you’ll have unlocked one of the most powerful day-trading tools! 

Ready to get your trading career started the right way? Click here to sign up for our Live Trading Bootcamp & get access to our full vault of elite trading resources and coaching!

The post What is the VWAP Trading Indicator and How to Use it as a Day Trader? appeared first on Bulls on Wall Street.

“For those that are prepared, a bear market is not only a calamity, but an opportunity.” John Templeton

Recently I released our member only group mentorship session to the public for one simple reason: In this historic and volatile “corona” market, it is more important than ever that you know exactly how to trade a bear market. I am here to help. Today I am going to show you exactly how I put some of those lessons into practice with our winning Netflix trade.

Members were alerted of these trade in our swing trading service and chatroom.

The Bear Market Playbook

The playbook for the Coronavirus bear market is complex, but for our purposes today can be broken down into these three simple strategies.

1. Develop 3 different lists of stocks
   1. Beaten down stocks
   2. Relative strength stocks that are mostly “coronavirus” plays
   3. The “usual suspect” momentum stocks like Apple, Tesla and Google.
2. Trade the following setups from these list
   1. Rubberbands longs
   2. Dead cat shorts
   3. Momentum continuation in either direction
3. Manage risk ruthlessly, trade small and with less frequency than normal

Relative Strength and Chill

The Netflix trade came from our “coronavirus” relative strength list.

The list is made up of stocks that are doing better than the rest of the market, otherwise know as showing relative strength. Netflix is on the coronavirus list due to expected subscriber growth as more and more people are stuck quarantined at home during the pandemic. It’s the “stuck at home” stock.

The chart below illustrates just how strong Netflix has been in comparison to the S&P 500. Notice that the red line (Netflix) has outperformed the blue line (S&P 500) by 13%. This is what we in the biz call relative strength.

The Story of the Netflix Trade

Relative strength is what put Netflix on our radar. Next up we had to wait for the right circumstances to trade it.

We entered when Netlix gave us a textbook “rubber band setup“.

The Trend: Like the rest of the market, even many relative strength stock were taken down with the market. Netflix was no exception. However, as we have already shown, the stock held up better than the market did as it pulled back.

Notice the big green candles under the 9ema. This was our first clue that conditions were improving. The big green candle at the bottom of the circled area below was our potential low.

The Setup: Now with the initial trend stalled, we were on the lookout for a rubber band entry trigger. We got that on the remount of the 9-ema (yellow line) on the date of our entry, March 19th. While our setup entry trigger was was complete, we now had to have a plan to exit.

The Trade: Once in the trade, we targeted the previous gap down level, with the ability to adjust if the market shows strong signs of continuation. We did receive a strong market signal, so we sold out at the target level. It happed to be right near the highs before a pullback.

This endeded up being a textbook rubber band setup that was executed with patience and strategy. It an example of how our alerts and many of our members have outperformed the market

(****insert images from chatroom of members posts)

Swing Bear Market Class

Get ready for something you’ve been always waiting for! April 12th, we will be announcing the new launch of our Bear Market Swing Trading course taught by none other than Paul Singh live over 3-days, stay tuned over the coming days for information on how you can be the select few to gain access to this course.

The post The Winning Netflix Trade In A Nutshell (Corona Virus Bear Market) appeared first on Bulls on Wall Street.

It is characterized by a strong counter-trend move in the opposite direction a stock has been trending in for prior days/weeks. There are two types of exhaustion gaps: Bearish exhaustion gaps, and bullish gaps. Here are examples of both:

Bullish Exhaustion Gap Example

A bullish exhaustion gap occurs at the end of a strong downtrend in a stock.  Here is a bullish exhaustion gap example with Kroger stock:Notice how it has a huge red day right before the circled green candle. And then the stock gapped down, even more, the next day. At this point, all of the supply has dried up since the stock has dropped so much in a short period of time (in this case it was bad earnings) and it was due for a dead cat bounce. As soon the market opened the gap was bought up and the stock rallied strongly.

Bearish Example

A bearish exhaustion gap is the opposite of a bullish one. It is a stock that gaps up which is sold into strongly. Here is an example of a bearish gap in Nvidia stock:You can see how it had a strong run-up, and then a huge green day the day before it had that huge sell-off into the exhaustion gap. It gapped up even further after a big day, and there was a scramble for traders and investors to take profits soon after the market opened.

Anticipating Exhaustion Gaps

You are probably thinking: How do I know the difference between an exhaustion gap or a gap that is just a trend continuation? How you can identify a likely exhaustion gap candidate is a stock that starts to reverse trend soon after the market opens after a big gap up in a strong uptrend or a big gap down in a strong downtrend.

As seen in the examples above, the exhaustion gap is the trigger for a short term trend reversal. Being able to recognize exhaustion gaps will allow you to take a position in a stock in anticipation of the gap reversing. These reversals will often be strong, as you can see in both examples, and can be great day trading opportunities if executed correctly.

Trading Exhaustion Gaps

This is a SHORT TERM trading setup. This is a trade you want to be holding for several hours, or maybe a couple of days. This is not a setup that you want to marry forever. NVDA resumed trend later that year and starting a run to the high $200’s. To make these high probability setups, you need to have EXTENSION in the names of interest. They have to be in an overbought or oversold state to make the setup trustworthy. This means you would to see an RSI above 80 for a short, or below 20 during the morning of the gap up.

Get Early-Bird Pricing for Our Next 60-Day Live Trading Boot Camp

We don’t sugar coat it. Becoming a consistently profitable stock trader is easy, or an overnight process. That’s why our 60-day Live trading boot camp is designed specifically to help struggling traders overcome their weaknesses, and expedite their path towards profitability. We will teach you 30 more trading setups in this boot camp, in addition to the exhaustion gap.

Early-Bird pricing ends February 1st!

Click here to save your seat for our next live-trading bootcamp.

The post Exhaustion Gap Definition: One of the Most Powerful Reversal Setups appeared first on Bulls on Wall Street.