Being so close to something on a constant basis can make you miss the big picture. In trading and in life in general, I highly advise that people take a step back to keep moving forward. Taking that step back can help you to achieve a much clearer perspective on your goals and ambitions. Then moving forward with a fresh mind, you are more likely to make better decisions. Decisions that will make beneficial changes in the long run because your view has been widened. Even if it is once a month or even once a year, take that step back to reevaluate what you exactly are trying to accomplish and if you are taking the proper steps to achieve it. You will also most likely have that eureka moment where all the dots finally connect at once. Just think about a detective on Law & Order. The entire show they are finding clues to find a suspect, caught up in all of the drama. Usually when they finally take that step back do they realize what almost seems to have been in front of them the whole time. So take some time to meditate and reenergize your life, you won’t regret how enlightened you will feel!
As traders we are faced with this problem all the time. We put ourself in a tough position by being so involved in the markets day in and day out. Closely watching daily price action and getting sucked into the major news events of the week. However, I do feel as if most traders are aware that it is beneficial to view their given timeframe on a longer one. That is why as part of my trading process, I have incorporated using the weekly charts as a preliminary check on a trend. When I find a breakout on the daily, I will switch over to the weekly to confirm a positive trend. Taking that step back to view the overall trend can significantly increase the chance of the trade going in my favor. The weekly helps filter out the noise that can accompany only viewing a security on a daily timeframe. It also helps to provide a clearer indication of trend changes and the overall strength of a trend.
Notice how nicely Apple has traded since the start of 2014. This gives a textbook representation of how the weekly can block all of the noise. Forget about the S&P 500 9.7% drop in October, forget about the bending iPhone 6s and just forget about anything news or fundamentally related to Apple. Price action from the beginning of 2014 has simply been volatility contraction, breakout, trend, volatility contraction, breakout, trend .etc. To this day it looks as if Apple is setting up very nicely for another solid breakout after the last volatility contraction.
Here is the weekly for oil. The weekly helps magnify the devastating drop in oil. On the way down there was not one spot I would even lightly consider trying to catch oil at the bottom. But notice how nicely the weekly defines the textbook double bottom in oil (not to say the bottom is officially in). Oil creates the first bounce, followed by a bounce that pushes farther through support that then reverses and closes above support. As I mentioned on my last blog post, that is actually the candle that gave me a valid failed breakdown entry on oil. Price moved quickly away from the entry and we have not seen red on the weekly since. (sorry for jinxing it to those still long oil)