Learn to read the situation

Read the situation, decisions, take a decision, correct decision

Read the situation, decisions, take a decision, correct decisionAre you able to read the situation correctly? Over the years, a trader builds the own experience that will be very important in understanding the situations that arise every day and making decisions about them. One of these situations happened to me on Thursday, October 5th.

Following my analysis of Natural Gas, and I also published it on the site (click here to read it) Wednesday, October 4th I opened a long position on the future with delivery December. Initially, everything was fine but the next day there would be the weekly Natural Gas storage report (issued by EIA), that could have even negatively affected my trade.

The data was worse than expected, I mean, storage was falling more than analysts' expectations and Natural Gas which came up sharply. However, after a few minutes, sales orders began to rain, bringing down the price of the future just as quickly. What happened? In practice, strong hands (at least part of them) took advantage of the data to liquidate their positions.

Natural Gas chart


The volumes show a peak in the next ten minutes after the output of the data, as you can see from the chart of the future delivery November (the closest to delivery) above. I did the wisest thing to do under these circumstances, I closed my long on Natural Gas (in small gain) and I avoided to take the stop-loss subsequently. Because in these cases, beyond the graphics analysis, the seasonality, if strong hands decide to liquidate, nine times out of ten the price will fall.

So, you have to read the situation that happens to you correctly, that the losses you suffer may be at least lessons and help you to create your own experience, as they were with me. In the past, I would have kept the position open, today no. This also makes the difference between a successful trader and one who is not (yet).

Seasonalgo, seasonal trading, spread trading, commodity market


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