Hi Lachy, it is great to have you back in 2020. We have been working together for over five years and it seems you always get your forecasts right. Where are we going in 2020?
Once again it is both an honor and a privilege to be working with Your Trading Edge in 2020. 2020 will be a very exciting year for trading as we have a number of clear guarantees and a number of complete unknowns.
The guarantees, love him or hate him, is that President Trump will be voted in for a second term toward the end of 2020. He will survive impeachment, and any further legal attempts to challenge him running for a second term will also most likely fail. So, we know we have at least four more years of Trump and the volatility this brings. Volatility is great for trading, so Trump’s reelection is great news for us.
On a completely separate issue, we have the rise of the Coronavirus in mainland China, which may I suggest is being severely downplayed by the Chinese government. Remember the SARS outbreak? This new virus is already causing significant jitters in the financial markets and I see the virus situation getting a lot worse before it gets better. If it wasn’t for the strength of the US economy right now, may I suggest that the Coronavirus would have already started to trigger serious global concerns about the start of the next Global Financial Crisis (GFC 2).
All in all, I think 2020 will go down in financial history as a year of significant volatility. Financial markets are driven by trader sentiment and may I suggest that the US stock indexes cannot go up for ever. Eventually, the indexes will reach a point where confidence in buying is outweighed by confidence in selling and we will move towards a GFC 2 style correction. Some of you old enough to remember Paul Keating may also remember ‘the recession we had to have’, and I think we are in a similar sentiment based situation now.
How high can the markets go and what do you think is going to trigger the fall?
That is a tough question to answer because we have a couple of clearly unknown variables circling the financial markets as we do this interview. The most dangerous of these variables is the Coronavirus as we simply don’t know how far it will spread and how severe it will be. As a result, to answer your question I will have to revert to technical analysis. (Refer to image at top of page)
Most of the professional traders I work with use Fibonacci Extensions as an indication of where the market might extend to and then fail.
In the case of the NASDAQ, a global favorite for my clients, we have predictions currently running in the market for the buyers to push as high as 9742.25. This is the 75% Fib Extension off the weekly chart. 10,000 on the NASDAQ is not an unrealistic achievement in the next 4 to 5 months. It is a round number and traders love targeting round numbers. Further, the 100% Fib Extension off the weekly chart is at 10014.50, slightly above 10,000, meaning the number is quite achievable.
To achieve 10000 the NASDAQ must show clear buying strength above the magic number of 9600 where it is currently stalling (at the time of writing). This stall is just above the 61.8% Weekly Fib Extension @ 9598.50, so I am happy to suggest it is this Fibonacci stalling the buying at this stage. Buying strength above 9600 will be signaled by a weekly candle close above 9600. If the NASDAQ cannot close above 9600 on the weekly chart, then we are going to see a significant drop in the value of the NASDAQ before it potentially tries to close back above this 9600-level in a renewed rally. Either way we are in for an exciting year!
What should Traders look for if they want to take advantage of 2020 and the potential volatility?
In over 25 years of trading, I have learnt that there are three keys to trading very well in the markets regardless of the direction the markets run. Here they are for all YTE readers globally!
Tip Number 1:
Make sure your strategy allows you to trade the markets in both directions. By this I mean that your strategy should allow you to make money when the market is both rising and falling. If we have a very positive year, you get to buy with the market. If we have a very negative year, you get to sell with the market. Either way, regardless of market direction, you are set up to win.
Tip Number Two:
Set realistic (small) trading targets every day and get very good at achieving these targets. The best target I have seen used by new traders is a target of $100 per day. If you get good at earning $100 per day, you can very quickly step to $200 per day, then $400 per day, then $800 per day and the rest is history. Many traders I observe go for $1000 profit per day when they first start trading, having never mastered the smaller $100 target first. I have nick named this ‘Trying to dominate the world financial markets in your undies!’ and it tends to not go well for the vast majority of traders. Instead, keep your trading small, keep it simple, master your art and then go for the big bucks! “Go slow to go fast!” is the advice I give every trader I teach.
Tip Number 3:
Stop trading through brokers if you want to make a lot of money out of trading. I do not want to be controversial here, but I am known for it. I have taught over 1000 traders in 21 countries how to trade the markets really well and none of us trade through brokers, we never have, and we never will. As futures traders, we trade directly to and from the Chicago Mercantile Exchange and hence we avoid the use of traditional brokers all together. The advantages we generate from this are a very big deal indeed.
- Our first advantage is that we do not have to cross a ‘broker price spread’ every time we enter and exit the markets. This means more money in our pocket every time we take a winning trade.
- Our second advantage is that there is no one on the ‘other side’ of the market actively trading against us. This means that when we take a valid trade, we are highly likely to get paid.
- Our third advantage is that we are trading in a pure and un-manipulated trading environment that is created for us by the exchange, not a broker. This means our market analysis can be very accurate and we can predict exactly when the market will run and exactly when the market will stall. All in all, a very big advantage if you want to be a professional trader.
Lachy, once again not a dull moment when we chat to you!
Spot on! There is a lot of money to be made in 2020 and I am delighted to be leading the charge for IDTA and every one of our clients who wants to go pro in 2020. If you need a hand with your trading, find me on the web or get in contact with IDTA HQ on the Gold Coast. If you want to start learning straight away, jump on the on demand webinar (link below). Have an awesome trading day!!!
Lachy, thank you for being part of YTE in 2020!
As always, my pleasure. Lachlan Elsworth, Founder and Trading System Architect | The International Day Trading Academy.