How to Trade Red Markets

by | Sep 22, 2022 | Market Lessons

Howdy, traders. It’s Bryce here today.

The markets had a super volatile second half of the day yesterday after Chairman Powell made the much-anticipated 75 basis point rate hike. 

He also asserted that further rate hikes will be necessary at the final two meetings of the year. 

There was a bit of a dip, followed by a rip, and then a much deeper dip into the close. All indexes closed in the red by about 1.70%. 

This does put us on the path to an induced recession. That’s the game plan to bring down inflation after all. And when earnings seasons start to roll in with reduced earnings, red markets naturally follow. 

So, let’s dive into how to trade in red market environments. 

How I Trade in Red Markets 

First things first, you can’t get far in a red market — or in any market — if you’re not clear on your key levels. The reason is that when markets turn red, it becomes extra important to be as precise as possible and to follow your targets. 

More than ever, it becomes important to be a sniper. But what do you do when there’s no clear resistance level in the recent past? I explain in this YouTube video why Oracle is a huge help for me right on StocksToTrade.  

The main reason is that there are crazy amounts of back data in the system that you won’t find in an ordinary candlestick chart. It’s the kind of next-level stuff that can keep you a step ahead of every other trader.

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Right now, the volatility is crazy. Stocks actually haven’t been this volatile outside of other major impactful economic events like the dotcom bust and the 2020 pandemic shutdown. 

Check out how I’ve been selecting the trades that make sense to trade in this market here. I put together a sample video for you so you could get a real taste of what I’m talking about. 

The other thing to consider is that analysts anticipate that flat markets might be on the horizon. This is actually a more difficult scenario for traders. 

In that case, you’re not just a sniper, you’re also a scalper. My first mentor, Tim Sykes, trades like this, and he’s made six figures this year. With his method, it helps to know level two, a tool explained in this video

And while you can make amazing gains when you master his strategy, if you’re just starting out, I would take it as a practice opportunity. It’s your chance to become as precise as possible so you can turn pro by the time the markets pick up again. 

And keep your risk level low. I’m talking $2 low. That’s what I did, and I explain how it helped me refine my process right here

Conclusion

The best way to trade in the future is to learn the best strategies now. The markets tend to operate in cycles, so if you’re just getting started, it may feel new to you, but it’s definitely happened before

That’s why it helps to learn from experienced traders who’ve been there, and who’ve studied its history…tirelessly…I mean like staring at charts ‘till my eyes turned red. Just sayin’.

The best place to learn how to trade is in the Small Cap Rockets Chat Room. We’ll get you prepared for today’s trades, and the next. 

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