Issue 20: Patient Traders Get Rewarded When Relationships Breakdown - Masters in Trading Digest

PATIENT TRADERS GET REWARDED WHEN RELATIONSHIPS BREAKDOWN

Welcome to Issue 020 of Masters in Trading Digest.

In today’s FREE MIT Digest, we share two stories that we are following.

We start with Futures trades that lately seem too good to be true. That’s how reliable they have been.

Next, the Natural Gas trade is heating up. Is this because commodities are getting volatile across the board or is the trade garnering interest because Russia is closer to an invasion of Ukraine?

We think you’ll enjoy this one!

Good investing,

Jonathan

THE BEGINNER FUTURES TRADE STRIKES AGAIN

This trade was made MIT “famous” when Pablo Lucena shared this information in the video, Trading Futures Weekly Goals. (video shared below.)

It is a simple, straightforward approach to trading futures and it is what Pablo would depend on for consistent income when he first started trading full time.

You can see from the chart below, we shared an alert when the Bond market traded down to its implied volatility band.  The below chart only shows the /ZN Futures contract, along with the implied volatility bands of the /ZN Futures.  The implied volatility bands are the equivalent of looking at the market's “expected move.”

The tool shown below is Masters in Trading Bond EDGE.

The /ZN traded right down to its implied volatility (the expected move) and reversed higher.  Notice how the /ZN tried for a second time, and still couldn’t get through this strong support?

The second chart below shows a few other Bond contracts:  

  • 10yr – /ZN (green) 
  • 30yr – /ZB (blue)
  • 30yr+ – /UB (white)

The green line (/ZN) trades down to the implied while the others do not.  

This is a great example of an easy way to learn an excellent trade.

Watch Pablo’s original video explaining this straightforward approach: 

DISCORD: WHAT’S THE COMMUNITY SAYING?

Last Sunday’s Week Ahead Trade Ideas (01/23/22) we shared an idea for members to consider: Buy an option straddle in $UNG, a Natural Gas ETF.

WHY do we like this trade?  Check out the chart below:

The chart shows a comparison between 4 different futures contracts.

  1. WTI Oil Futures – yellow
  2. Heating Oil Futures – blue
  3. Gasoline Futures – purple
  4. Natural Gas Futures – yellow

When traders use comparison analysis, more commonly referred to as “relative value trading” they analyze how all the markets behave together.

So, look at the chart above…

Notice the yellow line (natural gas) is moving way more than the other three lines?  That’s what it looks like when natural gas acts volatile. 

Because Natural Gas is moving so much, especially in relation to its ‘peers’ – it, therefore, behooves us to enter trades that benefit from the ETF $UNG moving around.

PSST! In this week's trade ideas we shared another low-risk, high reward Natural Gas trade idea. Traders want to get in, when the getting’s good.  Try Wall Street Wiretapper For Only $47 First Month Trial

What Else You Need to Know

FINAL THOUGHTS

WHAT TO EXPECT IN THE NEXT MIT DIGEST

With the market continuing to be volatile, it’s important for traders to trade with less size, and widen out levels.

Let’s see what happens with volatility early this week, and come up with a plan Wednesday.  If short-term volatility starts to trade lower, markets will most likely trade higher.

Keep your feedback coming into support@mastersintrading.com.  We’re excited to share your feedback along with fantastic suggestions for upcoming issues.

Until then, trade smart and always manage your tail-risk.

Thanks for reading,
Jonathan Rose

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Masters in Trading Digest - Issue 20

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