Saturday, October 9, 2010

Trading Plan: Which Instrument to trade






If there is a situation where all 5 markets (bonds, crude oil, dax, S&P and euro)
have short signals (closing price of 10 min bar goes below last swing low), its wise
to trade the instrument with the highest risk/reward ratio.

So instruments like the DAX or BUND might move in the end the same distance but if the short trend started with less potential (distance to where the last upmove started) you end up earning more money with other instruments.

There are obviously other factors like that crude oil and EURO sold off strong yesterday, DAX closed positive where as S&P had a negative prior day, but in general its more rewarding to trade instruments that have on all timeframes high potential.

Note: DAX also is just before 200 EMA line that also explains the pause.



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