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Scott Redler: Rules and Time Frames for a Volatile Market


Short-term traders must stay tactical in times like these. But long-term investors will be just fine.

Since the market entered a corrective phase, it is ever-important to monitor key levels within the market, as well as your time frame.

Active day and swing traders should pay attention to some some basic rules when attacking the market.

For example, I closely monitor SPY's 8 and 21 day moving averages. These give you a picture of the short-term trend.

When the market stays above them, you can take a portfolio approach to the market because the trend is on your side. 

But if those levels break, it's time to get tactical and a bit more cautious because that's when things can go either way.

You can't rely on a rising tide to keep you going.

And once the 200 day breaks -- like in July -- you want to get out of the way.

Now that the trend from 2011 broke, the market is trying to figure out what's next.

So let's look at the macro chart showing levels of interest on SPX:

We're in a range between 1830-1990.

If we can get above it, then some pressure comes off.

But if we break below 1830, which ties to the macro trend from 2009, 1740 could come into play. 

Here's how far these key levels are from the 2135 high:

2040: -4.4%
1990: -6.8%
1830: -14.3%
1740: -18.5%
1573: -26.3%

Long-term players survived 1987, 2001, 2008-2009, 2011, and they will survive this.

If you have a long-term investment plan like a 401K or 529, keep those monthly flows going. Over the long run, corrections just mean that hings will average out in your favor.

But If you trade actively, you must be extremely disciplined when markets are volatile.

Always have a roadmap planned out.

Wait for markets to confirm it, and then you execute.

Interested in more from Scott Redler?

Check out Redler All-Access now.
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