Most places on earth have different seasons. Spring, Summer, Fall, and Winter are some of the normal seasons we encounter. Each of them have a different set of dynamics. In one season, you plant. In another, you harvest. In Winter, some places buckle down for a hard reset. The markets are exactly the same way. I have identified three strong market seasons that I have learned to navigate and trade in.
Imagine planting corn in Winter. Looking for a crop to harvest in Spring. Imagine setting out the irrigation watering system in the fall just before a hard freeze. These activities would be very destructive and a total waste of time and money. Did you know that the same goes for the markets? So many people that I train are planting in Fall, harvesting nothing in the Spring, and they are completely confused as to why their systems are not working.
Before revealing the three market seasons that I have isolated in all markets, I want reveal why your system may only be working 30% of the time sustainably. There is a reason that most lagging indicators only work around 30% of the time. The reason is that they are built for a certain market season, but you might be trying to use them in the wrong season. Imagine a guy trying to measure wind speed with an airport wind sock – IN A HURRICANE!
Once I reveal the three market seasons that I have found, you might see why your trading system is not working in one or two of the other seasons. Most systems are designed to only work in one season. This is why I have developed multiple trading systems to fit the season that we’re in.
I don’t need a combine in the Spring, and I don’t need a seeding machine in Winter. I need the right equipment at the right time.
Do I have your attention yet? Let’s work on getting your 30% success rate up to 70% or higher.
Season #1 I call RANGING SEASON. This is a beautiful dance between buyers and sellers where everyone moves back and forth in perfect rhythm. The buyers move up to a perfect technical spot and then they hand it off to the sellers who bring it back down to their target. It’s a beautiful thing, and most people win during this season, no matter what they are trading. The lagging indicators work great. Trend lines, support and resistance all work together. Everyone seems to be happy. But then the next season comes.
Season #2 I call TRENDING SEASON. This is the time where the market breaks out one way or the other. It breaks up or it breaks down. But which ever way it goes, we see clearly that the market is destroying the other side and is taking territory with great plans to seize territory and hold on to gains. This is a season of warfare, and when a hyper-fueled market heads in one direction, it comes like a speeding locomotive. You would be a fool to stand in the way of that market and risk going the other way.
During season #2, if you are trying to dance with the opposition, you’re going to get slaughtered. This is not a love dance. It’s all our war. Your indicators and ideologies built for season #1 will not work in season #2. This is why I teach a highly accurate trading system that wins big time when we enter this season.
And then there’s season #3 which I call WHIPSAW, or HURRICANE, or TORNADO SEASON. I think you get the point. This is the great season of destruction where the winds blow everywhere. There is no sense of measurement that works. Everyone is systematically getting wiped out together.
This season is typically measured with “higher highs and lower lows”. It’s not up trending or down trending. It’s simply in a whipsaw motion back and forth.
What do I do when Season #3 Whipsaw hits? I reverse my trades completely. Let me explain.
The first thing I do with my students is to teach them exactly when we enter Season #1, #2 or #3. We know immediately when the season has changed. We then retrofit our trading to those seasons. And when Season #3 hits, my students know to go to paper trading immediately to prove that the season is indeed upon us. They will never lose real money because they have stepped aside until the hurricane, tornado or whipsaw is finished.
Since I have been trading for decades, I have fully trained myself to understand Season #3. Therefore I can reverse my trade and win almost all the time. When I would normally buy, I sell. And when I would normally sell, I buy. Everything goes exactly opposite of normal in Season #3. This is the only way to win (in my humble opinion).
It’s not easy to reverse your trades if you don’t understand fully what’s happening in front of you. Why? Because it’s impossible for you to buy if you believe the market is going down. And it’s impossible to sell if you really believe the market is going up. Your faith in a direction is where you will always put your life, blood, sweat, tears and money. But if the direction has flipped as it does in Season #3, you’re going to lose it if you continue to use your typical trading techniques.
Go look to the market charts for Season #1 Range, Season #2 Trend, and Season #3 Whipsaw. The markets are always in one of those three seasons.
Consider developing investing/trading systems that work in those three environments. Also consider standing aside during Season #3 and watch your overall failure rate plummet.
Here’s a video for you to check out where I talk a little about the “Three Seasons”.
