Trading Commodities and Financial Futures: A Step-by-Step Guide to Mastering the Markets, Third Edition

Secret 22

Watch for breakouts from consolidation

I've discussed this before, but this secret is powerful and cannot be overemphasized. You need to know what kind of market you are in. In a consolidating market, you can make money by scalping small moves back and forth. However, you won't make the big money in this kind of market, and you never should attempt to pyramid in this kind of market. Big profits are made in the runs between accumulation and distribution. I've found you can make more money by waiting until a commodity plainly declares its trend than by getting in before the move starts. Too many traders are fixated on picking the top or bottom, and as a result, they miss the big picture. What difference does it make if you buy 10, 20, ...