Bo Yoder´s Letter from America

The slow cycling in the Russell 2000 acts as an excuse to explain my favorite style of trading…What I call “Trading As A Liquidity Provider”.

 

 

I usually manage my multi-day trades based on a big picture view.  As you have seen in the Russell, I am currently using trailing stops set above the last swing high (2) as I expect to see price continue to trend to the downside. (Price forecast shown by the arrows on the chart above)

 

But If I am trading intra day, there is just so much more “jitter” and whipsaws in price in smaller timeframes that it’s a pity to miss out.  If I had been managing my Russell position in this way, I could have sold at points (1),(2) & (3) and targeted the green zone as my area to take profits.

 

 

 

In a more realistic example, here we see 8 reversal trades within the same support zone on the hourly chart of Cisco (NASDAQ:CSCO).  Each time the price fell down, a Liquidity Provider would be buying shares.

This adds liquidity to the market, so those who see the market as bearish have someone to sell to, and offers an opportunity to build a position “cheaply”.  Each trade would have generated at least .20 in profits for a gross profit of $1.60 per share.  While the investor sat in a dormant stock, the Liquidity Provider captured 8 winners in a row.

 

If you would like to learn more, we have just released a book/video training package that will help you better understand how Trading As A Liquidity Provider works.

 

Check it out here: http://3dapextrading.info/lpt-book.html