Welcome back Rookie Bloggers! What a couple of weeks we have had in the overall markets. We had a pretty solid rundown followed by an explosion to the upside. The rundown I mentioned took about 10 days to find a pivot and then in merely half that time the market recovered all that same drop. That my friends is what you call volatility!

Now we started this series of the blogs talking about the phases of the markets and what trades work well in what different types of markets. The first phase of any market is the consolidation phase. The market spends the majority of its time in this sideways movement. This current market has seen little consolidation on the daily time frame and more of a switch between the second phase and that is breaking out to the trend phase. We have seen this current market trend down and then quickly up but could be headed back into consolidation, only time will tell. This is where it becomes paramount that we are able to identify the phase of the market or the phase that our equity is in that we are trading. This takes technical knowledge and experience. If you go back to the first blog in this series you will see all the conditions we are looking for in each phase.

In the last couple of weeks, we have put on some mock trade types that tend to work well in consolidating markets and those were the covered call and the naked put. In this weeks video, we are going to go over these trades and see what we can learn from how these trades are playing out. You see we started these trades in a particular phase but we are going to see what happens when the phases shift. This is one of the big lessons that all traders need to come to grips with and that is what happens when things change and am I as a trader prepared to react in a manner that will protect my account so that I can live to trade another day.

So check out the video and see if we can’t pull some nuggets of wisdom from our mock trades because after all that is what they are for. In the next blog we will look at one more trade that works pretty well in a consolidating market and that is the iron condor and that parts that make up an iron condor.

Until next time…be well and keep those stops tight!