I am in an interesting position with respect to a colleague of mine. We disagree on where the FKLI, the Malaysian futures, is potentially going next. He believes it is going up. I believe the next best bet is down. Who is correct? Who knows?

Contrary to popular opinion, technical traders do not always know where the market is going with a high degree of certainty. However, we do know where there are chinks in the market armour, where trades MIGHT develop. Depending on the limitations and style of the trader, we favour different chinks. That is fine, and it is why we might end up with different opinions. The key trait that successful traders share, however, is that we are able to enter our trades with very small risk for very large potential reward.

Here is the trade as an example.

July 12th 2018 FKLI Daily.jpg

I believe the downward  momentum  of the trend isn’t spent yet. The trend is not quite at its end, although it certainly shows signs of slowing down. On the other hand, he believes that the downward trend is over, at least temporarily. We might even both be right – prices may move upwards briefly, in accordance with his beliefs, and he may be able to grab some points from the index, or the corresponding move in stocks. If he is absolutely correct, and this turns out to be a major low in the market, then he will have caught it very near the bottom – on the first higher high.

For my side, I would have two trades. I expect the market to go lower, and if it does, I would have a long trade soon after, as I agree that the trend does look very close to ending. However, in the mean time, I can actually trade to the short side, when prices reach a level of resistance.

July 12th 2018 FKLI Hourly.jpg

The hourly chart depicts my potential shorting zone: 1709.69-1726.66. Prices have risen nearly to the Blue Box. This is where you see the differences between and similarities of good traders. I am watching for a potential reversal here to continue the daily trend, and a short here could well result in an excellent trade moving towards a new low, or at least with a sufficient reaction for me to trade manage a scalp. My colleague is looking for this zone to break, which will give it room to rise. We both expect this to be a make-or-break situation, but our analytical styles bias us in different directions.

The zone might just be broken to the topside with no reaction for me to enter a trade whatsoever. (I’m actually looking for a small divergence with a candlestick entry.) Nonetheless, this is an interesting setup, because it shows that even with similar tools, traders can end up with differing viewpoints.

Kaye Lee
Head Trader Consultant