It is obvious that every time that President Trump decides to tweet bad news about relationships with China, the markets take a nose dive.
This has been very irritating. One minute my accounts are at all time highs and the next day they lose chunks of gains because of a tweet.
Whilst I have found myself cursing Trump on more than one occasion; and wondering what self respecting president tweets his business, there is a pattern emerging that you can benefit from trading Social Media and the markets news.
Before I go on though, please be aware that if you can’t take the ups and downs of investing then you can always go and get a job in McDonalds instead of buying the stock.
All trading carries risks. What works one month doesn’t mean it will work the next.
Social Media and the Markets – Trading the tweets
If you look at this daily chart of the DOW, you can see that there have been sharp sell offs [blue arrows] after Trumps tweets about the trade war with China.
You can also see that I have drawn a support line that has been formed from the bottoms of these sell offs.
A simple strategy to profit from Trumps tweets is to wait until support is met again and trade the swing back up.
You will put your stop loss just beneath the support line.
This isn’t rocket science, but thankfully every time that trump has tweeted negatively and the markets have sold off, they [the markets] have then gone onto recovery steadily. Or at least back up to the 26300 level.
He [Trump] has the power to spook the markets sensationally using tweets. And it is his spooking of the markets that gives us that can spread bet the chance to profit from his tweets.
Taking a profit
If you enter your trade at the support level, where do you take profits?
A simple and effective strategy for taking profits is to move your stop loss up to a level of 2/1 in your favour.
For example; if you enter a trade and your stop loss is 100 points, then you wait until your trade is 200 points in profit and move your stop loss up to this level.
That way, you get to lock in profit and if the price continues to rally then you can get extra profit on top of your locked in winnings.
If trading the daily charts gives you larger stop losses than you’d like, then you can drop down to the 4H charts and trade those.
This may seem too simple a strategy to be profitable, but the price doesn’t lie… and nor does the chart.