The financial markets are complex. It is not possible to accurately predict specific price movements of any stock, futures, bonds or any financial instrument with great certainty. The very best traders get it right 70-80% of the time. Elite traders know they will be wrong 20-30% of the time, but that doesn’t bother them because they know how to manage risks to maximize profits and minimize loses with the mentioned percentage winners. It seems obvious, but countless traders continue to lose hard earned money. Some of these traders keep losing because they care more about being right than making money.

When the mind is clear to only concern itself with making money and not being right, more money will be made. When the mind doesn’t have to spend energy defending a wrong position it is free to create and execute the most advantageous positions to profit. Never forget why you are in the market: To make money!

Megaphone Chart Pattern

A Megaphone is also known as a broadening pattern. This pattern describes a market in confusion with no probable direction up or down. This pattern may suggest one to sit on the sidelines until the market resolves itself. A trader may trade this pattern but must understand the implications of such a trade and the potential erratic price movements that are likely to happen.

The bigger move takes precedence which is a move done on this chart, consequently, the bias is for a downward movement, but to a far lesser likelihood than other patterns like and ascending or descending triangle for example.

Understanding market volatility can help get more profit by using bigger profit targets than if volatility wasn’t considered. The Chicago Board Options Exchange (CBOE) reports a Volatility Index that quantifies the market's expectation of 30-day volatility. Losses can also be reduced by improved risk management using market volatility data. The Volatility Index (VIX) can also suggest how quickly a market may move from one price level to another.

Implied volatility is mostly used with options but is also used to calculate the VIX Index. The VIX Index is constructed using the implied volatilities of a wide range of S&P 500 index options. Implied volatility is calculated by the current price of an option based on Black Scholes Pricing Model. The solution of this pricing model calculates a mathematical volatility based on option price. The VIX is widely used measure of market risk and is often referred to as the "fear index”.

The other type of volatility is Historical Volatility, which is a measure of price fluctuation over time. Historical volatility uses historical (daily, weekly, monthly, quarterly, and yearly) price data to empirically measure the volatility of a market or instrument in the past. The value rendered by a historical volatility study is the standard deviation of bar-to-bar price differences.

There are times in a high volatility market when there are no buy or sell signals. While the markets may be active it may lack direction and produce large losses if you are wrong. You may even be right but wild price swings often hit your stops causing a losses. Whenever your edge is reduced its prudent to step aside and let the market work itself out.  Patience is always rewarded in the trading business more.

With record highs being reported on all the indexes and stocks motoring up to new highs, it would seem everyone must be making money. Unfortunately, this is not the case. The manner in which markets goes up can be gut wrenching, because its far from linear and just when the market seems paused to go down, it rockets to new highs. In this process, many traders go for what appears to be an easy ride to new highs, but get stopped out when normal retracement occurs.

Traders must put on trades with reasonable stops with the big picture in mind. The best way to stay objective about a trade is to risk the proper amount on any given trade. If you are excessively worried about the consequences of a trade , you likely have on too much size.  As a trade proves itself right, you may add to your position to further capitalize on your position. 

Markets that move a great distance in a short span of time are vunerable to deep pull backs which can happen very quickly. This will be an opportunity in a bull market to enter the market if you are flat. Of course as always, have your stop in place with any trade.

The most helpful opinion you can have on the markets is to not have one. Not only will you make more money, but all the time spent forming an opinion can be saved for making profitable trading decisions and managing trades.

The movement of any market is beyond the complexity of even the most powerful super computer to analyze. Markets are commonly described as chaotic and non-linear. With this said a trader must accept probability in the world of trading. This can also be expressed as a statistical probability that you will be right and you will be wrong with a distribution between the two which defines your edge.

Assuming you are able to make money in a rising or falling market, there should be no real bias as to the direction of the market. The only concern is trading the direction that statistically gives you the best odds of making a profit. Making statistical bets over a series of trades will make profits assuming positvie expectations. Having a winning trading method isn't difficult, It's difficult following the trading method. If a method has a postive expectation and is followed with discipline, profits will follow.