Mikula Forecasting Company

Cotton Stop and Reverse

A lot of commodity markets have been trending downward for over six months now. Here is a chart of the cotton. One very good way to trade a market that has a strong trend is to use a Stop and Reverse method but only trade in the direction of the trend. Applied to this chart is the MarketWarrior standard deviation stop and reverse indicator. The cotton market is moving down so we would watch the stop and reverse indicator for short selling signals. When the indicator signals a short sale at points A, B, C and D we would sell short. The exit would be triggered by the short stop. This would create 1 small profit trade, 2 small losing trades, and from point D a large profit trade.