Every investor, when first entering this market, has fantasized about finding a certain Holy Grail of trading! However, achieving success in the futures market is truly not easy, mainly due to the chaotic and bizarre intraday fluctuations of the futures market. To survive in this jungle-like market, one must master the following three major trading methods.

1. Utilize technical adjustments for short-term trading

In the futures market, no sharp uptrend can rush to the top in one breath, and no tragic downtrend can fall straight to the bottom in a single line. There must be a consolidation in the middle. It is only after consolidation that a new wave of rise or fall can be launched. This consolidation is technically referred to as a technical adjustment.

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Technical adjustments are caused by three forces:

First, some traders with floating profits make profit-taking positions, and technical buying or selling orders exert counter-pressure on the market in the opposite direction;

Second, some traders with floating losses adopt an averaging strategy, adding dead codes, which makes the trend more tortuous;

Third, some people feel that "this wave has almost reached its end," and they make a short-term raid, which also impacts the price.

Technical adjustments provide us with an opportunity for short-term trading. Usually, such an adjustment is equivalent to 30% to 50% of the previous rise or fall. If grasped, the profit is also quite considerable.The emergence of technical adjustments is also traceable with signals. For instance, in an uptrend, if there are three consecutive days of red lines, but each is shorter than the last, with the increase diminishing daily; or after several days of continuous rise, there is a high open and low close, resulting in a black line with an upper shadow, these are signals indicating that the uptrend is about to adjust.

Conversely, in a downtrend, if there are three consecutive days of black lines, but each is shorter than the last, with the decrease diminishing daily; or after several days of continuous fall, there is a low open and high close, resulting in a red line with a lower shadow, these are signs that the downtrend is about to rebound.

Taking advantage of the adjustment in the uptrend to go short, or seizing the rebound in the downtrend to go long, is in line with the principle of going with the market trend. Even if one has already captured the opportunity of the uptrend or downtrend in the previous stage, and then sells or buys in the opposite direction during the adjustment, it can truly achieve the ideal state of "picking both watermelons and sesame seeds."

Using technical adjustments for trading can only be done in the short term, and one must not be too greedy. Generally, when the adjustment reaches a maximum of 50% of the range, it should be considered as over. Because even users of the "average price strategy" will quickly close their positions and exit the market at this price. If you are too greedy and do not leave, and the market turns back to the main direction, it will become "greedy for sesame seeds and losing watermelons."

Whether it is a technical adjustment in the uptrend or the downtrend, it does not mean a change in the overall direction. The fundamental factors of the market do not change when the adjustment occurs, the market sentiment does not change strategically, and the overall trend of the chart does not change, so the adjustment is temporary. Pulling the fist back is to hit forward more powerfully. This is what we should keep in mind when using technical adjustments for short-term operations.

II. Pay attention to the signals of single-day reversals.

There is no market that only rises and does not fall, nor is there a market that only falls and does not rise. The alternation of rises and falls is the basic law of the futures trend. However, the reversal of rises and falls has two different types of changes:

One is a change in the overall direction, where a large uptrend turns into a large downtrend or a large downtrend turns into a large uptrend. This kind of reversal is usually marked by patterns such as double tops or double bottoms, three peaks or three troughs, head and shoulders tops or inverted head and shoulders bottoms, large round tops or large round bottoms, and is considered a major movement, which generally takes about three weeks to a month and a half to develop.

The other is a technical adjustment, that is, a small fall in a large rise or a small rise in a large fall. This kind of reversal is usually marked by a high open and low close, often with an upper shadow black line; or a low open and high close, often with a lower shadow red line, and is considered a minor movement, which is completed within a trading day, hence the term single-day reversal.Profit-taking is the main cause of single-day reversals. A large uptrend or downtrend is often composed of several smaller upward or downward waves. After a period of rise or fall, there is a retraction to digest before the next wave of rise or fall. At the top of each small upward wave or the bottom of each small downward wave, there is a concentration. Liquidation sales or liquidation purchases cause single-day reversals.

The most special feature of a single-day reversal is that its opening price and closing price have a significance of carrying on from the past and leading to the future. After several consecutive days of rising, a gap-up opening or after several consecutive days of falling, a gap-down opening is the first characteristic of a single-day reversal. This point has a continuity for the rapid rise or fall that has lasted for several days and can be said to be "carrying on from the past."

After the opening high, buyers with floating profits take the opportunity to sell high and make profits, pushing the market price down, which is the opposite direction of the previous rise, forming a rise-to-fall on the day; or after the opening low, sellers with floating profits take the opportunity to cover positions and close positions at a low price, pushing the market price up, which is the opposite direction of the previous fall, forming a fall-to-rise on the day.

This is the second characteristic of a single-day reversal. This point has an indicative significance for the technical adjustments of small falls or rises in the following days and can be said to be "leading to the future."

After a single-day reversal occurs, the adjustment range that follows is generally equivalent to 30% to 50% of the previous rise or fall. In terms of futures contract margin, if grasped, the profit is quite considerable. Therefore, after a round of sharp rise or sharp fall, attention should be paid to whether there are signs of a single-day reversal. When the situation of a single-day reversal is about to be determined, that is, near the closing, to do short or long positions, it is often possible to earn the fall or rise in the following days.

III. Seize the good opportunity of "head and shoulders top"

As a turning point of the rise and fall, the head and shoulders top is a relatively reliable signal for falling. Understanding the formation rules, morphological characteristics, and corresponding buying and selling strategies of the head and shoulders top can not only grasp the important short-selling opportunities, but also, in the opposite case, according to the rising signal of the inverted head and shoulders bottom, grasp the clear long positions.

The so-called head and shoulders top is formed in this way: following the rise of the previous stage, the trend rises to point A and begins to fall back; it stands firm at point B; it is another round of rise, surpassing the price of point A, with point C as the top of the rise, and then falls back, sliding to a level similar to point B, standing at point D, and then turning up, rising to a price not much different from point A, stopping at point E, and then turning down, when it breaks through the neckline formed by the two low points of B and D, the entire downtrend is formed. Such a graph, with three high points, the middle one being the highest, just like a person's head, and the two sides being lower, just like two shoulders, so it is called "head and shoulders top" according to the image.Firstly, the head and shoulders top is formed during an upward trend. When the right shoulder has not yet appeared, looking only at the left shoulder and the head, it appears to be a "higher wave after wave" upward trend. Even if one buys at the price of the left shoulder, the situation is still very favorable at the head price.

Secondly, after falling from the head, the price turns around and rises again, and then sharply turns down again at a price close to the left shoulder, forming the right shoulder. At this time, the contracts purchased in the area of one head and two shoulders become unprofitable and incur floating losses.

Thirdly, when the trend breaks through the neckline, because the entire head and shoulders top is based on the neckline, once the neckline is broken, all the long positions in the head and shoulders area are caught in a net, with no one escaping. The bears take advantage of the situation to add to the downward pressure, while the bulls stop losses and admit their losses, exacerbating the decline.

The formation of a head and shoulders top is to lay the foundation for a significant downtrend. As with a major battle, planning takes time, usually about a month and a half, nearly forty trading days are needed to mature. And the decline is at least equivalent to the distance from the head to the neckline.

After the left shoulder and the head appear, if we suspect it may be a head and shoulders top, we can go short, but set a stop loss, and surrender if the price breaks through the head.

Because it has been proven to be a "higher wave after wave" upward trend, it is not a head and shoulders top at all. When the right shoulder has formed but has not yet broken through the neckline; we can also estimate that the trend will break through the line and take the lead in short selling, but also set a limit, and stop loss and exit if the price rises back through the top of the right shoulder, because at this point, it has shown that the trend is not a real head and shoulders top, but just a fake move to lure people to go short. Don't fall into this trap!