Bitcoin and Crypto Market Updates (July 3rd)

Rotation rotation rotation… where art thou?

The market keeps its cards close to its chest, leaving many (including myself) wondering where the money flows exactly? I’ve pounded the table plenty on a need to see a rotation out of the tech sector and into areas like IWM (small caps) to show a ‘’healthy’’ sign we are in a sustainable bull market.

When we look at last week's performance we’re still not getting a clear signal. IWM closed the week strong but Real Estate and Industrials were the biggest winners for the week. So there are signs there but the water is muddy imo and tells me we need to wait for a clearer signal.

Another two areas caught my attention this morning

Yields – Yields are showing we are expecting rates to go higher… This is also reflected in the ‘’Chances of a fed rate hike chart’’ for July with nearly 90% expecting a 25 hike. Fast forward to September over 60% predict a pause.

Now factor this in when looking at last month's performance…. As you can see here by far the best-performing areas of the market last month were food and energy.

Looking at these two areas together this raises some red flags and suggests further rate increases and it seems like the market might be off with its expectations of a pause in Sept. AND IF that’s the case do I really want to risk putting money into ‘’Zombie companies’’ with large debt levels with increased costs of financing?

No thanks.

Last week in the previous newsletter entry we mentioned kill zones, today we are gonna dig a bit further into the concept. As a trader, understanding the concept of "kill zones" and how to effectively utilize them can be something you would like to consider as those periods could present lucrative trading opportunities. By mastering kill zones, you can harness volatility to your advantage and optimize your trading performance.

What are Kill Zones?

Contrary to what the name might suggest, kill zones are not zones where traders gather to physically "kill" the market. There are no swords or secret ceremonies involved. Kill zones are metaphorical zones where market participants strategically position themselves to take advantage of heightened volatility. So, rest assured, no harm will come to the market during these periods!

Kill zones are specific time periods during the trading day that experience heightened price volatility. These periods often coincide with market openings, major economic announcements, or trading session overlaps. The term "kill" in kill zones refers to the concept of taking advantage of market volatility to "kill" it in terms of profiting from price movements. However, it's important to note that kill zones are not intended for literal harm but rather for maximizing trading opportunities.

How to Use Kill Zones?

To effectively use kill zones in your trading strategy, follow these key steps:

• Identify Kill Zone Times:

Research and identify the specific times when kill zones occur in the markets you trade. Market openings, such as the opening bell in stock markets or the London open in forex, are common kill zone times. Additionally, pay attention to economic news releases and events that can trigger volatility spikes.

• Analyze Historical Price Behavior:

Review historical price data during kill zones to identify patterns and understand how price reacts to these volatile periods. Look for consistent price movements, breakouts, or reversals that can be used to inform your trading decisions.

• Implement Trading Strategies:

Develop and implement trading strategies that align with kill zones. For example, you may focus on breakouts or short-term trend-following strategies to capitalize on the increased volatility during these periods. Ensure you have clear entry and exit rules to manage risk effectively.

• Utilise Technical Indicators:

Incorporate technical indicators that can help confirm price movements during kill zones. Oscillators like the Average True Range (ATR) can provide insights into volatility levels, while momentum indicators such as the Open Interest (OI) can help identify potential direction.
There are a bunch of TradingView “Killzone” indicators so you can be aware of the different sessions and visualise them along with your charts.

Tips for Trading with Kill Zones:

Here are some valuable tips for trading in kill zones:

-Plan Ahead: Prepare your trading strategy and set your targets before entering a kill zone. Having a clear plan helps you avoid impulsive decisions and maintain discipline during volatile periods.

-Implement Risk Management: Always prioritize risk management by using stop-loss orders and setting appropriate position sizes. Volatility can work in your favour, but it can also lead to significant losses if not managed effectively.

-Stay Informed: Stay updated on market news and economic events that may impact volatility during kill zones. Being aware of upcoming announcements and their potential effects can help you make more informed trading decisions.

Some platforms even have contracts based solely on volatility fluctuations in which kill zones and news and economic events can play a capital role.

Conclusion:

Kill zones provide traders with a valuable opportunity to capitalize on increased volatility during specific time periods in the trading day. By understanding what kill zones are, how to use them, and what they indicate, you can incorporate them into your trading strategy effectively. Remember to plan ahead, implement risk management measures, and stay informed about market events. With a well-executed approach to trading in kill zones, you can optimize your profitability and achieve greater success in your trading endeavours.