![\"Image\"](\"https:\/\/cdn.jeffclarktrader.com\/JMU\/images\/202403\/20240325-JMU-01.png\")
<\/p>\nOne of the easiest ways to simplify your trading is through the use of mechanical systems and rules.<\/p>\n
Having systems in place takes a lot of the pressure off your shoulders.<\/p>\n
It gives you a framework allowing you to approach every trade in a consistent manner. <\/p>\n
Most importantly, it removes the guesswork from trading. Instead of trying to figure out what the market is going to do, you simply follow the rules of your system.<\/p>\n
All the hard work goes into developing the system. Once the system is developed, it’s just a matter of implementing it over and over again.<\/p>\n
Today, we’re going to take a look at one of my favorite systems.<\/p>\n
This particular system is used to grade the overall market. This grade will tell you how bullish or bearish you should be.<\/p>\n
We’re going to do this by implementing a simple scorecard system. It’s really easy… and I guarantee you can start doing this yourself by the time you’ve finished reading what I have to say.<\/p>\n
The scorecard can have a maximum rating of +3 and a minimum rating of -3.<\/p>\n
A +3 rating is ultra-bullish. +2 would be strongly bullish. +1 means the market is mildly bullish.<\/p>\n
A score of 0, of course, would mean we are neutral.<\/p>\n
And on the other side of the spectrum, -3 means we are ultra-bearish. -2 would be strongly bearish and -1 means the market is mildly bearish.<\/p>\n
All you need to start assigning a score to the market are the 20- and 50-period simple moving averages (SMA).<\/p>\n
If the market is above both moving averages, it gets a maximum score of +2.<\/p>\n
If we’re above the 20-SMA but below the 50-SMA, that’s a score of +1.<\/p>\n
And if the slope of both moving averages is positive, we can add another +1 to the overall score.<\/p>\n
In a bullish market if we’re trading above both moving averages, and the slope of the moving averages is pointing upwards, we have a total score of +3.<\/p>\n
It works the exact same way in a bear market.<\/p>\n
Being below both moving averages gives us a maximum score of -2. And if the slope of both moving averages is negative, we can add another -1 to the overall score for a total score of -3.<\/p>\n
Here’s a chart of the SPX during a bear market.<\/p>\n
<\/p>\n
<\/p>\n
Between April 21, 2022, and July 5, 2022, the SPX flashed a score of -3.<\/p>\n
The market was below both moving averages and the slope of the moving averages was pointing down.<\/p>\n
This is an example of when you should be ultra-bearish, and your trading portfolio should reflect just that.<\/p>\n
Here’s a current chart of the SPX.<\/p>\n
<\/p>\n
![\"Image\"](\"https:\/\/cdn.jeffclarktrader.com\/JMU\/images\/202403\/20240325-JMU-02.png\")
<\/p>\n
As you can see, the market is above both moving averages and the slope of the moving averages is positive.<\/p>\n
This means we assign this market the maximum bullish score of +3.<\/p>\n
What a +3 market means to you could be different from what it means to me.<\/p>\n
This is the part where you have to take this system and filter it through your own investment objectives and risk tolerances.<\/p>\n
For me, a +3 market means I want almost only long exposure. Downside positions are simply countertrend and unlikely to work out.<\/p>\n
<\/p>\n
![\"Signature\"](\"https:\/\/files.jeffclarktrader.com\/global\/signatures\/imre-gams-signature.png\")
<\/p>\n