WHEN BEING RIGHT, CAN BE BETTER

Like many of you, I'm confident in my ability to read the charts.  I feel I'm good at understanding where the market key points of interest are, and where the market is likely to go.  trades have been good this week (see prior post).  But being right can be better.


So, if you feel like everything is falling into place, and seem right, how could it be any better?

For me, it's patience.  Even when price hits a key target, There are times when patience is needed to get a better entry.  Waiting for a pull back to enter the next, stronger leg of a trend is difficult.  The open of today's market was an excellent example.  Price is at the long target, so go long.  Three pushes and bang, out at the stop, and the market runs to the short target.  Fails.  Here is the patience entry, where being right was better.  Patience for the reversal would allow for a better long entry.



TODAY:

[09:13] <Chartmaster> ES to open with support around 55.5-56. currently bearish bias, and break of support sees 52.25-53 challenged. long: not interested until 57.75 area

As stated above, the market move to the long target. then reversed to the support (look for short).  A variation of a symmetrical triangle was noted, as well as two bullish trend lines.  We continued to play EMA support near the long target, the latter moving into the HOD outlook.


[11:41] <Chartmaster> trgts from am still in play  59.25-60.25


A bearish trend developed, but tight stops limited  trade success.  The bullish trend at the end of the day was more productive.

[15:39] <Chartmaster> 61-65 anyone? :)

61-65 was an estimate of the BO run for the market.  At 6-10 points, and using the support level, the market would see 1361-1365.

click to enlarge

TRADING THE TRADERS

We began a discussion on this yesterday.  To understand the market, you need to understand the traders involved in the market. Price action merely reflects what the trader is doing.  The irony in this, the trader is following the PA to make trade decisions.

Your objective is to think like the trader.  What is this "guy" going to do?  There are thoughts on this; some call it follow the money, or follow the institutions, etc.  But it goes beyond that.

Your job is to observe what the market is reporting about past decisions by the trader, and then understand what that trader is going to do next.  PA will clue you on this as it reflects the actions of the trader, and those action, within given conditions, can be reasonably predictable.  Essentially, trade the trader.

The only thing better would be a job on the floor.  Knowing the order flow and moving price for or against that flow is the definition of perfection, in terms of developing a perpetual money machine.



TODAY:

Market  price action was declining since the Euro Zone open.  It had short written all over it.  But we saw the long opportunity, and defined it early.

[09:01] <Chartmaster> no long considered until 51-51.25 breaks

That key reflection point would be a key all day.  Longs would launch from this point two more times today.  Each time pushing for a higher high for the day.

Traders were looking for the HOD as early as 10AM when price was at 52-52.5.  We were at a minimum HOD at 54.25-55.

click to enlarge

The long target hit, and was the first trade of the day.  Remain long until the TL breaks, EMA breaks, or the HOD area hits.

The follow up trade is the EMA support.  EMA not breaking, up bias day,  no 5t challenge of the EMA( where price crosses the EMA or other recognized S/R by 5 ticks) which tends to be a trapping action.  Traders will go long.  We traded the trader.

A short when the EMA does break, and two additional trades at the key level, identified  before the open, completed our trades for the day.

click to enlarge

The trades and the "why" are posted in our chat.  Join us when you have a chance.

LAND OF MILK AND HONEY

Sometimes, reading charts and having the market seemingly comply has been, as one trader put it, a bit uncanny.  I jokingly said my computer clock was 5 minutes fast.  But there are times when the market appears to play by some set of rules.

 We have heard that the market is going up, going down, or going sideways.  But in those generic claims, are there patterns or trends that seem to give us an edge?  Or do we simple see what we want to see, or is the expection of an event -price to bounce at the EMA- just self fulfilling when it does?  Or, did a significant number of traders think it would bounce and entered trades causing the very event they were anticipating?

Price action has no direction, no plan, no thought nor memory.  PA merely reflects the actions of investors and traders.  I am suggesting that, to improve your trading, you need to also consider improving your ability to read investors/traders actions, or what an I/T is most likely to do.  It follows from the same thought that a DJIA of 12000 was an important psychological point, as was 1300 SNP.  What happens at those "key" spots?  What do I/T do near, at, and above a key point?

PA follows I/T actions, and I/T spend time following PA to execute an action.



TODAY:

The trades have been removed so we can focus upon the setups and reads.  Besides, when we discuss where (and the why) to take a trade, combined with the exit, the trade +++++'s become obvious.  Today, was the land of milk and honey.

The pre-open had a defined resistance and support.  Traders are likely to buy/sell at these points.  Where the EMA is located, has the S/R been challenged, what strength is in the bar(s) approaching the S/R?  These are a few of the questions that help define if we follow the buy/sell expected, or do we play a break out.

THE PLAY:  look for the long at the resistance.  The strong break at the EMA is positive, suggesting you hold.  An additional positive is no close below the EMA, which acts as support when rising. (resistance when declining).  Your stop goes to plus 1, or 1345.75, when the resistance breaks.  Generally, your stop trails price 1-1.25 points to max the value of a running trend.  Pullbacks can be shallow and not hit your stop.  If they do, great.  Look for the next trade.


The resistance BO would be considered a failed breakout.


THE PLAY:   By b1 you have enough information to suggest a short.  Aggressive traders are ahead of you.  They shorted the FBO, or at a minimum the break below the pre-open resistance. By b6 (50% PB of b5) you have a strong short only slightly below the pros; you have a clear wedge with two lower highs from the FBO high.  The exit was at b11 when it hit your trailing stop.


A channel developed inside the wedge.  The comment was made, "no long considerations until a channel breakout".  We had a break, and an EMA failure combined with sideways PA.  The yellow bullish TL is away from the bars, but your eyes should see the run.  B18, b26 then b35, and we are on the buy side of the channel.


THE PLAYS:  One tick above the low tail of b35.  B26 works, but midday trading is not a personal favorite. 

[12:50] <Chartmaster> back to pre open range and long exits

[12:57] <Chartmaster> longs at 45.25
[12:57] <Chartmaster> 50% level pre open
[13:02] <Chartmaster> they would target 46.5 for part or all  on profit
[13:19] <Chartmaster> exit 46.25

PA is back inside the pre-open S/R.  The PA does not know it, but traders do!  Remember.  Improve your ability to read traders.  So, here we are back in the pre-open range.  Your looking for long/short and BO.


THE PLAY: 

We are in the pre-open range. Our thought that traders wanted 46.5 worked. B49-50 were at the support and the EMA, screaming LONG, followed by a second BO.  It would fail, and you could see the shorts jumping on the band wagon.  That gets us to the following:

[14:18] <Chartmaster> focused on trades  like 44.5 is preopen support look for bo short..
[14:18] <Chartmaster> we have ema 5t  so (an EMA) hold is new long
[14:21] <Chartmaster> long wins.

[15:41] <Chartmaster> long exit 53.5

One scenario we look for is a five tick failure.  B58 gave us the 5t referred to in the post.  Short are entering thinking we see 42-42.5 area.  Pros were in at b55.  "Late to the party" shorts get in at the EMA, and are feeling good as PA continues down only to hit 5t and begin reversing.  Pros are out, and the late want-to-be traders are out on b59.  Two things can happen.  Pros enter again to continue the short, or longs see the weakness and act.  If the EMA holds, read LONG.  And we have the bullish yellow TL for support.  The rest was milk and honey.

BREAK OUT TREND RUN

A breakout that develops into a strong trend run is a trader's dream come true.  It produces a good return for the trade, and will offer multiple entry points to catch part of the run.


TODAY:

A
The holiday is behind us.  The Euro Zone open rocketed the ES from the 1329.5 area to a 1337 high. The ensuing pullback (PB) produced a rectangle with a 34.5-37 range.


B

Aggressive traders will short the top of the rectangle, and long the bottom, Albeit, they are mindful of a potential breakout (BO) that can create a loosing trade.  There does not seem to be standard protective stop, with variations from 4t to 8t.  Personally, if the entry is correct-or near correct- you should not need a stop in excess of 8t, and there are strong arguments for a 5t stop.

Traders looking for a BO long, will tend to wait for the initial PB after the BO.  You will not know which test of the upper level will BO, however, after the initial 1337 failed,  we had two challenges and test three seems to be a legitimate opportunity for the BO to succeed.  Shorts will allow a 5t failure, then look for a reason to enter long.  Longs have a rising EMA and a weakened resistance at 1337.  B4 strength was supportive for the long.  THEN...


C

An upward bias channel.  Good for longs, at the bottom of the channel.  A long at 37 worked, briefly.  Late bulls most likely were trapped by the PB of b7 and b8.  From part B, and worth repeating.  Unless you are prepared for a failed BO-should it occur- then "Traders looking for a BO long, will tend to wait for the initial PB after the BO".  They entered at b9 and b10 and never considered another short for the A.M.  The channel BO offered another chance to enter the long trend run.  41.5 was identified as a key point, and this played out as the day progressed.


D & E

Selling strength was noted in the chat dialogue, and we participated in the EMA PB.  The peaking of D was the right side of a M pattern.  The pattern is fairly straight forward.  PA rises, rolls over, and tends to have a shallow PB.  The second half of the M can be of an equal o lesser height, but the backside PB tends to be much stronger.  We tested the 41.5 support,  then had a BO on the backside PB of the "M".

WHY TRADE GLOBAL CHARTS?

Some choose to trade rth charts, and they have various, valid reasons.  I simply believe the global setting is a better tool for trading.  I also do not accept that there is a gap at the open, that is artificially created with the rth chart.  True gaps are a price difference from open to close between two candles,  the close Friday evening and the open Sunday evening, or any holiday close and next trading open.

The difference can be seen in the interpretation of the U.S. open at 9:30 A.M.  With the rth, you do not see the pattern in the trading that is revealed by the global look.


TODAY:

The market is in a nice descending wedge of "pie" left over from the holiday.  Having difference in which day to take-Friday or Monday- created a lower volume trading day, which can easily be pushed around, or simple sit stagnate.

If the pattern is acceptable, traders will seek longs at the bottom and shorts at the top, while being mindful of potential breakouts.  Using protective stops will help control a  loss if caught by a breakout.

B4 and B6 provide such trades, and was followed by a long at B24 after a trend reversal developed.  The exit was discussed in the room; the logic being we were entering the mid day trading zone which tends to be flat.

A failed BO attempt resulted in a scratched trade with no gain.  The bullish nature of B40-46, combined with a rising EMA, suggested the flat zone would continue the previous trend.  This area, by the way, is the rectangle area referred to in previous post.  It is a sideways PA waiting for a BO.

The final effort was a lower high, and it had the characteristics of our EMA scalp setup.  This set up will be discussed in a later post once it is fully defined.

The after hours market appears to be willing to continue the bullish bias.

FOLLOW THE MONEY, TRAIL THE MONEY

Follow the money, trail the money.  Add in some proven setups, and your on your way to seeking profitable trades.  Follow the money simple means look for trends.  What is the price action doing?  Use a setup and go with the market.

Trail the money is order management.  Once your in a trade, move your stop into a profit position.  PA away from your entry is followed until your stop hits.  Generally, it is -1 to -1.5 from PA highs, either candle to candle or new highs being established in the market.  Short trailing is the reverse.

Example from today.  We entered the trend line hit, and trailed the PA.

[10:02] <Chartmaster>  mkt moving up again
[10:09] <Chartmaster> part 26.5 bal runner at be+1 25.5
[10:13] <Chartmaster> ok follow now st 26.5
[10:14] <Chartmaster> i m not worried if it hits and takes me out.  will be more trades  but when mkt moves I follow with the stp
[10:15] <Chartmaster> 28 breaks go to 27  etc
[10:16] <Chartmaster> 27.75
[10:17] <Chartmaster> you hold because it's in the money  how much, whenever it hits stp
10:17] <Chartmaster> 28
[10:20] <Chartmaster> ding ding out 28
[10:22] <Chartmaster> out of long



TODAY:


Today actually started last evening.  The bias has remained bullish, and the after-hours market was very productive, following the setup described in  Playing the Market.


[20:48] <Chartmaster>  2 attempts to bo 13.25  bit s/w now
[20:50] <Chartmaster> still long bias into upper teens.  we have 2 days and a long weekend for lot of news  most likely will be out and on side by thur mid day
[20:56] <Chartmaster> some stalling issues at 1315, 1318-19
[21:03] <Chartmaster> a break below 7.75 considered mkt failure (again) causing a major bear run and continue the longer term dn move from 4/8
[21:04] <Chartmaster> 1318-19 essentially 3 pushed (we have 2) to reverse the 4/8 trend

The bullish channel developed, and led us past the 1313.25 level, providing multiple point,  long rewards.

The A.M. trading continued with TL setups

.

And....

The weather is nice, and it is a short week due to the holiday.  Taking a break.  After all, there will always be a next trade.

Enjoy your day.............

PLAYING THE MARKET PART 2

Yesterday's blog gave a quick review of some of the setups used to follow the market.  Those setups were used again in today's market.  Please refer to that post for more information.


TODAY:

[07:32] <@Chartmaster> outlook today: bullish nature from lows around 1294. expect the 2nd test to bo. target to break by bulls is 1306 level resist.  extended trends seem to be back in favor follow them..

It did not take long for us to follow the trend.  The longer term bias from four A.M. EST was supportive of long positions.  Bars 1 to 10 area was an inverted  H&S and provided TL touches for long entries.  A temporary short trend developed, but was quickly played out and converted back to a bullish trend for the remainder of the day.

When the short trend ended, a bullish channel developed.  This bullish channel was supported by the EMA and the bullish TL.  Our targeted breakout was 1303.75;  top of the channel, top of bars 16-17, and it would allow us to return to the original bullish TL.

[12:16] <Chartmaster> 3.75 bo of bull channel and bo b16-17  very good for bull

Followed by:

[13:44] <Chartmaster> 10.5 next key bo area (resist) for bull with some pause around 8.25-8.75

Per blog discussion yesterday, play TL touches in a trend.  Play "weakness" (Pullbacks) inside a channel.

At the end of the day, another TL touch was productive going into the target area.  If you miss the original run, wait for the pullback.  In this case, the PB was noted, and discussed as a trap of late longs.  An Entry after the PB would be a stronger position.

[17:03] <Chartmaster> btw there is the pb discussed..

Note the strength in waiting for the PB long, as opposed to those trapped at 11-12 trying to get in the long bias.

PLAYING THE MARKET

TODAY:

The blog focus today is upon setups that can be productive for a trader.  All the trades have been removed, so you will focus on the "where" and follow the discussion as to the "why".  Actual trades were recorded in our chat room.

All trades have a degree of risk, and a loss can be realized.  Setup discussions should be practiced for execution and management, two tools you will need to be a successful trader.

The following discussion will help you identify what we look for when trading.  Look for these setups, practice them, and improve your ability to use them for successful trades.

FAILURES:

Failures should be regarded as an opportunity to enter a short trade.  These will be found at support and resistance levels, and at the EMA.

1. The S/R failure had two variations in pre-open trading:  1.)  Price is moving in a narrow range to either side of the S/R, then breaks; and 2.)  Price runs the S/R, then shows a pullback test.  The test failure is a preferred entry if you missed the original run through the S/R level.
2. The EMA failure should have a positive or negative slope.  A flat EMA is not optimal for a failure.  The first touches after a strong trend away from the EMA is preferred.

CHANNELS:

1. Channels will be bullish or bearish.  A sideways channel is referred to as a rectangle and is a break out setup.
2. In the channel, long (reverse directions for a short) any pullback bar that does not reach the lower trend line, or any bar that  touches at/near the lower TL.
3. The width of the channel will restrict the hold time on the trade, i.e. a narrow channel usually is good for a point to 2/3 the channel width, whereas a wider channel can be for a point and use a runner.
4. If in a trade, exit a breakout opposite to your trade.

TREND LINES:

Trend lines are similar to the channel.  When identified, long (use opposite for short) any touch of the TL and hold until there is a break-usually a close- below the TL.


Those were the setups for the market today: short, short, long, short, long, and long.

MAPPING INTO EXPIRATION DAY

TODAY:

With mapping, we have an indication of where price action will give us an edge as to market direction, thus a point to consider an entry.  Today the long remained at 13.25 with a short look at 10.5.  It should be noted, that a failure at either can be viewed as an earlier counter entry, as opposed to waiting for the original long/short target to hit.

Examples: 

1. pre-open failed, short into 10.5 area and look for reason to continue or to get out.
2. B4, bear failed to continue b3 strength. B5 was your long into 13.25, as opposed to those waiting for 13.25.

The bullish nature for today's PA was seen in the upward TL from b270 to b5-6, then b21-22.  Again, a failure (i.e. b21-22) is a strong candidate for a long even though we are below the long mapping target at 13.25.

It's Friday, expiration day, and nice weather.  Bulls got 1318, a target discussed in our chat.  Time to begin the weekend.

MAPPING THE MARKET PART 2

When mapping the market, we determine  points when buyers/sellers are likely to take an action we can use to our benefit.  Essentially, the market PA has four parts:

1. Break out long         Point where bullish run will likely begin/succeed.
2. indecision                Trades are available, but may be scalps.  Market drifts in a narrow range.
3. Break out short        Point where bearish run will likely begin/succeed.
4. Strength of 1-3         The first hit can fail; a second push (leg) at the point is stronger.

Knowing the area, and how strong the PA is at that point, increases the confidence in the trade.


PRE-OPEN:

[08:59] <Chartmaster> today:  longer term bias(has been)down.  not to say we will not Take a long, but more favorable long term hold of long is at 1306 area  strong short below the 99 area  crushing blow to bulls if we see 95 fail

Our range bar chart was telling the story.  We were in a decline, but holding in the upper channel.  Our break out point for the short hit, but failed to continue, but more on that in the blog.

MARKET OPEN:

Price is rising, breaks the EMA, and hits our target.  If this was a movie, the next scene is one of struggle and fading out.  B1 closed below, suggesting this is likely a FBO.  It is also what we consider a scratch trade.

Being in a failing trade has a psychological impact on traders.  The stop loss was a -9t.  A +8 saving grace, but there was the opportunity cost of not playing the FBO.  The controlling candle b4 hit the lower target, and was a +1 auto-entry.  But notice how the bear did not carry through on b5.  This is a reversal setup, and it did test 50% of  b4, another clue  that is important in a reversal.

In the past, the 'advantage" of the trade was included, and then it was dropped.  The thought was, the trade was more important than the "advantage."  This post bring back the "advantage of the trade."  The reversal was a trade, and we had a strong 3.5 for the next long.  This time it was on the second push of the bull.  The next 3.5 was at the low of a channel.  Rough line, but the bodies never broke the lower TL.  It is a HL reversal.  Being at out map price was nice too!

We also played the hold point discussed in the morning commentary, when price hit the HP, and  formed a HL

MAPPING THE MARKET PART 1

To understand the mapping of the market for Wednesday,you have to go back to the prior evening.  The market flashed a long hold at 1311.5.  This is a point where the market dynamics went from a short bias to a long bias.  Institutions will use these points to enter, and as implied, hold long or hold short.  These point  are one part of their investing strategy, and additional spread entries can occur above or below the initial flash.  hey will accumulate at varying points, and distribute  in a similar manor.  It is not in their interest to load the market and cause a large swing. All swings will be managed, and over time.


MARKET OPEN:

Market mapping is a technique of determining where the PA is most likely to be contained, or break out.  Our long and short brackets were in place.  The first trade actually came in pre-market and it helped to determine an additional setup for the day; we would look for additional failed breakouts.

Price had moved some six point from the hold point, and price seems to return to check important inflection points.  The market does not know this, it merely reflects the psychology of the trader that KNOWS certain points are important.  After all, the financial media has made it a point to convince you these numbers are important.

That test of the hold point was a long entry, and it led to another failed break out.  But this FBO was also a lower high, suggesting a move lower.  With our map "in hand" and a cooperative market, shorting became fashionable.

The market made an important double bottom in the 1306.5 area.  With the break of the EMA, we ended the day with a long.

TRADE THE PLAN

The success-or not- of your trades during a given session is strongly influenced by your daily plan, and how close you follow it.  The study you do do before the market opens will reward you in improved trading.


TODAY:                                  


The buy-sell  stress points were determined and plotted on the chart pre-open.  It gives us a clue as to the market  direction for the day, and let's us focus upon what we consider as the correct play direction.  The beauty of a plan, it allows you to enter the market anytime during the session.  Today, I had a late start and was not participating until b11-12 area.  B12-13 was a valid test of the short point, and there was an EMA failure

Once the market LOD was established, our focus was on a strong bull.  The entry for the bull trade that had a high probability to work was established at 1308.5

Allowing the bull to develop would give us a stronger position.  It also helped us wait for the bullish channel to develop.

The plan would include long of 8.5, and any lower touches of the trend line.  The gap play at b46 was very productive, and shared in our chat.

[13:18] <Chartmaster> b46 is gap bar suggesting long

The exit was at 1310, followed by another trade off the 1308.5  level (we used 1308.25).

a bracket trade was set for the price action around B66.  We has support at 10.5 being tested.  The bracket would allow the bull to revive, and the bear steam to continue a run down.

The final trade was a long off the reversal established on b73.  Again, 8.5 was a key for that successful trade.

LET THE MARKET COME TO YOU

Chasing market price is one of those things that some traders venture into.  Hopefully, they learn their lesson the first time, provided the first time did not wipe them out.  Chasing price is in the same chapter as revenge trading, double up to get your money back, and hold, it will come back into profit.


TODAY

An alternative to chasing price, is to let the market come to you.  This method starts by reading the market as to stress points, and establishing your entries and exits.

When the market opened, we had our plan in place, and let the market come to us.

[09:11] <Chartmaster> es 5m has established a neutral area, possible long/shorts area, and bo long bo short consideration. long bias slightly favored

[09:35] <Chartmaster> will wait for the pb  this first run up will trap those jumping in late  ie the long was around 25.5

[09:39] <Chartmaster> traders shorted at the bo point  longs trapped selling/getting out 
[09:40] <Chartmaster> no gain lot of pain  :)
[09:40] <Chartmaster> when they are out  we enter..
[09:41] <Chartmaster> 25.5
[09:42] <Chartmaster> will buy in N zone next push up
[09:43] <Chartmaster> 5t risk now...
[09:45] <Chartmaster> +1 and run

By waiting for our trade, the market rewarded us with a move in our favor.  The runner was at +2 for the minimum.  The market could have continued long.  Could will get you into trouble.

THE CHART AND SOME OF THE CHAT:

[12:27] <Chartmaster> long 27.25 area  upper tl bo   sh 23.5
[12:30] <Chartmaster> bracket orders to enter trend bo's
[12:31] <Chartmaster> i want to the bull to be "healthy"  and the bear "determined"  to trend
[12:32] <Chartmaster> although aggressive trader can sh here  25.5 area expecting ema failure
(this was good for +3)
[12:45] <Chartmaster> looking like a fbo pb entry possible leg 2
[12:48]    (nick removed)           fbo pb meaning retrace up?
[12:49] <Chartmaster> yes  they should pb to 23.5   approx 50% of the bo  if not set another sh below b37
[12:51] <Chartmaster> after 23.5  bull would go to ema
[12:52] <Chartmaster> mkt deciding now..
[14:45] <Chartmaster> took time but they got that pb we discussed  23.5 and ema
[15:06] <Chartmaster> that lower green line was the bo order sh tends to follow prior trend
[15:07] <Chartmaster> out
[15:14] <Chartmaster> leg 2
[15:15] <Chartmaster> failure they pb to 20.5 to close

The last break out  target continued for some 9 points as of this writing.  Identify key points, and let the market come to you.

WALKING AWAY

Whenever you have doubt about:

•  market direction
•  what is the price action going to do.
•  is this support/resistance,  is it enough support/resistance to enter
• recognizing selling or buying weakness

WALK AWAY.

Not trading is preferred to trading when your focus is not "in it".  Step back. Take a break.  If things are still uncertain, call it a day.

Another reason for walking away is a slow, churning market. Small bars, wicks and tails, marked by extended periods of sideways action.  The market has had a nice run, now what?  A fight to reverse?  Wait all day for THE play?

Sometimes, it is the end of a day or a week.  Stepping away can be refreshing.  Remember, there will always be another trade,

Take a break. Enjoy walking away.


TODAY:

Nice bullish Euro Market trend coming into the US open.  But then it began to stall, and a rectangle was created.

We like these brackets, and establish a long/short breakout target.  The lower target was hit for a +2 short. Buying was noted, and at the open I was not willing to risk profit on a strong reversal back into the rectangle.  We never know how strong a PB will be, and holding a trade is a personal preference.

The follow up PB in the bearish trend tended to be disguised.  A short at b14-15 could work, but that is hindsight.  Personally, there were no other trades inside this run.  Longer term, we still have a bullish flavor to the market, and there was no rush to jump on this sinking ship, nor getting trapped in a long at or near the LOD only to see another new low develop.

The weather is nice.  It's Friday.  Walk away.

A MARKET "IN BALANCE"

Occasionally the market will appear in balance, or in equilibrium.  Will it be bullish or bearish?  The early A.M. market showed a bullish trend running into a rectangle.  It further developed into a type of H & S, and

returned to the pre-channel level.  What developed next is what I referred to as market in balance, or equilibrium.  the short was established at 29.5 and the long was 29.75, a very tight balance between the bulls and bears.

TODAY:

Today, some of the quick bytes posted in the chat are included to identify where we have interest in placing orders.

[09:30] <Chartmaster> meaning:  no clear up/dn bias   stay out  or guess..  I pref the first
[09:30] <Chartmaster> however, if bulls fail the 50%  i go short

At the open, bar 1 (b1) tested the 50% level needed to convince traders that the market balance (MB) would first favor the bulls, and a long at 1330 b2 was a valid entry point.

The market then ran some +6 points and would be expected to test PA up to -6 from the EQ level identified.  A prior unfilled short at 29.5 was entered below b13 to hopefully collect some of that -6 expectation.  The same level was shorted a second time at b20 (hit b21) anticipated EMA failure.

The double bottom formation produced the next trade opportunity.  Note rising tails  b26-30 versus b16.

[11:56] <Chartmaster> 27 is a long area. 

The targets were 28 and 1329, however the trade was taken off at +1.  Rule:  when you have interruptions, take your trade off. 


[13:11] <Chartmaster> 30 becomes a shot entry

 With the conflict resolved, the pullback nature of b40-43  was an acceptable area to use a short.  Remember, we were looking at a balanced day.  Had this gone against us, the exit would be at 1332.25. 


[15:23] <Chartmaster> 29.5  has a ring to it..

It had been nice to us, go for it again.  Traders were entering at 29.5-29.25 for this short at b70-71.  Not sure of their reasoning, however this was a key price in the MB, and would continue to attract attention until the area failed.

A productive day, following a close range variance from a key focus point.

Finds us on Mirc Othernet at  #chartmaster.

IMPROVING YOUR ODDS: Matching Your Trade with the Market

Your objective in trading is to learn how to make correct calls.  Making a correct call is worth far more than making a winning trade.

Making a correct call is key to your success as a trader.  Correct calls will improve your ability to stay out, get in, stay in.  I know some traders that will practice-after a failed trade- twenty straight correct entries  before going live again.  They simple want trades that have a higher probability to work in their favor, and they want to be right.  They practice what is expected to be

Correct calls can include:

• area to enter.  What price is likely to work for your trade.
• enter a long or enter a short
• standard entry or increased contract entry.
• take no action.  Poor entry in the PA, no setup, distractions, and so forth.
• with the trend or counter trend
• the trade has to be right, NOW.  You do not stay and hope.

TODAY

The market had four phases today and each had a "correct" setup.  That is not to say that other setups were not available.  It simple means these were the setups we were relying upon for trades.

PHASE 1:  The market was in a bearish channel prior to the US open.  The rth only approach would miss this information, thus the preference for global charts.  In a bearish channel, the preference is for shorts at/near the upper TL.  At the end of the channel was a failed breakout which led to a long position.


PHASE 2:    A rectangle pattern that represents sideways price action.  The expectation is that the breakout will follow the previous trend.  The short was hit on bar 18.  The EMA can act as a resistance as the trade goes negative and will give your trade time to work.  Your stop would be above the top TL.


PHASE 3 & 4:  The break of  #2  was also a BO of  #1.  This bear run (any run) is assumed to have two to three legs from the breakout.  Pullbacks 3 and 4 failed to reach the EMA resistance and would be short entries.  The first leg was for 4 points.  Leg 2 and 3 should approach this total for your target.


PHASE 5:   A bullish channel that is generally expected to retest the prior breakout point (BOP).  Some traders will wait to enter long if price exceeds that BOP, while others will attempt tight stop shorts at the same area.

Our approach is to long the lower TL, and watch for any market changes at that prior BOP.

BACK TO BASICS

Trading is about reading the market, and what, if any, advantages can be garnered.  It is not personal. It is a business.  What one individual does or does not do is not the focus.   The focus is on set ups, market reads, and trade management once in a trade.

There were some conversations last evening that I found helpful, and assume were legitimate evaluations of how the blog had strayed, perceived and or actual, from the original intent. 

As such, effort will be made to bring content only, to the post and this blog,  that will more align with the original intent of discussing the market.


LAST EVENING

A symmetrical triangle was developing on the 5m ES chart.  The tendency is to breakout in the direction of the trend.  We were declining from the high around 1331 and could see a return to the 29 area, but more likely would see a BO lower.

Price Action failed to break a major MA, and was the short opportunity.  It broke in the expected direction.

As with any setup, once this BO was resolved, the market reads will reset.



AT THE OPEN

The initial trade was a long and short in the pre-open using a 3m chart.  The first entry for the 5m was the pullback to the EMA.  This is an acceptable entry.  We have higher lows ( bullish bias) and this is the second hold by the EMA area. (bar 3,  b7-8).


The next opportunity for consideration was the ascending triangle.  The flat TL top is the focus of a BO which has the tendency to follow the trend. Additionally, we have rising support at the EMA.

The slow midday was returning to the AT area.  This developed into a bearish channel identified  by b61.

With trend trading is preferred, and shorts would be acceptable along the upper TL.

B69-70 was at the lower TL and a major MA.  This support  allows for a long position with a target at the next MA's above.  These area can be key reversals, and the objective is to take part off at +1 and set your stop at break even.  At +2.25, move your stop to +1 and trail the price action.  You are trying to run with the  trend, should it develop, or stop out in profit.  In this case, the market hit the target area but continued the channel down.

TREND? WHAT TREND?

[09:17] <Chartmaster> today looking like a sell off day

IT worked for a while.  But in the final analysis, all the runs and PB's went in a circle and returned to the opening range.  Some early A.M. trades took advantage of the failed breakout above the pre-open sideways action.

  A secondary pullback was an acceptable entry, and we took it to end the early morning trading.


By mid day, a descending triangle was noted, suggesting the downward bias would continue.  It had a strong resistance at 1327.5, and the first break failed.

[12:59] <Chartmaster> nice triple hit on 27.25-27.5  support   10am 11 1  +/- few mins
[13:01] <Chartmaster> issue: the second hit bull run was to lower high from 1st  suggesting a down channel


The 5t pullback was the entry for that trade around 1328.5.

[13:53] <Chartmaster> that 5t was clue to next move  trapped initial bo shorts

Never like saying done, although I do.  The market will telegraph additional opportunities, and unless it is Friday, "done" is a hard thing to do.  At 26.5-26.75, 3 points in a flat day is worth taking.

[15:35] <Chartmaster> dn from  recent high good time for eod bulls to upset shorts run price higher
[15:36] <Chartmaster> 29-29.5  close target

1329.25.  Close enough.

TRADE PSYCHOLOGY

Fear and greed are assumed to be a part of trading psychology, however I would suggest that fear is a greater deterrent to trading,  than greed is to a broken account from excessive risk taking.

 It follows from the same thought that all the wealth could be distributed to the poor, and within x time, they would be poor again and the wealthy would once again be wealthy.

 Both are part of the psychology of  wealth.  It is a mindset that establishes a plan, accepts risk, accepts there can/will be failures, but the target will be accomplished.  If you can't see IT, can't see you as a part of IT, it can not become a part of your journey.

You can practice and delve into as much literature as possible, but in the final analysis, pressing the button to buy or sell is the hardest thing to do for many traders.  All it takes is a negative number to show in the trade window, and 1) they jump out or 2) they compound the fear with irrational thoughts of doubling up to get even or to get ahead.

Fear of losing, not being competitive, losing face; pick the description for the thoughts that race through the mind of the trader that, by the way, doesn't have a fear of the trade, but has a fear of the money involved.  They simply are not prepared to accept the risk.  Wealthy individuals have determined they will succeed, and have learned to accept the risks to achieve their goal.  They know that  it is a process, where a loss is a step that needs to be modified to become a success.

Fear will keep people poor in trading.  keep them out of trading, and when they do trade, get them out irregardless of all the indicators in their trade package shouting stay!

TRADES


The trade day started with two bracket areas that were productive.  Trade the BO and/or the pullback to key support.