Quick Draw

On our small time frame trading today we are short the S&P mini from the open. Going for a move into value. (www.tradeinwaves.com)

The Morning After

So yesterday we finally had some selling. Not that that is unusual. Looking at a daily chart we should expect some overall pullback in the market around these areas. I was looking at some profile distributions this morning and it looks like the market is doing some balancing. Today I don’t expect to much but I do notice that the internals are strong at the moment. I was very particular about watching the opening print this morning to see if it held. This is a strategy I am using on an automated system. Basically what we had was the opening print get tested and give way. I then short looking for the midpoint of yesterdays value area. It just about made it but then volume dried up unusually low so the position came off. If volume stayed I would have kept the position on but when volume on this futures contract dies down in the first hour that low my system pulls it. So it is what it is. Small gain. As long as it’s not large losses I am fine with that. It;s a good thing also because the opening print was tested again and gave way to some upside. I would not be looking for shorts again unless we get significantly below that opening print again.

You can see the opening action outlined in this profile chart.(learn more at – www.tradeinwaves.com)

With Breadth Like This Who Needs To Stick Around?

When we have such weak signals at the opening bell as we did today we have to immediately looks at some of our market internals to get and idea of what the overall market is setting up for. OS today for example we had some very weak overnight trading. At the open we nibbled on a short position and from tat point it was smooth sailing. The internal I am watching is the advancers/decliners. Take a look at my chart below. With numbers this weak it's very difficult to even consider at reversion trade up, even on the smallest timeframe. So if you took a nice trade from the open and caught some of the downside I would just be happy and walk away. The skew of the market is still very negative and the only other trade we would normally be waiting for is a possible scalp long when we get some positive slope. However with the internals being this weak I am not even going to consider that at this point. I'm just going to take what I got and wait things out here.(www.tradeinwaves.com)

Way To Find A Strong Price Level To Keep And Eye On When Trading

As the market develops I use a very simple way of drawing support and resistance levels that tell me where the mean reversions should pull price to. When price gets to these levels it’s then that we are noting failure or support. This is method is super simple. below is a chart example. Basically you start regression lines at key swing points. If you do not know what a key swing point is, we will talk about that more in the chat. Just remind me. Anyway see in the chart how I started the regression from the key swing points. Now look at where these “slope” lines intersect. That is where I draw a horizontal line as a mean level for the two swings. Now when price gets to that point we are looking for a bull or bear winner on the tape. Get it? (learn about these trading techniques at www.tradeinwaves.com)

Things I Looked At In My Browser

http://personalmba.com/

http://finance.bi.no/~bernt/gcc_prog/

http://www.verticalsolutions.com/strategies.html

http://www.nabaztag.com

http://www.tradeinwaves.com

When And Why To Exit A Rally

This is a common question in the live call room and it has no clear cut answer. See the thing is that each trader has a different style and so for each trader the level to take profit and get out of a rally will always vary. I have heard many different schools of thought but my best advice is to just do “what works for you”. In other words just because I exit with certain criteria does not mean that you should or that Bob should. I make my calls in the live room based on what I am doing and how my fund operates and generally we are in the school of thought of being consistent rather then trying to get every single tick on the table.
So let me share with you why this morning I recently exited the futures market from a day trade near the open. Bottom line was simple that we had a nice run and that at this point we where a few SD away from the mean. The higher away from the mean of the move we get the less the probability becomes of more forward or upward movement. The second thing that alerted me to exiting was the fact that we are now trading above our initial balance. (email me if you want to know more about IB). Look at the chart above and you will see how this YM futures contract was trading above it initial balance area after a very strong uptrend. In this type of opening action usually the IB will be a good bracket for the days action and so I exited all positions. Now if the market continues to take off so be it. We still had a fun ride.(www.tradeinwaves.com)

Happy 4th

First let me apologize for not writing sooner. I have been working on automation and back testing a lot and been super busy. The good news is I have come up with some great ideas that I will share.
Its right after lunch here and the markets have slowed a lot. After the first 45 minutes of trade today volume really started to slow. If you got the bigger move down today then great. However I want to focus on something I did today and that worked out if you had not hit the move down. I basically waited for a long time for the smallest timeframe I watch to start making significant(email me to define that more) higher highs and higher lows. I then took a very conservative long position. However I had not intention of holding. From this chart you can see what I did was looked at the last significant push down and looked at the distribution(outlined in blue). Normally you would get me looking for the long to move at least across the distribution but today since volume dried up so fast I only looked for the midpoint. As you can see it just barely made it and I was back flat. I’m auk with this . A little pocket change to keep the fund in the green on a otherwise down day for the index’s.
Have a good weekend and I will write more next week.