wshahan

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4.15 POST 2 The Rules for Trading Spikes “Spikes” are one of the six special situations featured in Dalton’s classic book on trading the CBOT Market Profile (Mind over Markets, Dalton, Jones, and Dalton). See page 280-288 for a detailed discussion of spike trading Spikes are created by the rapid movement of prices away from existing value in the last few periods of the session. A spike offers no opportunity for prices to be retested during the session and hence serves as a reference for the next day’s trading. (I am ignoring the Globex session for the purposes of this discussion.) We had such a spike in the last 45 minutes of Friday’s session. In profile parlance it occurred in the M, N periods (30 minute bars starting with A,) and took place between 1372.25 and 1363.75. SPIKE STRATEGY FOR MONDAY’S OPENING: The spike’s range and extremes now serve as key reference points for Monday’s trade. 1. Opening within the Spike: An opening within the spike is the most likely occurrence and indicates that the market is accepting Friday’s new lower price levels. This is a large spike in relation to the average true range of the ES, so it would not be unreasonable for today’s trade to remain within the spike. Look for rotational trade opportunities. If prices trade through either extreme; either upon retest, or with conviction, go with the breakout. 2. Opening above the spike: An opening above the spike indicates that market participants consider prices within the spike range too low and indicates rejection of them. The objective is to enter long positions as close to the support offered by the spike top as possible. 3, Opening below the spike: An opening below the Spike indicates that market participants consider prices within the spike range to high and indicates acceptance of lower prices. The objective is to enter short as close to the resistance supplied by the spike bottom as possible. Bonus Tip: The move has special significance because the preceding bar contained a small intra day selling tail beginning at our over/under price of 1374. (The failure at 1394 combined with the lack of volume and corresponding lack of range was the reason I went short.) The late move down went through the day’s entire value area in a small fraction of the time it took the for value area to form. Does this move have any potential significance for price movement Monday? Only time will tell. Hope this is helpful, Spookywill

I go by "Spookywill" as some of my trades are spooky. Last Friday afternoon is an example. I am a professional Trader. I trade for myself and 4 clients. I have been screen trading since 1982, and I have lost money in as many different ways are there are schools of technical analyses. I have blown out my account 7 different times that I can remember, and have been “really broke” once. I spent 18 years as a psychotherapist, and upon my retirement in 2008 and went back to my first love, trading. I promptly lost my shirt once again. After 2008, it took me pretty much three years to get to where I think I am “real good” at trading. You may be in disagreement after the next twenty-eight days, but I have confidence. Only time will tell. Thus starts the odyssey that results in this tread I started last Thursday. My hope is that I can save you some time in developing the expertise you need to be successful trading. I have developed a methodology that works for me. Over the next 30 days I will give those who are willing to work, and who ask questions that don’t directly pertain to the specifics of the methodology, enough to develop their own trading plan. I will, if Traders lab approves, submit two new threads per week, one with the trade specifics and one with philosophy and trade tips. The new threads hopefully will control “noise” generate by my posts to date. With the caveat that that are as many different ways to trade successfully as there traders; Here are the some key elements of my trading Methodology: 1. I use no indicators. The tools I rely on the most are: 2. I am an auction market trader, and I owe much to the work of Don Jones and Tom Alexander. 3. My background is in Market Profile trading ( since 1987), and while I don’t formally trade profiles, I keep and eye on them, particular for the migration of value. I think any serious trader needs to be well acquainted with Dalton’s book: Mind over Markets by Dalton, Jones, and Dalton. In particular, his 6 special situations are still relevant. Later today, I am going to post an entry applying his spike theories to Friday’s late decline. 4. I use volume at price analysis heavily in my work, and have developed my own variation of Peter Steidlmayer’s volume strips concept. Interesting to note, Steidlmayer, who originally developed the Market Profile now describes it as “Not very helpful.” 5. Pattern Recognition: A. Acquired through experience B. Intuition: To paraphrase James Dalton, Intuition is another word for experience. To this I add: There are four stages of learning, the forth is being or functioning with unconscious expertise. This is another way of saying you can only learn from your experience. The goal is to become able to make good trading decisions without much internal debate. While not all the trading decisions will be profitable, if you are consistent with your internal methodology, you will expect and be okay with your losers and overall you will be profitable. Personally, I define my trade risk so that I have the expectation of producing a satisfactory level of overall profitability if I have one out of three winners. YOUR BRAIN: A and B above can be summarized by saying you can’t become successful by purchasing a system or learning someone else’s methodology. You must learn from hard work and your own experience. If 99% of all traders fail, and you keep doing what others are doing (jumping on the latest indicator set up, paying big money for systems that can’t fail etc.), the odds are you will continue to fail. The temptation is to think: “If only I learn to do it better, ‘it’ will work”, when, in fact, ‘it’ is inherently flawed and will never work. It is necessary to learn how to trade first, only then should you risk real money. This is the reverse of what the great majority of the Futures Industry promotes. [/b ]I will address this topic in more detail tomorrow. There are a number threads posted in Trader’s Lab questioning whether the ES can be traded profitably. I say it can. The S&P E-mini contract (Symbol: ES) is I think the hardest one to trade in the US session for four reasons: 1. Poor range development during the US session. 2. Many, if not a majority, of the recent substantial price moves have occurred in the Globex (overnight) session. 3. The ES is subject to arbitrages, program trading, and other activities that are unrelated to current trading. These frequently can have a impact on current prices that is unrelated to current supply and demand. 4. Noise: The ES tends to have a high degree of 2-way trading (overlapping) involved in its attempts at directional movement. This is particularly true in the day session, and holds true in any time frame up to 120 minutes. This means stop placement is critical. It also means small accounts with a fixed dollar stop have a good (I won’t say very high out of courtesy) probability of being stopped out. I will address the topic of stop placement probably next Monday. Such a deal you guys and gals are getting out of these threads. I made more money recently trading in the NASDAQ and Copper than the ES. I also think the 10 year US note contract is an excellent and also low cost alternative to the 4 stock indices. However, for some reason, the ES is everyone’s favorite. And there is the challenge as to whether the ES can be profitably traded. So I have 2 profitable days trading it, and 28 more to go. Regarding, as was suggested in a post to this thread, submitting a ten year track record. The idea is clearly spurious, ala Peter Lynch among many others. The last trade has more meaning than a ten year history. Thirty days is vastly more relevant and a good test. So now you have two days results of the thirty days and twenty-eight more days to go. During that time, if you have the desire, capacity to learn, and willingness to work, you will be exposed to what is working for me as a successful trader. The idea is to adapt what I do to your own personal trading methodology. The last posts I submitted on Friday stated that if prices could not hold the 1374 level, go short, and at 1:53 I warned we had no volume or range, so expect prices to decline. Of course, we got a 10 point drop in the last 30 minutes of trading. Friday’s Globex session had a high 1384 shortly be the US session. That was the low risk and obvious entry. Prices then declined without pause to 1368, consolidated for five hours before selling off to new lows in the last 30 minutes of trade. If you check my tread entitled “today’s trade”, you will see I advised entering short at 1377, followed by a post saying the 9:30 AM CST low was likely to hold so cover. I then went long at 1372, but the rally never came, and it was clear by 1:00 PM that a failure was likely. The advice given was that if prices did not remain above1374 (prices reached 1374.50 and later double topped at 1374), then cover the long at a small profit and aggressive traders go short. This alert was given 2 times, the last at 1:53 CST, giving over 2 hours of advance notice of a potential sell off. Thus the gain on the three trades was up to 28 E-mini points on a day when the day session range was only 18.5 points. All the trades were posted in the thread entitled “Today’s Trade. Thursday was also a good day; again see the posts in the Thread: Today’s Trade. There are no short cuts to success. Were the last two days flukes? Again, only time will tell. My hope is that there is enough here to encourage a few to spend the time and do the work necessary to develop a successful personal methodology.

1.53 PM CST Heads up, guys and gals, we have had no range, no vol. since 10:30 AM CST. This can lead to lower prices into the close.

1:20 PM CST As mentioned earlier, 1374 was our over/under levelfor the day. And I have been warning about the possibility of a bounce followed by a decline and posible retest of today's lows. We had a weak 3 hour ralley attempt followed by an upside failure at 1394.50. Price declined from 1374.50 to 1371,50, and are attempting to rise once more. If we cannot remain above 1394, close the longs for a small profit, and the adventurous can place shorts. This is a very difficult day to trade as we have effectively a three point range the opening 90 minutes of the US session. I am nervous, but holding the long. Good hunting! Spookywill

12:15 PM CST If this 30 min bar does exceed the last one, then we may be getting the several hour bounce and then potential failure that I warned about previously. At this juncture, we will monitor the extremes of the last 30 minute bar (11:30 AM to 12:00 PM). Stay long as long as we don't take its low out. Low: 1371 We have ascending lows in the 30 minute ES chart, and the NASDAQ looks like it is trying to go up, both bullish signs. Good trading, Spookywill

yes, obviously 1400, my bad.

10:44 AM CST Based on the current structure that has formed on the 5 minute chart, I have a buy signal: Go long at 1372- 1372.50, stop at 1368.75 This is a very aggresive trade, if this is a intra day trend chang, there will be more conservaive entries to come. Se previous thread for set up rationale.

10:18 AM CST We reversed andentered short upon penetrating 1377-this was outlined in the premkt post. The profit upon closing the S&P e-mini long was +10.5 points per contract, disappointing but we are doing well with the short. There is a high volume structure between 1364 and 1370 which will be difficult to trade through to the downside. The current low is testing the 4.10 day session high (1370.50). If this level holds, as I think is likely, take profits on the shorts and go long. 1374 is my current over/under point for today, I think the current low at 1368.75 can be retested (just was), but I at this time becoming skeptical of further new lows today. My current plan is find a good location to reverse and go long, We are likely to have little range in the ES until after lunch, but we shall see. One possible scenario is to get a couple hour bounce from the current low and then a failure to the downside.. I don't have a timely way to atert you to this, so be warned. Happy hunting, Spookywill

Today's premarket Condition: 7:53 AM CST We are building value (volume at time) beteen 1378 and 1384-86. This structure is on top of the previous one at 1374-1380 formed April 8 (Globex) and April 10 before the sharp drop. The new sturcture should produce a sharp move away from value without implying a directional bias. Breaking below 1377 would produce a sell signal. We had a high volume area yesterday between 1379.25 and 1377.25 which had a high probability of being reviseted today and in which we are trading in as I am writing.. We retested yesterday's high twice an failed to take it out. 1. Our best potential for favorable trade location is to get a restest of yesterday's high and trade off that, long if it is taken out, short if it fails. 2.Go short if prices break 1377. 3.Go long for a retest of 1388 (Globex high and also resistance,) and target 1400 if 1377 holds. I am holding long from yesterday, see yesterday's posts, at 1366.50. Good trading to you, Spookywill

The stop was 1373, the target was the lows of 4.10 I got stopped out on copper for penny $250)loss. I reversed the S&P position and went long at 1366.50 the rational for which I covered in another post. THe S&P profit was only 3.5 points. The resulting long position gave me the big profit I was attempting to get. The stop is at 1362.50 which is just below the Globex low. Target potentially is new highs. The next resistance area is 1392, then the 1400 area.(3:42 pm CST.) I am still holding the long position. I am still trying to determine how to deliver timely trade information. I will attempt to post someting premarket tomorrow. I have to figure out how to share the methodology as it can't be done with out charts and more verbalization than I am willing to atempt. I did post a thread warning not to go short the ES at 1:30 (PM, CST)when there was a small consolidation formation around 1380 which hopefully was helpful SpookyWill

The tempttation of many traders, even eperienced ones is to want to fade a sudden, sharp run and to attempt to go short. This the vast majority of the time is a mistake. At this juncture, the probabilities favor a break up this afternoon (1:43 pm CST) out of consolidation between 1380 1382.50. Buy pullbacks in strong markets, don't fade a strong trened. This bit of intormation will save you a lot of money and physical distress. Hope this info will be useful. Spookywill

There is a lag time to post into Traders Lab. I haven't figured out how to deal with this and give timely trade locations. I can post in market condition data and potential opportunites before the opening (8:30) CST, I will try this tomorrow. I entered this morning short the-emini at 1370, and I was stopped out of my copper trade overnight. I reversed and went long at 1366.75 after the opening and am still holding long (1:13 PM CST.) The rational and parametes based on both market structure and pattern recognition very clear cut and the trade entry was simple. Unless we see something weird, the plan is to hold long and look for a retest of 1300. 1383 and 1392 are key resistance levels. Hope this is helpful, Spookywill

I trade the E-min and make money every day. I do some swing trading, and I regularly trade the NASDAQ, Copper Notes and Bonds. I am an auction market trader and I use a combination of CBOT Market Profile, volume at price analysis, and pattern recognition techniques. I have been a screen trader for thiry years and have tried everythig. What I have now works for me. I made 22 points in the NASDAQ today, shorted the ES a 1370 and am still holding, shorted copper at 3.6600 and am stil holding. You don't have to believe me, I will post set ups staring tomorrow, the proof is in the trades. I generally make one to 3 trades a day. The first set up is usually between 7:30 and 9:30 CST in the morning. I hope I can help you in your trading. The ES is the hardest to trade because it is, like today, frequently range bound, but it can be successfully day traded. Hpe it helps, Spookywill

A REAL "SWINGING EVENING" I exited the Thursday day session carrying Short positions in the the NASDAQ at 2759.50, and S&P E-mini at 1395.50. I closed the trades in the Friday morning session for a gain of 32.75 points in the NASDAQ and 16 points in the E-mini. The trades illustrated three key auction market principles: 1. Initial Setup 2. Trade entry 3. The critical nature of stop management, especially: a. Initial placement must be related to market structure; and b. The importance of not moving stops prematurely. We had a two day consolidation pattern with Thursday being balanced profile. This formation has the possibility of producing a sharp move without predicting a direction. Since value had been migrating lower, and the structure we shorted was a double top with the Globex high, the short was a reasonable bet. The stop management was critical to the trade and many traders would have been stopped out prior to the big decline. This issue will be addressed by me in Monday's chat room session. You are invited to visit my room Monday, April 9th to review Thursdays' trades and trade set ups. Also, to see what Mondays' potential trade development brings. The hope is the review will give you useful information to for own trading. There is no charge for the visit. To visit the room, E-mail me at wshahan@comcast.net for the Go To Meeting Room number.