steve46

Today was a fairly easy to anticipate trend day down, as institutions and funds took this opportunity to sell inventory to retail. Newbies and struggling traders who want to survive, have no option but to observe during these times. I think the way to handle it is to simply follow whatever rule set you have established and be cautious. Market psychology rules the market. That is to say, media creates the illusion of an opportunity to buy (releasing the news of a "bail out" after close of market). The market shows a "gap up" suggesting that (retail) demand exists, and institutions are only too glad to cooperate by selling marked up inventory to naive retail buyers. The next day (today) institutions sell it down as the public continued to buy early in the morning. Then as the bids trailed off, size players marked it down and were able to sell at a profit all the way back to the previous low (where many of them bought it to begin with). and so it goes back and forth..... Once you learn to see the cyclic nature of this activity, it is easier to be patient and wait for the periodic opportunities that show themselves in this and every market in the world. This also illustrates the importance of risk management and learning to minimize loss so that when an opportunity arises, you have sufficient capital to participate. Two charts this time. the first is a 5 min chart of the Globex market showing the early action and test of the previous days market. Then another 570 minute chart with Monthly, Weekly and Daily pivot, as well as support lines in place. Note the confluence of the trend line and Monthly Pivot. By the way, there is a good reason why the test of the trend line occurs during the night...can anyone guess why that is usually the way it happens?

Regarding the use of the longer term 570 minute bar or candle chart, you can see the touch of the upper trend line in the overnight market (sometime after 00:00:00 EST) This suggests that price might want to correct back down. Its just a data point and one would want to develop some more evidence for a possible short before entering of course. That pre-market test occurred at 1282 and the US market opened at 1276.50. A swing trader might have been willing to take that trade using a stop just above 82, perhaps trading around an options position. I would not be doing that, and I am pretty sure a newbie or struggling trader could not afford that risk. The return however could be anticipated from previous recent volatility (one way of estimating profit targets is to measure previous wide range "down" bars or candles).

Easy to take for granted the simple skills like drawing a trend line I will use the previous chart (which by the way was badly annotated, my bad) and do it correctly this time. In general you want to connect three points with your trend lines. This is the classical method. I don't adhere to that however. I will start with any two points and look for price to confirm my trend lines with a third touch. Further, I like to draw one set with what I call an "origin" or base point (seen on the top of this chart, and for the secondary line I like to start it somewhere BETWEEN the upper touch points. While it may not seem important, it is a detail that new or struggling traders should pay attention to because it can impact how you enter and/or exit your trades

Okay so lets get back on the track here....The next item that should be important to struggling traders is detecting trend on the larger time frame. I have attached a chart using 570 minute candles. I like this because it shows longer term trend nicely and one of the candles always corresponds to the market open. As you can see from a quick scan of the chart, since mid-July we saw a very nice up trend, and if you had some experience with this kind of chart and the use of trend lines, it is possible that you could have taken some early entries, and just held to EOD for an average of 28 pts. Notice also the transition from up to downtrending movement, and notice particularly the last significant move down. The wide range bar (taking out the trend line at 1258.75) moving down to a low of 1226. One can see the origin of tha move beginning on 9/02, where price tried to take out the upper trend line, tested that area and failed. Traders came in at that point (1297) and sold that market down significantly and if you had a longer term chart to refer to, you might have taken part of that move to the bank.

Ah it seems I missed your point. Your comment was about "who is right" I see Yes the "close" of trading is at 16:15 The CME settlement which I mistakenly labeled the "CME close" usually posts at 16:20 I have made that mistake when talking informally to traders for years. You are right....

The CME settlement is an accounting process that happens after the close at 16:15. Simply put it take a few moments for all trades to be counted (this is my understanding). I have no idea "when" the CME decided to do this. You may want to inquire if it is important to you....I use the CME settlement (not the close at 16:15) in my calculations so I wait until 16:20....and if you have Esignal you can take that data point off the 16:20 bar or candle, or you can go to the CME site and get it from the Settlement data for index futures. Here is a link to the CME settlement http://www.cme.com/html.wrap/wrappedpages/end_of_day/daily_settlement_prices/es.html?h=1

Sure go ahead and use 16:15 I happen to use the CME close at 16:20 for my own work... 16:15 will work just fine.... Good luck Steve

I use RTH (reg trade hours) for everything except Market Profile. Regular Trade Hours are 9:30am to 16:20pm EST I use several Market Profile charts as follows 1. RTH chart (see above) for my RTH trades 2. Overnight chart (16:30pm to 9:30am) to identify specific opportunities (sorry that is the best I can offer you) 3. Longer term charts (Weekly and Monthly) and again I use these to identify specific opportunities Steve

Hello If you read the text on both site, they claim to use the same formula "H + L + C /3"..This is how most users get their daily pivots. The rest is just a matter of manipulating the basic formula to get support and resistance. Personally I use the formula built-in to Esignal. I think MyPivots is probably fine as well. The market profile items I mention in my posts refer (always) to the previous day. I also use current day information that is proprietary, so I have not shared it. I will say however that one can develop a number of reasonably good systems by looking at the the way the current day's profile develops and thinking about it a bit...Its not rocket science. I found a number of elements based on the size of the initial balance that worked well just by trial and error. Remember that my own preference is to trade "tests" and "retests" of specific price points. I hope this helps a bit Steve

I appreciate your comment and I hope you will continue to participate.

I think Mark Cook's comments are very realistic. It is cliche but true that this business is a marathon rather than a sprint, and to survive I think one has to get into subjects they don't really want to including how to prepare for (and come back from) significant losses. Also on a related subject, every trader should have a program in place to handle interruptions of service, natural disasters, and other events that could cause harm to their accounts. Similar to backing up your computer files, nobody wants to do it, until it is too late. If you really want to a part of this business, you have to give this some thought or one day events will overtake you..... As regards "ET" clearly the site owner has decided to let it become the equivalent of an Internet "public restroom". Too bad...

There is one more thing that occurs to me. It is important that people who are trying, who are giving their best effort to this very difficult pursuit, not be mislead.....One thing that is important (to me) is to provide traders and would be traders with an accurate picture of what the business requires and what the risks are. In this respect my views are very similar to Mark Cook's. Here is a link to a short speech Mark gave about "avoiding trading mistakes" (under "PDF workbook", click on the arrow). http://club.ino.com/trading/tag/common-trading-mistakes/ Most people tell me it is difficult to listen to because what he talks about falls into two (2) categories, things you want to know and things you don't want to know.... I strongly suggest traders (newbies and struggling alike) take a moment to listen to "both sides of the story"....

I appreciate your kind suggestion. Been there, done that, got the T-Shirt..... As with many such ideas, there is a cost, a "trade-off" if you will. What is it? Well, you can see for yourself by putting the 240 EMA in place right alongside the 200 EMA. Then you simply scroll back through the candles.....sometimes you get signals you wouldn't have with the 200...I think each trader has to make their own decision. Now on a related subject....and this pertains particularly to newbies and struggling traders.....one of the problems you (both groups) suffer from is the need to have an EXACT PAINT BY THE NUMBERS BLACK OR WHITE trade signal....if you last long enough and get enough screen time you will at some point figure out that exact signals, crisp, no debate, black or white, yes or no, trade signals are NOT a feature of most decent systems. Instead what we have to work with, are signals that tell us to go long or short in an area, a neighborhood and to watch how the market develops at that point, and THIS is my segue into the importance of stops, of knowing what the correct stop size is for the current volatility and (as you develop your experience and your abilities) how to judge whether your entry is going to work or not.... One way is to look (after your entry) at how many units traded around your entry on the bid and on the offer. As an example look at the previous days chart and if you have the data check out the entries I show on my chart. Look at the number of contracts that traded on the bid/offer at 1297.50 and you will see "why" it was right to go short at that point. Look particularly at the candle at 9:48:22 (on the 10,000V chart). Professionals call that candle a "peekaboo" because locals use that candle (price) to get a "peek" at what is hiding (stops) above that price point. If a significant number of stops had been hit at and above 1297.50, the market would have broken out to the upside, but as you can see it did not. In fact the opposite was true, and the "stops" were waiting below that price point and as you can see, price retraced a full 12 points down from there. For those who are serious about obtaining professional status in this business, this is one of the differences between a skilled professional and a retail trader. A professional knows how to read the tape, a retail trader cannot and so he just enters and hopes for the best......The moral of the story, start learning (it takes a while) to read the tape. Good luck Steve

The $ADD also turned up during the lunch hour, indicating that some buying was coming into the market. During the next 40 minutes price moved up to test the Value Area Low, failing to take it out and again we can see the retest at 14:27:09 and the subsequent failure creating a lower high. As always there were several places to get short. This is an important trade because it is based on the idea of rejection of the value area. Not just the value area high, but previous value in general and that (to me) means the market is rolling over and that traders are taking profits and looking for value at a lower price (professional use the phrase finding value at a "better price"). As you can see from a quick review of the original chart, the downtrend that started in the morning, continued after the lunch hour (this happens all the time) and traders took this market down another 10 points in front of a long holiday weekend. In closing I think its important to mention the value of Market Profile. If you use it for a while it forces you to think in terms of value, not as a single price point, but as a general concept. Today's market rejected a range of prices as it moved up and down testing. Knowing that this was a possibility, a trader could enter at the extremes with some confidence knowing that they might get a 10 point profit. Otherwise you might be tempted to scalp and get flushed out early, leaving money on the table. For those who are not familiar with Market Profile I suggest looking into it.

Sorry I was interrupted and didn't finish my comments That second trade is an important one. Again the 10,000V chart shows the larger picture, but it is up to the trader to know how to interpret it. I see it this way 1. As mentioned in the previous post, price tested the Value Area High (1299) and Yesterday's Close (1298) and failed to take them out. As we can see, traders rejected that area and price retaced to another area of confluence (Daily Pivot at 1291.16 and the Value Area Low at 1291.50). Price consolidated for while in this area for 10 minutes (10:23 to 10:33am EST) and then took that area out to the downside. Traders continued to "reject" this area looking for "fair value" elsewhere. During this move down, the $VOLD indicated a trend day down with mostly red candles. But at the lunch hour, those candles turned to doji's and then the display turned up indicating a possible move up..Check out the attached chart

I thought I would re-visit the subject of screen display. I was thinking about it today and it occurs to me that my setup may not work well for new or struggling traders. As I mentioned, we all have our strengths. I am able to remember and visualize price, not everybody can do this....If you are one of those folks who needs to see the larger context, it may be better for you to have a display that includes both a 10,000V chart (or perhaps a 5 min standard candle chart) AND an 800V chart. In some instances, one may serve you better than the other. Here is one example where the 10,000V chart may do a better job (vs the 800V) of showing you where to get on board Look at today's price action on a 10,000V chart. Start at the far left and note how the Asian Markets open and move down, then the DAX (Europe) opens and retraces up to test both the Value Area High and Yesterday's Close...As readers will remember, one of our "ideas" is to trade tests of confluence (2 data points) and the preferred entry is on retest and failure. In this case the test occurs in the pre-market, and the retest at 9:45 AM EST. As usual, there are several nice entry points at or near 1297.50.

As regards scaling in, I know of one person who can make that work. he scales in early in the day, holding to end of day or overnight (possibly for a multi-day swing). For shorter intraday trading, I do not like it. I do however like to scale out. Scaling out allows me to take small profits on trades that do not run, also I am able to scratch trades easier and pay my fixed expenses (commissions for example) that way. I treat this as a business, paying all expenses from my trading revenues. As I have mentioned previously I suggest traders do not trade one unit, as it is virtually impossible to make a living that way. In my opinion a skilled trader with a decent sized account should trade no less than 12 units, scaling out at 2*,3,5,7 and 10 and keeping 2 units left in the market in case the trade runs in your favor. *During the summer I execute my first scale out at 1.5 pts. So the economics of a sample trade are as follows Enter at price A with 12 units. Exit 2 units at 1.5 points for a profit of $150 minus about $10 commission = $140.00 Exit 2 units at 3 points for a profit of $300 minus about $10 = $290 Exit 2 units at 5 points for a profit of $500 minus about $10 = $490 Exit 2 units at 7 points for a profit of $700 minus about $10 = $690 Exit 2 units at 10 points for a profit of $1000 minus about $10 = $990 A completed 10 point trade brings in a minimum $2600 net of commissions. Remember that we have 2 units to run to EOD if necessary. A losing trade costs about $1260.00 (2 pt stoploss x 12 units x $50/pt plus about $60 commission) This tells the aspiring business person that A. They want to select trades carefully as each loser costs significant money B. Select your stoploss carefully so as to maximize your opportunities. C. They want to hold each trade as long as possible, because it is important to take as many 10 point winners as possible (in order to overcome expenses). Further it is important to catch some trades that move to 15 and 20 points (because this constitutes the majority of your long term profits). D. If you encounter losing streaks of more than 3 consecutive trades, you need to stop and re-evaluate your performance. That includes the size of your stoploss. Hope this helps. Steve

I have two setups, one for summer and another for the rest of the year...I will describe my summer screen..... 1. One constant volume chart (during summer I normally use 800V) with 200EMA, 80EMA, pivots and previous day's high and low 2. $VOLD and $ADD in very small charts next to the primary CV chart with 80 & 200 EMA on both. I review a market profile spreadsheet that I developed for my trading about 15 minutes prior to the market open. I am able to remember those price points well enough that I don't need to refer to it during the day. Thats it.... I hope the message is clear....I couldn't make a quick decision having to consider all the data you show on your screen. I would be chasing entries all the time... Some of this is a function of how good a trader is at remembering and visualizing important price points. I happen to be good at it. If you are not good at visualizing perhaps you need to keep more information on your screen.

Regarding the psychology of trading, understand that I am not a skilled mental health practitioner. In my professional work I had the luxury of hiring only folks who exhibited positive mental outlooks....they were the "winners" who seemed to find a way to overcome the challenges that life imposes on us. What I noticed about them was their attitude....They always maintained a positive outlook...they looked forward to those challenges and approached them with confidence...they assumed they would prevail against any problem, and they were willing to work at it....to do whatever it took...however long it took...eventually they were going to win....period. My suggestion is to start with a winning attitude (confidence) and patience. Most of us know what we should be doing, but do not do it......so Take a sober look at what you are doing with your time.....take the time to analyze what is not working for you and correct it....as a practical issue, whatever issue you are trying to overcome...if you can monitor and correct it for a period of one month, generally speaking you have beaten it.....much of success in trading is about changing your perceptions and learning new habits.....I can assure you the rest will fall into place IF you can simply do this...

Hello I can't help but smile when I read comments like the one above Clearly high level performance in any pursuit requires practice. I think each individual has to decide how to approach this subject. I certainly understand the wish to "have it right now"...I suggest moving ahead deliberately and patiently and then (if you are using a simulator or perhaps just "putting a toe in the water" periodically) evaluate your results over a period of time. In my view it is consistent performance that counts. To give an idea of what to shoot for, I make money 4 days out of every 5 that I trade. To restrict losses, I have a setpoint that I never exceed on a daily basis. The last time I came near to that point was May of 2004, and just as importantly when you do have a losing day, DO NOT TRADE AGAIN UNTIL YOU HAVE FOUND OUT WHY IT HAPPENED. Make a point of understanding what went wrong.....and correct that before risking money again. This is one of the more important bits of advice that I could offer a trader. I hope its taken seriously as you probably won't advance much until you get this right. So to simplify....Choose from the ideas that I suggested and use what works for you...I suggest trading tests and/or retests of the 200 period EMA as a beginning point.....Then be disciplined in the application of the principles....Study and analyze your results using a spreadsheet or something similar....when you make a mistake...stop....identify what you are doing wrong and correct that problem before you trade again......rinse and repeat.

I have a couple of final comments as regards using this system First, one can see (at least I hope one can see) that the first challenge struggling traders face is find a way to "see the markets". To me this means having some context or framework in which to see movement, and some baseline to gauge when to get in and when to get out. Second, one has to develop some confidence in the system. One way to do that is to spend time (screen time) watching price movement develop on your charts, seeing how price acts when it tests the 200 and 80 period EMAs. Especially for new traders, I think it is important to see for yourself how price moves, so that you can start to have some confidence in your entries. Also I posted a spreadsheet showing one simple way to keep intraday data. This is also important because the next challenge is learning to manage the trade Managing the trade means having a stop in place (the right size stop) and knowing when to take profits. My advise to beginners and struggling traders is not to trade one contract. Its just too difficult to make money that way. If your account size is less than 20,000 USD, I suggest you either wait and work on a simulator. If you have risk capital (capital that you don't mind losing) I suggest trading on a sim until you have consistent success, then trading at least 3 contracts and scaling out. If you look at the max profits column on my spreadsheet you can see where the scale outs should be in this volatility. Of course you would want to evaluate this based on more than one day's data. The final challenges are discipline and focus. I believe most if not all of you (new and struggling traders) have the same problem. That is you don't or cannot currently focus on a chart without distraction. What that means is even if you have a good system, one that you have confidence in, you will still miss trades, and you will be tempted to chase entries. Until you make it your top priority to have no distractions and to be focused on your objective, you probably won't make money. The discipline comes when you take losses. You have to have the confidence in your system to know you will win if you keep your discpline and take the entries. If you stop or hesitate because you think you're going to take a loss, then you are already beaten. You might as well stop trading and go back to your research, because you haven't found the method that works for you yet. I think that is about all I can say on this subject. So I will stop posting at this point. I wish everyone the best of luck in the markets. Steve PS; That last trade is now at +14 ES points.

And a traditional candle chart (w/5 min candles). I have a horizontal line in place showing Friday's low. The 10:00 candle shows the market's response to the housing report. It gets sorted out in the next 40 minutes and then we have a nice short opportunity. The wide range red candle is what I term a "failure candle". Right after that you have some nice high probability short entries.

and a final shot of the 2401V chart Again you can see how choppy the open and the beginning of the day was as traders waited for the report at 10:00 EST

and a shot of the open using a 10,000V chart

This is what the open looked like on an 800V chart.... You had a couple of tests of the 80 period EMA, but no tests of the 200 period EMA Just using this chart, your choices were to trade the test of the 80 or stand aside