20 EMA and Patterns

[Deusomega 10]

 

Yeah the last part I didn't really see any strong conviction maybe a short but I wouldn't have took it nothing one sided. Like that first move up. If I had missed that I would of said f it and quit for the day.

[JMC 10]

A look at some opportunities in other markets today. Several potential entries in the ES:

 

 

A couple of nice bounces off of the EMA in GC:

 

[Deusomega 10]

EMA or just natural orderflow?

 

 

[JMC 10]

  Deusomega said:

EMA or just natural orderflow?

 

[ATTACH]25840[/ATTACH]

 

[ATTACH]25841[/ATTACH]

 

Good eyes. Most likely a little of both.

[drm7 10]

A couple of good opportunities on the ES 5 minute. CL was also good on the 1 minute chart, if you were selective and waited for a rejection of the 100 EMA.

[JMC 10]

Nice bounce off of that test of the EMA in CL. Wonder if we get another 1:30pm trade into the close?

 

[JMC 10]

Retest of the EMA and there she goes...

 

[ake 10]

  JMC said:

Also should be noted I got runover (- .20) buying the pullback at 9:30am. Starting to favor Brownsfan's recommendation of briefly waiting to see how price reacts to the EMA before jumping in.

 

JMC, do you use volume? and do you use the Bollinger Bands for targets or for entries in range bound days?

 

Thanks!

[JMC 10]

  ake said:

JMC, do you use volume? and do you use the Bollinger Bands for targets or for entries in range bound days?

 

Thanks!

 

I do watch volume, usually use it after I'm in a trade for confirmation and even to look for signs of exhaustion (volume spike) for possible exits. I don't enter off of the Bollinger Bands, rather I use them as a visual reference point as they seem to mark the most likely move that can be expected off of an EMA entry.

 

Not always the case as moves can often extend far beyond the bands. However, if I'm in a trade from the EMA, I would look at any exit prior to hitting a band as premature and cutting a winning trade short.

[phoenix01 10]

  ake said:

JMC, do you use volume? and do you use the Bollinger Bands for targets or for entries in range bound days?

 

I think we should spent more time discussing exits and filtering the good trades from the bad ones. JMC I know you filter with times of day, is there anything else you use? I've found nothing to be a filter apart from personal experience of watching good and bad setups.

 

And exits, well it's the most difficult part of this type of trading. Currently Iam just trailing behind each bar that goes in my favour. I'll move my stop to breakeven once a trade has gone far enough that if it came back to that point it would be invalid. That is vague but you get a feeling of that once you watched the timeframe long enough.

 

I think we all would benefit from discussing exits.

[ake 10]

  phoenix01 said:

I've found nothing to be a filter apart from personal experience of watching good and bad setups.

 

Ideas for filters, Phoenix.

 

 

1. Take only the signals where there is a confluence of support (for longs) or resistance (for shorts) areas. For example, if price is bouncing off the EMA AND yesterday's low, or any pivot level or a trend line

 

2. Take only the signals that follow an A-B-C up or down. Notice that this won't stop you from taking trend reversals. In many cases the reaction that follows the highest high in a trend is made up of an A-B-C and the B correction happens before the crossing of the EMA

 

3. Take only long trades if price is above the EMA in the higher timeframe

[ake 10]

4. Use a larger period for the EMA (50, 100?)

 

5. Take only trades where there's no support or resistance (trend lines, pivot levels, 200 SMA, yesterday's high / low) between the entry point and the target

[drm7 10]

Exits:

 

Stop placed just outside of entry bar.

 

Profit target 2x ATR of current time frame.

 

(Optional - needs more work) move stop to breakeven on 1 to 1.5x ATR move in your favor.

[brownsfan019 17]

JMC - those big ones hit the BB first? I just glanced, got to run but was trying to catch up on the thread.

 

Nice job w/ the charts everyone, visuals sure do make it easier to see what you are talking about!

[brownsfan019 17]

  phoenix01 said:

I think we should spent more time discussing exits and filtering the good trades from the bad ones. JMC I know you filter with times of day, is there anything else you use? I've found nothing to be a filter apart from personal experience of watching good and bad setups.

 

And exits, well it's the most difficult part of this type of trading. Currently Iam just trailing behind each bar that goes in my favour. I'll move my stop to breakeven once a trade has gone far enough that if it came back to that point it would be invalid. That is vague but you get a feeling of that once you watched the timeframe long enough.

 

I think we all would benefit from discussing exits.

 

phoenix - I would like to keep this thread about entering w/ the use of the EMA. Exits can go into a million different directions and I would welcome you to start a new thread on the topic, but right now this is a great thread about entries.

 

Thanks!

[JMC 10]

  phoenix01 said:

I think we should spent more time discussing exits and filtering the good trades from the bad ones. JMC I know you filter with times of day, is there anything else you use? I've found nothing to be a filter apart from personal experience of watching good and bad setups.

 

And exits, well it's the most difficult part of this type of trading. Currently Iam just trailing behind each bar that goes in my favour. I'll move my stop to breakeven once a trade has gone far enough that if it came back to that point it would be invalid. That is vague but you get a feeling of that once you watched the timeframe long enough.

 

I think we all would benefit from discussing exits.

 

No real filter other than time of day and experience. I try to keep things as simple as possible. As far as exits, my earlier comment regarding bollinger bands gives you an idea of what I am looking for in terms of the minimum size of the possible move. You could also track your maximum favorable excursion (MFE) after your entries. I've found on most days in CL you are usually best off looking to take a profit somewhere in .60 to .80 cent profit range. Obviously this is not always the best solution. For me, I've had to realize I'm not always (almost never) going to catch the entire move. Got to be happy catching steady, consistent gains over homeruns.

 

Getting back to entries, as per Brownsfan request, another thought as far as filters go. It's been my experience that most of my winning trades at the EMA take little heat. Thinking of tightening my inital stop loss to 10 ticks from 20 ticks. Seems awfully tight for a limit order in CL, but in a way it would "filter" out all but the "most likely to succeed" trades. Just a thought. Would have worked great today. But today was almost ideal day for trading this style.

[brownsfan019 17]

23:29 EST CL 1min/100EMA looks like a pretty nice pb there JMC. You trading around the clock by chance? Only a 40t+ move for anyone trading the late night times. Came from the opposite BB as well.

[joshdance 10]

  brownsfan019 said:

23:29 EST CL 1min/100EMA looks like a pretty nice pb there JMC. You trading around the clock by chance? Only a 40t+ move for anyone trading the late night times. Came from the opposite BB as well.

 

I'm a nerd and do watch the market at all times it seems--my girlfriend just loves it, I assure you, haha...

 

That's a tough trade to take IMO. Friday and today were quite convincingly dominated by the bulls, and after market close today (Monday) and since globex opened, it only retraced less than 50 ticks down, and has since easily broken Monday's high and has stayed above it. In other words, there's a heck of a lot of demand being shown here (when the longs get to lock in 75% safely of the big move of the day and can leave their stop just below a 25% retracement of the large move of the day, you know it's a strong market at the moment). I'm sure a shakeout is inevitable, but anything short at this time is quite risky IMO, until the shorts prove something first. The target for that trade would be about 20 ticks, risk about the same.

Edited August 23, 2011 by joshdance

[JMC 10]

  brownsfan019 said:

23:29 EST CL 1min/100EMA looks like a pretty nice pb there JMC. You trading around the clock by chance? Only a 40t+ move for anyone trading the late night times. Came from the opposite BB as well.

 

No overnight trading for me. Need a solid eight hours of sleep or I'm useless. Looking through the charts I see that pullback as well as a nice one around 3:24am that was a 65+ tick winner.

 

Euro (6E) had a couple of nice entries as well around 2:48 and 3:09 heading into the European open. Wish I had the tenacity to trade the European session.

 

[JMC 10]

Another possible entry short at the EMA premarket in TF.

 

 

Also, noticing the Dollar has perked up this morning off of the EMA.

 

[JMC 10]

Also, in case anybody is interested, the 100 EMA setting used on the 1 minute chart seem to work in a similar fashion (though not quite as reliable) on the 1 hour time frame. I've found this particularly true when markets are trending.

 

Hourly Chart of the ES:

 

 

I don't trade this time frame but I find it somewhat useful when looking at the bigger picture.

[joshdance 10]

Just as important as knowing when to use a tool is knowing when not to use it. When I woke up this morning, my view was that of the left of the vertical red line. While EMA traders did provide some support around the EMA, it was hardly reliable and at best probably a few scratch trades. The globex VWAP was a more true value support. Later, the circled area shows both the VWAP and the EMA at the same value, and this confluence provided yet another point for eager shorts, smelling a breakdown, to place their orders.

[joshdance 10]

Along with this same theme, around 10:10 AM, when we hit the EMA again, it was not a high probability short IMO and I did not look to re-short. At 10:00AM we retested 84.00, and found good demand. The area of the low at 83.40 provided simply too much reason to buy in what has been a multi-day uptrend, as I posted last night. There was a 60m trendline, the weekly pivot (value), the daily pivot (value), yesterday's VWAP (value), yesterday's VPOC (value), all squished together into a relatively small range. Given the strength we have in context, shorting the EMA was not a great choice here even though it was also next to yesterday's high, another good reason for shorts to give it a try.

 

My point is that context is very important. Simply looking at a chart and seeing an EMA and buying may work at times, but if there's a context to give it strength, then it becomes really useful and powerful.

[brownsfan019 17]

Nice job on the charts guys, keep it up. This thread is growing into quite the collection of MA based charts.

[brownsfan019 17]

ES 1min/100ema after hours doing pretty well tonight for anyone up. I'm just looking at pullbacks to the 100ema and preferably have tagged the bollinger band first. No other context being used, just noticed a few nice ones while doing some other chart work.

 

JMC also posted a TF chart and that brings up another way to play these if you develop a specific rule set (for example saying it must come from a bollinger band tag before looking at the pullback) - you could monitor the 4 indexes fairly easily as these charts are literally 2 indicators other than price. That TF short JMC had may not have occurred on the ES if you were just watching the ES.

 

 

Yellow boxes = EMA entries after a BB tag.

ES 1min/100ema from 8-23 after hours.