How much analysis is required as a trader?

[pierre 10]

Hello,

 

I would like to explain my current problem. I have been trading the ER2 for a few months. One problem I have is the conflict between market analysis and trading with the flow.

 

I do setup my charts on different timeframes to analyze market direction. However, do traders approach the trading day with a certain bias? I find bias conflicts with the current activity or flow of the markets. At the same time I feel like market analysis is a necessity. How do you guys overcome this?

 

Pierre

[TinGull 10]

As far as how I find my bias...I base a lot of it on the Market Profile analysis. Check out the forum here on MP. It's amazing the insight into the markets that it gives you. For instance, if we're opening up above the point of control from yesterday, I'll have a more bullish bias. Now...that can all change as the day goes on, but if we're seeing TICK's above 0 all the time, then obviously a bullish day is upon us. opposite goes for bearish. A lot of it also comes from seeing how things are handled when the price reaches certain pivot points. Are we seeing a ton of selling when we rally up? Then the streets are alive with sound selling! Check out SoulTraders videos. There's TONS of good stuff there to watch.

[MrPaul 10]

Hello,

 

I would like to explain my current problem. I have been trading the ER2 for a few months. One problem I have is the conflict between market analysis and trading with the flow.

 

I do setup my charts on different timeframes to analyze market direction. However, do traders approach the trading day with a certain bias? I find bias conflicts with the current activity or flow of the markets. At the same time I feel like market analysis is a necessity. How do you guys overcome this?

 

Pierre

 

Pierre,

 

Have you ever read "The Disiplined Trader" or "Trading In The Zone" by Mark Douglas?

 

Those books helped me tremendously with having a bias formed by my analysis and not being able to get in the "flow". I am on my 6 or 7th read for both and always take something new out of them.

 

I typically approach each market day with the intent not to trade. I'll have to be convinced by price action that a bullish or bearish bias had entered the markets before I put on a trade. I guess that is why I click so well with pivots and breakouts and feel comfortable trading with them.

 

I believe that analysis is healthy and can offer a heads up and give you a good feel for who's in the markets, but anything beyond that starts to distort things open up an opportunity for you to think that you are right and the market is wrong while you are trading.

[Soultrader 12]

I typically approach each market day with the intent not to trade. I'll have to be convinced by price action that a bullish or bearish bias had entered the markets before I put on a trade.

 

Very interesting approach to the markets MrPaul. I never though of this but seems like a good way to discipline yourself in taking quality setups only.

 

Pierre,

 

I also do my daily analysis and approach the markets with a slight bias. I dont have basic rules as to look for long setups if price is above the opening price, POC, or daily pivot. What I usually do is to see if a low or high is in place.

 

What I especially like to watch for the early opening reversal and if price can make a higher low or lower high, I will use this information to focus on long or short setups. Of course market sentiment constantly changes so its important to be able to adjust with the fast changing environment.

[torero 10]

Hello,

 

I would like to explain my current problem. I have been trading the ER2 for a few months. One problem I have is the conflict between market analysis and trading with the flow.

 

I do setup my charts on different timeframes to analyze market direction. However, do traders approach the trading day with a certain bias? I find bias conflicts with the current activity or flow of the markets. At the same time I feel like market analysis is a necessity. How do you guys overcome this?

 

Pierre

 

We all have biases, even I do, but this bias must be objective, meaning the analysis from higher timeframes have given you the direction of the market, then you should approach from that bias, this is the crux of my trading plan. When I don't follow that bias, then I'll pay for not following my trading plan.

 

But there levels that decided which bias you should have, a support or resistance areas where you know the bulls well take control and bears will take control. During the trading day, these areas should guide your bias, but these areas are where the bias will also change the bias in the higher timeframes.

[pierre 10]

Thank you very much. How many trades do you plan to take everyday? Do you have areas that you look at beforehand that you will take trades off automatically?

[torero 10]

My plans are usually to trade at or near support or resistance areas, these are where biases will appear one way or the other, and these areas are where high probability trades are at. So if you think about it, prices don't move to these areas throughout the day, only a few, so this is where I concentrate my time on finding opportunities. 2-3 trades is my max number of trades. Any more is overkill and trying hard to make the trade do something when there isn't anything there.

 

Hope it makes sense.

[jperl 11]

As a daytrader, I have no initial bias at the start of the trading day. In fact, I think if you have an initial bias when you start the trading day, you will miss trading opportunities because of it.

Any bias I have for the day will develop as the day progresses. It is based on just one observation; The value of todays VWAP (volume weighted average price). If price action is above the VWAP, I will look only for long trades. If price action is below the VWAP, I will look only for short trades. When price action is near the VWAP, I don't trade.

JERRY