Steve's Basic System for Retail Traders

[steve46 12]

Wednesday's DAX & ES Distributions

[horace 10]

Wednesday's DAX & ES Distributions

 

 

You are a clever guy Steve.

[steve46 12]

Here is the open and the price action so far

 

Once again, we have traded into the midpoint of the distribution

 

Its really too bad that this "cannot be done" using statistics....

 

As with most things in life, its not cut & dried....one has to characterize how the market acts and then construct a viable trading plan around that knowledge..

 

For example looking at the market action for the last few sessions, one could make the case that on the open, there seems to be a tendency to sell off, and at specific times, a tendency to reverse....and take back that ground in the late morning and into the afternoon. In the late afternoon, short time frame players seem to be interested in taking profit and selling the market off slightly...can one construct a plan around that habitual behavior....oh yes...you certainly can....

 

Good luck everyone

Edited September 5, 2012 by steve46

[steve46 12]

I have pointed this out at least once previously

 

This is how you confirm "levels"..if we start with the left most arrow, you see price test and close at 1402...at that point buyers come in to mark it up...a significant move on an otherwise choppy crappy day.

 

Now go to the next arrow and you see a slightly different version of the same script...this time price comes down to test that same "line in the sand" looking for sellers...they don't find sellers and price reverses...closes above 1402, then comes back to retest....and again buyers come, moving it up signficantly

 

And the last arrow....again price comes back down to look for sellers and finding none, once again the market reverses at the same price....

 

To the extent that a trader can observe and then act, he or she might be able to adapt fast enough to profit from the information....it takes patience and willingness to watch first, and then trade, when you see a viable opportunity.

 

Good luck folks

[steve46 12]

and here is the same opportunity yet again (see the right most arrow up)

 

Price closes above 1402 and up we go....

[steve46 12]

This type of day is always frustrating for retail traders....The chop and lack of vol are difficult to deal with to be sure

 

The job of the professional is to find a way to get it done regardless....

 

First the obvious, price opened within the midpoint of our distribution and during the opening half hour could not establish any significant range...we look at the conditions, summer, low volume and markets waiting for substantial news regarding the Euro and we should I believe be ready for a range bound day.

 

On the charts previously posted we indicated that we had found what I like to call a "tell"...simply put we observe that as the market tests a particular price point, automated execution kicks in to mark it up....and even if it is only a few points each time...that is all we need PROVIDED that a reasonably accurate entry can be determined and used several times during the session...

 

We have posted this on other threads.....our training is specific when it comes to this situation. Once we determine that this entry is viable we simply continue to take the trade "until they make us pay" (until we are wrong)....why? Think about it....if it is automated execution that is largely responsible for the move, and we have a repetitive range bound day, what would cause this situation to change?.......nothing....it is likely to continue for an undetermined length of time....so the strategy (developed long ago by others) is to continue to jump on board, managing risk appropriately...booking a small win each time....

 

Once again our distribution provides the framework we needed to see this opportunity....

 

Good luck in the markets folks

Edited September 5, 2012 by steve46

[steve46 12]

and to put a little icing on the cake before I close out...I would like to direct the reader's attention back to post #104 where I posted today's distribution prior to the market open

 

If you look at the distribution on the right (for the ES contract) notice that just under the blue rectangle, you will see a line and a green up arrow....that line is at 1402....and the arrow represents our predetermined "logic" telling us that on a close at or above we would want to go long if/when we saw a valid opportunity (as we did several times today)....

[goodoboy 10]

 

This is how you confirm "levels"..if we start with the left most arrow, you see price test and close at 1402...at that point buyers come in to mark it up...a significant move on an otherwise choppy crappy day.

 

it takes patience and willingness to watch first,

 

Good luck folks

 

Thanks for the posting Steve. Your work is well appreciated.

 

What means by "at that point buyers come in to mark it up"? Does this means buyers come in to push price higher, searching for more buyers to take it even higher?

 

 

it takes patience and willingness to watch first,

 

Good luck folks

 

This is something, I need incorporate in my early morning analysis. Just take 20 mintues just to watch what happen in over night session before thinking of taking trade.

 

Thanks,

[goodoboy 10]

and here is the same opportunity yet again (see the right most arrow up)

 

Price closes above 1402 and up we go....

 

Just 30 minutes before this I was short. Thanks for the posting.

[steve46 12]

What you need GOB, is to learn to be a little bit more selective about your trade entries.

 

This (intraday trading) is one of the most challenging things you can do....the reason most folks blow out their accounts is that they don't understand how important it is to take the time to really watch the action, before you put money at risk....and I am guessing the local crazies will say something about this, but in my opinion what you really need is to watch someone who knows how to do this and can tell you what he/she is looking at while they trade...you can do it on your own...but its going to take its own good time...

 

As I said before you have good instinct but it seems to me that you get impatient or bored...and then you make mistakes....you cant let that happen...at least not very often..

 

In answer to your other question....this market is pretty simple...it tests up to find buyers and to activate automated order action...or down to find sellers (and to activate automated order action)...these tests are called "probes"....and if they don't get the response they are looking for in one direction, it is a signal of sorts, to go the other way...you see?

 

A while back I pointed out that the markets display one of two conditions...either "balance" or "imbalance"....if a market displays balance, that means that buyers and sellers are pretty much even in terms of committment and number of orders to buy & sell....when that happens price moves sideways and the range up and down is limited...in contrast, when the market displays imbalance...it means that one side has more "horsepower" and that usually results in a sustained trend (vertical move up or down)....what you need to do is to become a better observer of what the market is telling you...

 

Hope some of this helps

 

Steve

[steve46 12]

Thursday's DAX & ES Distributions

[goodoboy 10]

.what you need to do is to become a better observer of what the market is telling you...

 

Hope some of this helps

 

Steve

 

Thanks Steve,

 

You are right about the observing. Well, right about everything you wrote. Dismorning was interesting as twice price action probe to 1408 in search of sellers after testing 1414 for buyers. Thanks for the chart.

[goodoboy 10]

 

This (intraday trading) is one of the most challenging things you can do....the reason most folks blow out their accounts is that they don't understand how important it is to take the time to really watch the action, before you put money at risk....and I am guessing the local crazies will say something about this, but in my opinion what you really need is to watch someone who knows how to do this and can tell you what he/she is looking at while they trade...you can do it on your own...but its going to take its own good time...

 

Steve

 

Well, I don't want to blow any accounts. This is why I try to learn from mistakes and set some goals for myself when learning and practicing. Most of it is mental and a bit of second guessing. But its better.

 

I tried to watch someone trade ES for about 5 months and the person/mentor had about 7 indicators (2 special indicators), 3 indices, and only traded 1-3 times a week, with about 4 different screens. I ask the guy for coaching, he said I need to talk to his buddy to get about 5 screens first as a requirement. Well I sure didn't get coaching, after realizing and losing money, that wasn't the path for me. The problem with watching someone trade is finding a good person that fits personality to watch trade. I like things simple and straight forward, and i could be wrong, but just watching one chart and price is so far making most sense. Like you saying, just being a good observer is what i am doing. So, I just been reading and practicing and making some some rules/plans for myself. As well trade management notes that works for me. I will stick to sim until I reach my goals to trade live again.

[steve46 12]

Here is today's "breakout" trade....if you go back to post # 114 you will see my distribution for this morning...and at the top of the ES (right hand chart), you see the "up arrow" at 1418 (at the top of the distribution)....

 

That "logic arrow" tells the trader that on a close above that price he/she would look for a long (or simply take a long right there). The idea is simple and effective...at that point, long time frame participants are likely to come in to buy...in fact they are main "motivators" moving the market up...and they are the ones with the capital to continue to move this market up...rather than just take profits....

 

As you can see, today if you would have simply bought the next open above 1418 and held, you would have had a very nice day...if you didn't, well you are probably drumming your fingers on the table wondering why........

 

For those who are struggling or who have not figured it out, you have to trade from a core concept that works....and that gets you on the same side as the folks who have the capital and the motivation to move the market....the rest of it is about learning to recognize the signals, to size your position and hold it long enough to obtain a sizable profit, while managing risk.....

 

Best of luck to everyone

[steve46 12]

A couple of closing thoughts for those who might be interested

 

I believe I have mentioned this before....the folks who have the capital and the motivation to move markets do not have an interest in technical analysis per se....that is to say, most do not "care about" moving averages, channels, market profile, volume profile...etc....what they DO care about is profits...and time

 

What this means is that these folks are very much interested in making money at specific times of the year....that is the basis for my "time based pivots".....so "goodoboy" if you want to know where we are headed simply go to my blog and look at the yearly, quarterly and monthly numbers....

 

With today's news (about the Euro and bond buying)...institutional players know that there is a nice wind at their backs...and they know that they have a limited amount of time in which to make as much profit as they can....in fact....in the business we call this time period (from July to end of Sept) our "Pivot Quarter"....what this means is that we have only three month left in which to book profits for the year...so the goal for these folks is as follows

 

1. Stay above (keep the markets above) the quarterly open (July-Sept)

2. Try to get as far above 1424.75 as possible

3. Try to move as much inventory (trading volume) as possible before Christmas

 

Given that, what you have is a natural "long" bias...and the only obstacles in the way are either adverse domestic news, or adverse Euro news.....either one could cause a problem....

 

I continue to "look both ways" AND I keep a general long bias as I approach each trading day.

Edited September 6, 2012 by steve46

[horace 10]

if you want to know where we are headed simply go to my blog and look at the yearly, quarterly and monthly numbers....

.

 

 

Steve,

Where do we find your blog

 

regards

Horace

[goodoboy 10]

A couple of closing thoughts for those who might be interested

 

I believe I have mentioned this before....the folks who have the capital and the motivation to move markets do not have an interest in technical analysis per se....that is to say, most do not "care about" moving averages, channels, market profile, volume profile...etc....what they DO care about is profits...and time

 

What this means is that these folks are very much interested in making money at specific times of the year....that is the basis for my "time based pivots".....so "goodoboy" if you want to know where we are headed simply go to my blog and look at the yearly, quarterly and monthly numbers....

 

With today's news (about the Euro and bond buying)...institutional players know that there is a nice wind at their backs...and they know that they have a limited amount of time in which to make as much profit as they can....in fact....in the business we call this time period (from July to end of Sept) our "Pivot Quarter"....what this means is that we have only three month left in which to book profits for the year...so the goal for these folks is as follows

 

1. Stay above (keep the markets above) the quarterly open (July-Sept)

2. Try to get as far above 1424.75 as possible

3. Try to move as much inventory (trading volume) as possible before Christmas

 

Given that, what you have is a natural "long" bias...and the only obstacles in the way are either adverse domestic news, or adverse Euro news.....either one could cause a problem....

 

I continue to "look both ways" AND I keep a general long bias as I approach each trading day.

 

Thanks Steve, interesting! In other words, what you are saying is that institutional have between now and til end of the year to show a bigger positive return of the year for their customers or whoever?

[steve46 12]

Yes GOB, this is the pivot quarter...and if they want to maximize their profits the easiest way to do so is to keep the market above that line in the sand (July's open) AND to do a lot of volume....remember this (summer) and most of the year for that matter, we have seen pretty low volume....volume and price are the ways that institutional participants get paid.....on commission and profits off trading (when they can make them).....you see?

[steve46 12]

Here are Friday's ES & DAX distributions

 

It will be interesting to see how price acts when we are starting near the top instead of at the lower extreme or midpoint...

 

Based on what we are seeing, there is something going on with this method that I like (certainly makes it easier to make money), but do not have a complete understanding of as of yet....

 

A final note, I think this is the 7th (6 ES and 1 NQ) distribution that I have published, all in the evening prior to the open...and each time price has respected the "logic lines"...more to the point, on my worksheet where I have the lines sorted by short time frame and long time frame participants, I see now that by observing how price acts at each test point, I can confirm which side is in control...the advantage to this is that I can anticipate whether we are going to have a range day, or a trend day...(on the trend day for example I can stay with a position longer thus taking more profit)...

Edited September 7, 2012 by steve46

[steve46 12]

I am really enjoying trading this system

 

Here is the DAX open this evening....I realize we have unusual circumstances here with the news of unlimited bond buying coming out from the Euro Zone, however the distribution is really helping to frame the action and it seems to be quite accurate

 

This evening at the DAX open we saw price move through the upper limit (blue line) and our logic arrows tell us to wait for a close above that price point..as can be seen in the attached chart as price closes above that point we have our choice of entries...the first entry (the green arrow above the line) is the first open after price "takes out" the line....The second occurs when price retests (the right most green arrow)...that re-test occurs at the London open and up we go......

 

For those interested in the numbers the logic is that a close above the previous high at 1432.25 warrants a long entry...and that is exactly what happened....to the tick....I am not saying this will happen all the time, but it is nice to see it here this evening...

[steve46 12]

and here is the Employment Report Trade.....the red arrow is the moment the report is made public...and of course the data is negative so we have the initial move down....on this move we see price test 1432.25 on our distribution, take it out....and then reverse ACTIVATING OUR PRE-SET LOGIC...which tells us...if price takes out that price, then reverses, on a close above 1432.25, look for a long entry....

 

The green arrow shows the entry point as price does in fact "take out" that price....then reverses, and you have a few seconds to recognize and act as the next bar opens....that is your entry. The stop loss on this trade is a close back below the line...

 

This by the way is called "event trading" and is something that I try to do as much as possible. The volatility that moves the market makes it fairly straightforward, IF you have a plan....and the ability to recognize the opportunity and execute....

Edited September 7, 2012 by steve46

[goodoboy 10]

take it out....and then reverse ACTIVATING OUR PRE-SET LOGIC...which tells us...if price takes out that price, then reverses, on a close above 1432.25, look for a long entry....

 

The green arrow shows the entry point as price does in fact "take out" that price....then reverses, and you have a few seconds to recognize and act as the next bar opens....that is your entry. The stop loss on this trade is a close back below the line...

 

Thanks Steve, don't want to bother you while working so you can reply later, but when you state close above 1432.25, are you watching the 1 min chart or 3 min?

 

Thanks

[steve46 12]

Thanks Steve, don't want to bother you while working so you can reply later, but when you state close above 1432.25, are you watching the 1 min chart or 3 min?

 

Thanks

 

always the 1 min chart for this kind of trade...you can see that in the post just above yours (look at the top of the chart and you can see it is a 1 min chart)

 

Seeing this in hindsight shows you the logic and the result when it is done right....I think the best way to really do this and provide something of value is to have folks watch me do it in real time....I'll give it some thought...

Edited September 7, 2012 by steve46

[goodoboy 10]

always the 1 min chart for this kind of trade...you can see that in the post just above yours (look at the top of the chart and you can see it is a 1 min chart)

 

Seeing this in hindsight shows you the logic and the result when it is done right....I think the best way to really do this and provide something of value is to have folks watch me do it in real time....I'll give it some thought...

 

I can agree with you about watching you doing this. Cause I was tempted to go long at 1432.25 after 5 min candle closed above this price, but isn't this counter-trend trading when buying when price has falling down from 1436 to 1431 in a matter of seconds?

[steve46 12]

and here is the open...

 

As you can see we retested 1432.25 twice..so you had two shots at getting long

 

If you saw it, recognized the opportunity and took action, you got filled somewhere around 1432.50 or 1432.75....the move up was good for about 3+ points...and then we saw a reversal pattern (algo based reversal pattern)

 

This is expected to be a range day, but again news trumps everything

 

Good luck folks