Side-Ways Trend

November 28, 2012 · Posted in Uncategorized, Volatility Zones · Comments Off on Side-Ways Trend 

Most traders have tough time trading side-ways markets. Many traders may be right on their setups or detecting the trend, but during the choppy side-ways markets they lose more money. In Intraday futures, I use BarTimes to measure the side-ways markets. On ES 1220 Tick Chart, I look for time to complete 1220 ticks. If the average of last 5 bars exceeds 150 seconds, I know markets are slowing and side-ways trading may be in order. I also look at Volatilty (VLTY) on the same chart to measure potential risk zones.

Today after market reversed its 12 point loss, around Noon, I noticed VLTY went above 50, signaling potential risk zone. Also, from 12.30p onwards, the ES 1220 chart showed VLTY > 50 on fiscal cliff news. So, I avoided trading any NEW trades until I see VLTY below 50 and BarTime falls below 150 sec.

Patience has its rewards…

November 26, 2012 · Posted in ABC Bullish · Comments Off on Patience has its rewards… 

This morning ES gapped lower 5 points. General wisdom is to trade from SHORT side on big Gap up or big Gap down Days. Todays’ Gap is about 40%ATR of daily range and is not a big gap down day. Hence today it may be choppy day with slight bearish bias. After market open, market drifted lower but showed first sign of reversal from 100% GAP levels. There was a large ABC formation from 11/22 and 11/23 with AB range from 1387 to 1407.

In this ABC, AB leg took 134 bars to complete (Friday’s rally) the AB range (1387 to 1407.5). Around 10am, AB retraced to about 50% range giving first clues of potential continuation of rally from Friday. ES retraced 50% of previous swing in BC Leg (60-70 bars). Comparing to AB Leg (134 bars) it is about 50%. But this itself is not quite enough for it to reverse and start building CD leg. Fib. Ratios between the AB leg showed 61.8% ratio around 4-6 points below the 10am price. I decided to wait for 61.8% so I can get into the trade. About 11.15-11.30am, ES further retraced and hit my 61% range. ABC is also balanced as BC leg took 150 bars to complete this range. This would be a great candidate for ABC if it were to trade above the EL level (1397). I patiently waited for a LONG at 1397. Relatively simple pattern to trade. My risk is 2.5 points (Below C). I placed my targets at 1399, 1402 (38%) to 1407 (62%).

Patience paid off… About 12.22p, my first target 1399 (+2 pts) was triggered. After side-ways and choppy trading, at 2.50pm, my 1402 target was hit giving me +5 points.

Anticiaption of Pattern Targets

November 20, 2012 · Posted in ABC Bearish · Comments Off on Anticiaption of Pattern Targets 

I am a big believer of Confluence Zones. When price levels from multiple trade setups (could be totally different) gives a confluence, this has a bigger meaning for me. I never use price levels to trade. I trade Pattern Setups NOT the price levels. So, this price level confluence I use it for mostly EXITING the trades but not enter the trades. Anticipation is an emotion where we expect a certain event (could be good or bad) to happen. In trading world as part of trading plans, we must expect or anticipate objective ideas of how a trade may result. In other words, we trade a setup or pattern and anticipate it to reach target or hit the stops…

Today I was trading an ABC Bullish pattern in ES 1220 Tick charts. This ABC Pattern does not have 62% retracement but after a C retracement (58%) it started trading above 200-SMA. This itself is a confidence booster. The EL was also trading above MidBand at 1383. I thought it was a good entry at 1383 with a stop loss at 1381. Then came the analysis of my potential targets. From ABC, 62%AB is at 1386.25 and 79% is 1387.5. Now from Fib. Zone Pivots, the first FZP resistance zone is at 1386.5 to 1388. This phenomena occurs pretty regularly. So, I thought I have a great chance of trading ABC for at lease 3 points Profit (to 1386.5) with a STOP at 1381.5.

Trade was entered at 1383 (EL above 200-SMA and Mid Fib. Band). Target: 1386.5. Here is how the trade worked. I exited 3 contracts at 1386.5 (3.5 pts profit) and then I waited for my next target 1387.5. 1387.5 was traded but my next target was never filled. My Trailing Stop Loss was at 1385. So, I exited my second set of Contracts at 1385 (netting 2 pts Profit).

CMI 5m continues to show side-ways and bearish trend since 10:30p

November 19, 2012 · Posted in CMI · Comments Off on CMI 5m continues to show side-ways and bearish trend since 10:30p 

Tough to trade on Big GapUp Days

November 19, 2012 · Posted in CMI · Comments Off on Tough to trade on Big GapUp Days 

One of my rule is to NOT to counter trend trade on big GAP Up or Gap Down days. Today (11/19/2012, Monday) ES gapped up big (11.5 ES points) on the news of potential fiscal cliff solution. Overnight markets traded higher. These days are usually difficult to trade as markets gaps up or down in a hurry and trade side-ways for the rest of the day. These are the days I am more careful to NOT counter-trend trade and trade most of the opportunities in the GAP direction.

Today (11/19) Gap direction was UP. Around 10.30a, I started seeing CMI red bars signaling side-ways to mild down side trend. From open I was waiting for a CMI Green bar (UP) with a potential long trade setup (same direction as GAP up). I have not seen any setup until 1:30p. There were some scalp opportunities in the downside direction, but I refused to trade Shorts on a big Gap Up day.

CMI5 did great job today signaling RED bars and keeping me off the random LONG trades. I’ll wait for a clear Pattern setup in the direction (UP) of gap today.

Another Example of SuperBar Trend in ABC Pattern

November 13, 2012 · Posted in ABC Bullish · Comments Off on Another Example of SuperBar Trend in ABC Pattern 

On Nov. 12th, late day another ABC Bullish pattern emerged. ABC pattern is still developing as price traded above 200-SMA signaling a potential LONG setup.
But SuperBars indicated no trend reversal, hence NO trade. Usually late day trades would not have enough time to complete before the market closes, hence it may be great idea to avoid late day patterns development.

Importance of Trend Confirmation

November 13, 2012 · Posted in ABC Bullish, SuperBars · Comments Off on Importance of Trend Confirmation 

Market wisdom constantly teaches us “TREND IS FRIEND” and never ignore or counter-trend. Most traders look for trend indications to ride the trend wave.
In Pattern trading, it is most important to trade patterns with the trend for any trading success.

My primary trading methodology is to trade few Geometric patterns (ABCs, Gartleys, DB/DTs, Dragons, H&S/Inv. HS, Breakouts/Breakdowns in the direction of trend with Market Context. One of the aspect of my trading is to wait for TREND confirmation before entering into any pattern trade. Patience and disciplinepays off big if you wait for Trend confirmations before entering into a trade.

On Nov. 12th, 2012, S&P E-minis presented a case for clear trend confirmation into ABC Pattern setups.

Around 10am, I started watching a great ABC Bullish Pattern Setup with Entry Level above 1378 with a STOP at 1376. I patiently waited for it to trigger (Close above EL).
To my surprise, SuperBARS (Trend based Paintbars) is showing continuation of bearish trend even above EL. This tells me that down leg (BC) in ABC Pattern is NOT complete.
I hesitated a bit and removed my bid to buy. ES tried to break above 200-SMA and started drifting lower below 200-SMA with Bearish SuperBar Trend. Once
price closed below ABC Entry (1378), I knew Superbars did indicate further correction into ABC leg and may be forming a potential Double Bottom setup.

I waited patiently for another 90 minutes for ES to complete its Double Bottom setup (still in ABC with C at 94%). Around 11.30am I started seeing GREEN SuperBars
signaling a potential reversal and completion of Double Bottom and ABC Bullish Trade setup.

I entered a Long trade into ABC pattern at 1374.5 with a Stop at 1372.5 (below C). Targets were placed at 1374.5 (+2), 1376.5 (+4) and 1378 (+5.5). Stop was set at -2 points.

Within 90 minutes of time all my targets were hit. Patience and Discipline does pay off and have a great merit in trading.

TRADE Chart