Trading Large ABC Patterns

December 28, 2012 · Posted in ABC Bullish, Volatility Zones · Comments Off on Trading Large ABC Patterns 

Trading large patterns is a bit risky. My definition of large patterns are patterns with Major swings of patterns with 15 pts or more. Of course, it has larger targets but it also has Larger Stops, which may or may not fit into many traders trading plan. But there are some tmes, Larger patterns with Volatility around the entry have smaller stops (by design). This way if Pattern is WRONG, you can get out of trade with a smaller loss.Today’s ABC presented such an opportunity.

From mid day yesterday (Dec. 27, Thur.), ES rallied from a low of 1396 to 1416 on “fiscal cliff” news. This swing (AB Leg) is 20 pts in the ABC pattern. The BC retracement (overnight) was 16 pts. These type of ABCs will have larger targets and larger stops. At the open, ES showed this pattern completion. I was watching Opening VLTY and it is over 60. I usually wait for price to settle (VLTY < 50) in the first hour and wait for trade trigger. Today VLTY also helped for a better entry and smaller STOP (EL to C). I was not still convinced at the OPEN and waited until 9.50 am to start looking closely for a trade setup.

Around 9.55am, I entered LONG at 1403 with a Strict STOP at 1400 and NO-more adds, incase if I am wrong. As expected, Large ABC has Larger profit levels. So, my first Target was set 38%AB level at 1407 and next target is set at 1411 (just before 62%AB).

Around 10.30am, VLTY was slightly above 50. After sudden drop from 200-SMA, ES broke above 200-SMA to hit my first target: 1407 (+3 pts). I moved my STOP to b/e for the rest of the trade. About 10.50am, my trade was closed at 1411 (+8 pts). I still think this pattern may move much higher later in the day.