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October 17, 2005 Morning Comments: First, I owe the green Major Median Line a "thank you," for 11 straight wonderful winning trades. I did indeed sell against it Friday, taking a small profit out on half of the position but getting stopped out for a loss on the second half of the position. Lines that are tested that many times and keep producing deserve to be tested until they are bested...
On to today's trading: You can see the pre-market charts I used for the strategy sessions with the prop traders before the markets opened. I felt today was likely to be a two-way market, because price was running into overhead resistance early, but the strength of this move out of the hole was also unlikely to go quietly--So I marked both the early session confluence above the market at 1193-1194 and the confluence formed at the up sloping blue Median Line near the 1186-1187 area, which would likely act as support. I thought we might see something akin to "pinball" between these levels. As I said in the strategy sessions, the key is to wait for a clear set up, with good measured stops and solid risk reward ratios--and don't initiate a trade on either side until yoiu find one. |
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| Now note the very nice zoom bar lower, through both the blue Upper MLH and the red Median Line at the 1193 area. Once this bar closed, I was willing to be a seller, because there was a suitable measured stop area, with an acceptable risk reward ratio. |
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As the bar closed, I checked where price would intersect with the blue Upper MLH during the next bar. Then I put in an order to get short at that level, with an initial stop loss order 3 ticks above the spike high of the day. So I was selling at 1193 1/2, with an initial stop order at 1196 1/2. My profit target would be a test of the blue up sloping Median Line--but note that it is an up sloping Median Line, so my potential profits will decrease as time goes on, due to the upward slope of the Median Line. If I get short, I'll have to carefully adjust my profit target as time goes on to match the intersection price.
Price came back up and tested the blue Upper MLH, getting me short at 1193 1/2. I checked that my stop loss order was in the market and then placed my profit order at 1187 1/2. I came to this price by looking at the average size bars over the past 20 periods and then I overlap them about 1/3 of their range and measure where price will likely hit the target, IF the average bars give a true projection--I can always adjust my profit order as price nears the Median Line. |
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| Price formed an Energy Coil with double tops at 1194 and four bottoms at 1191 3/4. When price finally broke to the downside, the length of time spent in the Energy Coil dragged up the profit target because of the upward slope of the blue Median Line. As price approached the Median Line, I carefully measured the intersection level and finally adjusted my orders to 1188, where I was filled on my profit order. |
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Once price left double bottoms at the lows of the day and also began to creep higher along the up sloping blue Median Line, I wanted to try a long position. I monitored the intersection value of price with the blue Median Line as each bar closed, looking for a re-test to buy that was close enough to the swing lows formed by the low of the day at 1187 3/4. And five bars after the double bottoms were formed, price re-tested the blue Median Line at 1189 1/4, getting me long at the projected intersection. My initial stop on this long position is 3 ticks below the low of the day, at the 1187 3/4 double bottoms: 1187. And my profit target would be a re-test of the red Median Line, which measured to 1193 1/2.
In all honesty, the risk reward ratio was on the skinny side for my normal trading, but I liked the size of the stop and I had a nice buffer from the profitable morning trade to work with, so I was willing to take this second trade because it also fit with my pre-market view that this would turn into a "two way" type of day. |
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It didn't take long for price to climb out of the hole, filling my profit order at 1193 1/2. I checked my audit trail to make certain that I had sold and bought an equal number of contracts and also that I was no longer working any further orders.
This was a nice "two way" day that netted 5 1/2 S&P points on the down side and 4 1/4 S&P points on the upside, for a total of nearly 10 S&P points, which was $487.50 before commissions per contract. Looking for repeatable set ups and sticking with the early plan were the keys to these trades.
For those of that didn't hear, we had a nice multi-media test today for several hours. People came into the private "virtual room" and got to hear my raspy voice, ask questions, watch me draw...It was a very nice time. I'm going to do my best to have the same room up and running by 9am CST tomorrow [Tuesday] so people can come in and watch if they're interested, ask questions, see what the software is like and frankly, to get me more time practicing on this new software so we begin doing webinars on it and also mentoring and advanced seminars. If you'd like to drop by, follow these instructions:
Go to: www.omNovia.com/sc/spiketrading/demo and then follow the instructions and run the initial setup [it is very easy], then log in with your first and last name. The password is: 1235.
As I said above, I'll try to be there before 9am CST, which means as soon as I finish the pre-market strategy session with the prop traders, I'll pop into the room. If you beat me there, the room will be open but you won't see me logged in. Once I get in, I'll leave my charting package running with live charts, so you can watch what I am watching. I may be away from my trading desk for periods of time, but while I am there, positions permitting, I'll draw live, answer questions, maybe even show you what I am looking at in a particular market. Everyone is welcome--the room holds up to 100 people.
I wish you all good trading!
Tim |
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