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Market Commentary: October 3, 2005: Today I'm going to feature a text book Energy Point example. The key to making the transition to a consistently successful trader is to learn to identify repeatable trade entry set ups and then once you enter a particular trade, how to use solid money management to "box in" profits to try to maximize the ride once you're in the trade.
The chart above is the E*Mini S&P fifteen minute day session only pre-market chart from the seminar forum. I currently post pre-market charts like these on E*Mini S&Ps, Nasdaqs, Russells, Dax, 352 and 1408 tick bond futures, Euro FX, Canadian Dollar, Mini-Crude and Lean Hogs [Yes, Lean Hogs are fun to trade...I am adding Soy Meal to tomorrow's forum for another trader].
These pre-opening charts are generated using Autoforks software and along with the charts themselves, I also post the settings that allows anyone using the software to simply put in the variables for each pitchfork on a given chart and then change the color, and that makes it very easy for traders just learning about Median Lines to "see" what I am seeing BEFORE the market opens and to put together their own game plan, in writing, before the markets open. Since there is a nice little community of traders trading directly at Spike using Median Lines now, they've all started to form their own small trading groups, generally 3-5 traders per group. So before the open, they all work first on setting their charts up, beginning with reproducing what I've already posted for them, and then adding anything they see or someone else in their group points out. And of course, I spend about 45 minutes before the S&Ps open going from group to group, seeing if anyone has any questions and if they found something I missed entirely when I ran the pre-opening charts. If there's a software problem or a data problem, one of the customer service techs tries to solve it well before the markets open [If it's simple, I give it a go...].
Note that I pointed out two areas of interest before the markets opened this morning. I generally try to circle confluence or areas of lines of opposing forces and this morning, we had three quality lines crossing right at 1238, which caught my eye immediately and we also had a good area of confluence at 1230-1231, which coincided with Friday's lows. I wanted both of these areas to be on each trader's radar, because how price reacted at these key levels would likely call the tune of the day.
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Looking at this second chart, you can see that once price tested the Enery Point area at 1238, I got short on the re-test, right at 1238 and then used an initial stop of 3 ticks above the 1238 3/4 high of the bar that just tested the Energy Point, at 1239 1/2. My profit target was a test of the conluence below that came in near Friday's low, at 1231. This means I was risking 1 1/2 S&P points to make 7 S&P Points, which gave me a risk reward ratio of 4.67--very nice, indeed.
Price came back to test the 1238 area, getting me short the very next bar. And two bars later, price hit my profit target at 1231, at the confluence and near the lows of Friday. It was a very nice, quick and clean trade that netted seven S&P points, or $350 per contract before commissions. Though several traders were tempted to get long at the 1231 area with a stop 3 ticks below Friday's swing lows, only one took the trade, and after roughly four hours of torture, he closed his trade out with a small net gain and went home to prepare to watch the White Sox playoff games tomorrow...
For those of you that are curious, there was a nice trade in the bonds, a very nice long in December Lean Hogs and of course, I'm still in the Canadian Dollar trade I high-lighted in the weekend update.
I wish you all good trading!
Tim Morge |
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