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Thursday
Jun042009

October 28, 2005

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October 28, 2005 Morning Comments: This weekend I'd like to point out the importance of context when looking at pre-opening market charts and looking for potential trade set ups. You can make good money trading and not be particularly good at reading context, but to regularly catch the large moves that occur during a few days a week, you will find that context plays a key role. And the better you are at reading the context of the market about to open, the more consistently you'll find yourself catching the big moves when they do happen.

Looking at the two pre-opening charts, above, you can see that I highlighted three Energy Points, one at 1183 1/4, one at 1183 3/4 and another at 1193 3/4. I pointed out that in the larger scheme of things, the red Median Line Set has been "in control," although price has played a little "loose" around it, especially at and above the red Median Line. And then I pointed out that price was likely going to gap open higher anywhere from 3 to 5 S&P points higher. Yesterday, price broke below and closed below the red up sloping Lower Median Line Parallel, so an open above the red Lower Median Line Parallel should be considered a zoom bar higher. IF the first bar opens above the red Lower Median Line Parallel AND closes above it with "good separation [1 to 1 1/2 S&P points is good in my book], I'll consider it a quality zoom bar higher. Both the gap open higher and the zoom bar higher would be signs of strength--especially if price was then able to stay above the red up sloping Median Line Parallel and IF it was unable to fill the potentially open gap at 1182 1/2.

On the longer-term pre-opening chart, I mused that price had made four higher highs, all above the red up sloping Median Line. IF price gapped open higher, back above the red up sloping Lower Median Line Parallel, would it also now make a fourth higher low?

The one thing I didn't mark clearly on the two pre-opening charts that I DID point out was that we had two Energy Points below where the market was likely to open, and the proximity of these two Energy Points made me think price would be drawn to them like iron to a magnet. And note that the lower of the two was formed by the Major green Upper Median Line Parallel [the Median Line Set I've been calling "golden," since it game me 11 of 12 nice sized profitable trades in the past two weeks] and its intersection with the red Lower Median Line Parallel--so, this Energy Point is really the meeting of the "old and the new" or to put it another way, the meeting of the Major Median Line set that WAS in control and the Major Median Line set that now IS in control. And remember Dr. Andrews fifth tenet that price will reverse off prior Median Lines or their Parallels, so watch this Energy Point especially closely as price unfolds.

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Price did gap open higher and the first bar accelerated to the upside, giving me a very nice Zoom Bar higher to work with, at least in the setting of the context for the day. Price made one more bar higher and then traders began to wonder about the open gap below the market. Suddenly you could feel them pushing it lower, as the attraction of those two Energy Points below the market [at 1183 3/4 and 1183 1/4] began to exert their force on the market. It was at this point that I saw the trade set up I'd like to trade:

IF price traded to the lower Energy Point, where the two Major Opposing Median Line sets intersected, I'd be a buyer. I entered a limit order to get long at 1183 1/4. My initial stop loss would be one full point below yesterday's 1180 3/4 low, at 1179 3/4 [because I like to stay away from "even" numbers when possible]. My profit target for the first half of the position would be at the overhead 1193 3/4 Energy Point, so I'd be risking 3 1/2 S&P points to make a potential 10 1/2 S&P points, which gives me a risk reward ratio of 3 on the first half. The one caveat on this trade set up is that 3 1/2 points is about as large a stop as I use in the S&Ps, because I *never* take a trade with a risk reward ratio less than two and it's difficult to consistently make seven S&P handles a day...so I was only willing to stretch this far on this trade because it is an Energy Point formed by two Major Median Line sets that have been in total control of this market.

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Price made one more new low and then climbed out of the hole, heading straight for the Energy Point at 1193 3/4, and although price got to the level before "time," I still took the profit on 1/2 the position as planned--though the early arrival of price at the Energy Point probably boded well for further upward momentum. As soon as my profit target was hit on half the position, I moved my initial stop loss order to break even and of course, changed the size to reflect the 1/2 I had already taken off at a nice profit.

You'll see the off-hannded remark I placed on the chart, one I hear two of my trading partners use when price is just hitting the lines perfectly: "It's gonna go red to red!" they'd say...

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Price backed off a bit lower from the 1193 3/4 Energy Point and formed an Energy Coil, re-storing its expended directional energy, before taking off to the up side again. Once price made a new high, I moved my break even stop to three ticks below this 1190 1/2 swing low, at 1189 3/4. Price then sprinted higher, heading right for the red Median Line ["Red to Red!" as Andy and the Mayor would say...]. At 2 pm CST, I entered a MOC stop order, because I didn't want this trade to turn into an overnight trade if both my stop profit and profit orders weren't filled by the close. And as 3 pm CST rolled around, I finally took profits on the remaining 1/2 position at 1200 1/2 and then cancelled my remaining orders.

I booked 10 1/2 S&P points [$525 per contract] on 1/2 the position and 17 1/4 S&P points [$862.50 per contract] on the remaining half. It was a great way to end a very fun trading week.

I am about ready to open up seminars to people via the internet. IF you are interested in the full length seminars that I have been teaching to both the CME floor traders and CBOT floor traders, please email me and let me know. I'll then decide how often to give them and what times to give them based on the people that respond and what time zones they live in.

We are in the process of building a sister site in concert with eSignal, and we'll be making announcements, posting charts and articles and webinar replays there. It may take us a week or two to finish building the area there, but you can find the area at:

Market Maps with Timothy Morge at eSignalcentral.com

[Look under the third party developer and studies area]


I'll be back in the office downtown Monday and as soon as I get in, I'll open the multimedia room. You're all free to drop by and watch me draw up pre-opening charts. I generally get there between 6:30 and 6:45 am CST. If you're interested, you can enter the private room, watch, ask questions once the markets open, and see what the software is like. Early on, I won't be answering questions--instead you can watch me work on pre-opening charts. Once the markets open, after I take care of position entry orders, I'll either take questions or if I have anything urgent to attend to, you can watch AutoForks drawing on volume bars in the E*Mini S&P markets, so you can watch what we call "stealth Median Lines" call the tune in real-time. These are Median Lines of our own invention and we've found them to be deadly accurate tools...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 may open the room once I get downtown. If you beat me there, the room may 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 found the problem with my stealth settings--I had "frozen" the lines [told them to stop drawing new lines automatically] before I left for a meeting and forgotten to "unfreeze" them...so they'll be more interesting to watch again Monday.

I wish you all good trading!

Tim

Wednesday
Jun032009

October 27, 2005

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October 27, 2005 Morning Comments: I know that some of you are signing in "live," via the link mentioned below, and watching me draw and rock the pre-market charts. At the moment, we are only allowing traders that have accounts with Spike to hear the pre-opening comments and get the variables that are used with Autoforks to set up the charts you see me rock live in the morning. We may continue to keep that as the policy or if there is enough interest, we may make the availability of the Autoforks variables and pre-opening charts and live commentary part of an inexpensive subscription package. At this point, we'll wait to see if anyone expresses any real interest--if not, we'll keep it "in-house" for traders that have taken the seminars and trade through Spike.

Before the opening, I noted with interest that we were likely to gap open lower and that is generally a sign of weakness--especially if the gap filler line is not filled. I then identified two Energy Points [Energy Points are where two or more lines of Opposing Force meet], one at 1201 and another at 1190 1/2. It is my experience that these Energy Points tend to attract price like a magnet, so IF price indeed gaps open lower and doesn't fill the gap, price should be heading to a test of the Energy Point at 1190 1/2, where the true direction of the day will likely be decided, depending on whether price a) Congests or forms an Energy Coil; b) Reverses; or C) Accelerates once it gets to that area.

If the second chart confuses you, don't worry. It's only there to give you perspective and context of the major lines drawn that MAY come into play. You can trade the trade set ups without being comfortable watching so many lines--in fact, it's generally ONE of these lines that will determine the entry, but since I am setting up lines well before the open to serve as a frame work for other traders to use as "Market Maps," there generally needs to be a "big picture" set and a more "zoomed in" view. Some people need to know both to feel comfortable and some will only look at the "zoomed in" view."

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Price did gap open lower and failed to climb high enough to fill the "gap filler line," which came in at 1196 this morning. This is a sign of weakness and set the tone for the rest of the day. Once price clearly zoomed down through the blue down sloping Median Line and was testing the pink Median Line, I wanted to find a short trade entry set up that had a solid risk reward ratio and an acceptable stop loss. Here's what I found:

I wanted to sell the re-test of the just-zoomed blue Median Line at 1192, with an initial stop loss three ticks above the 1193 3/4 double tops at 1194 1/2. And IF price filled my entry order, my profit target would be a test of the red up sloping Lower Median Line Parallel at 1183. That meant I was risking 2 1/2 S&P handles to make 9 S&P handles per contract, which is a risk reward ratio of 3.6, which is very respectable. And those of you that read this page regularly know that this entry set up carries a very high probability of success--roughly 77 percent.

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Price made one more new low and then climbed out of the hole, climbing back above the blue down sloping Median Line briefly and filling my limit sell order at 1192 before closing back below the blue Median Line. Once I got confirmation from the CME server that I my sell order was filled, I double checked that my stop loss order was still in the market and then I entered my profit order at 1183.

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Once I was short, you can see that price stair stepped its way lower and when price took out the low of an Energy Coil, I moved my initial stop at 1194 1/2 down to a profit stop three ticks above the 1189 3/4 mini-swing high, to 1190 1/2. And though I don't show it on these charts, at 2 pm CST, I entered a "MOC" stop order, which means that if both my profit order AND my stop order remained unfilled at the close, I would be stopped out at the settlement price. I generally use these orders just to make certain that a day trade doesn't turn into an overnight trade should I get side tracked with business or have to go attend to something unforeseen with my little ones, etc.

Just about the time I was putting in my MOC stop order, price ran down and tested the Lower Median Line Parallel, filling my profit order at 1183. Once I got confirmation my profit order was filled from the CME server, I double checked that all my orders were cancelled and that I sold and bought an even number of contracts.

This was a nice clean trade that netted 9 E*Mini S&P handles, which is $450 per contract before brokerage. It was a classic zoom and re-test entry and I never took any real "heat" in this trade--price simply eroded all day long, so the key was finding a high-probability entry area to get short with an acceptable stop order.

We are in the process of building a sister site in concert with eSignal, and we'll be making announcements, posting charts and articles and webinar replays there. It may take us a week or two to finish building the area there, but you can find the area at:

Market Maps with Timothy Morge at eSignalcentral.com

[Look under the third party developer and studies area]


I'll be back in the office downtown tomorrow and as soon as I get in, I'll open the multimedia room. You're all free to drop by and watch me draw up pre-opening charts. I generally get there between 6:30 and 6:45 am CST. If you're interested, you can enter the private room, watch, ask questions once the markets open, and see what the software is like. Early on, I won't be answering questions--instead you can watch me work on pre-opening charts. Once the markets open, after I take care of position entry orders, I'll either take questions or if I have anything urgent to attend to, you can watch AutoForks drawing on volume bars in the E*Mini S&P markets, so you can watch what we call "stealth Median Lines" call the tune in real-time. These are Median Lines of our own invention and we've found them to be deadly accurate tools...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 may open the room once I get downtown. If you beat me there, the room may 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. Tomorrow is a refresher day for me, so even if I do take questions, I won't be available for a very long time. But I'll give you what time I have...

I wish you all good trading!

Tim