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Feeding ground

“Amity Island had everything. Clear skies. Gentle surf. Warm water. People flocked there every summer. It was the perfect feeding ground…”

At 11:30 I suggested to colleagues to take their short profits off before noon today. It could have gone to any day low, but I felt the weekly shorts should capture their profits early after such a great week.

It turned out to be a lucky call.

Guessing against the trend is never easy, but odds and probability shift and you have to adjust your plans accordingly. (Remember the Commander’s Intent theory?) 

There are many techinques that technical traders use to project possible targets, but it is not an exact science; it is more about being prepared for areas  or “zones” of support and resistance, and then not being stubborn when the momentum clearly shifts from one side to the other.

When there is blood in the street, be on the lookout for jaws.

 

jaws loves to catch those late to the party

jaws loves to catch those late to the party

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Chutes and Ladders

Do you remember the game of chutes and ladders?

It was a favorite of mine when I was a kid.

Sometimes a picture is worth a thousand words.

Learn to see the big picture.

Bear markets jump out the window, so you either take the leap of faith or miss the move. 

 

Chutes and ladders

Chutes and ladders

 

Risk and Reward

 Sloppy and choppy trading for the vast majority of traders unaccustomed to sequence trading.

 Plenty of setups today in both directions if you know what you are looking for.

Grabbing the majority of the move and leaving the last tic or two for the greedy usually works best for me.

That’s the essence of risk and reward; where do the odds of a small or large reversal begin to dictate your choice in direction?

Trend trading is my preferred method of playing; but in range days (or reversal days!) it seems wiser to play the range trading game until it doesn’t work anymore.

Having multiple contracts on increases our risk, but allows us to scale out our first points and then trail for the larger move. Scaling into a position is also viable provided we aren’t deluding our self about the true stop and breakout areas. These are gray areas that each trader has to address in our own business plan.

If I sense a big move is coming, I will assume a little more risk; not by adding more contracts but by scaling in early and then a bit late if it takes a little more time to develop the play.

I also am willing to assume more risk when the count is in my favor. Bases loaded, no outs, and a 3-0 count I assume the pitcher is coming with a fast ball right down the middle. When I get my favorite pattern setup, at the right time, and with the right volume signal, I am all over it.

Many ways to play the risk reward game; as long as I am willing to pay the price when I am wrong.

Staying in the game long enough to get another at bat is what it’s all about.

 

slice and dice

slice and dice

The Boys are back

 

Well, what an interesting day. Overnight globex ramp up, then gap up at the open taking out last week’ s high.

Clear sailing, right?

Wrong. Another misdirection trade catching traders buying the pullbacks all day long. Momentum didn’t begin in earnest until the lunch breakdown.

Overight actiivity is always suspect since volume is low and price can be easily manipulated.

In a book I am reading, a theory of war was being discussed. CI (Commander’s Intent) theory was suggested, as “No plan survives contact with the enemy”. I instinctively knew what the author meant. Planning is important, but then we must react in the heat of battle, just as skilled athletes need to perform under pressure.

As a technical trader, the “why” doesn’t concern me. Stops are stops, targets are targets.

The range for the past three weeks seems to lie within the big yellow box.

Many breakouts are false; seeing the bigger picture allows us to take reasonable trades where resistance may give us better odds for a reversal.

There are many good traders out there like Bernie Mitchell; make sure you check them out and get an education from someone willing to mentor you.

It’s too costly in this business to learn from only your own mistakes. 

 

I believe that everything in life serves me.

Summer vacation at the beach last week is no exception. A few observations:

  • Watching the waves, almost imperceptibly, the tide turns.
  • Swmming with the current that ran parallel to the shore was effortless.
  • Swimming against the current that ran parallel to the shore was impossible, even for Michael Phelps.
  • When riding the current, “getting out a little sooner” was easier than waiting until caught in the chop.
  • A come-along was the tool of choice to pull an off-roading BMW X5 out of the sand.
  • What a difference a day makes; one day sunny and pleasant, another cloudy, windy, and cold.

 Newly released Elliot Wave research has revealed some eye-opening results that will most certainly prove to be controversial.  Take a look.

Micro-wave

Robert Prechter’s Elliot Wave International is perhaps the most famous of contemporary wave theoricsts.

The main thrust is 3 impulse, 2 corrective waves.

The corrective phase against the main trend is the a-b-c wave; the one I call the microwave. It helps me keep clear what is the main direction we are going next. As a day trader, that is all that matters, try to scalp and position your trades along with the current momentum.

Some traders say that Elliot wave, although extremely elegant, is only easy to see in hindsight. I continue to study the methodology, but must admit I find it challenging to make the correct count in real time.

Deciphering the geometry of markets is also an art form; leaving a few lines on the chart helps me to remember to look for structure. Combined with the secret code, it’s a one-two punch that’s a knockout.

One of the hardest trades to take is to go long the hard gap up open. Every ounce of my being wants to short and keep shorting it. If the signal is there, I take it long, it’s as simple as that. If I can’t bring myself to do that, then I try to be patient and do nothing.

Letting the first hour range set up gives me an edge, as I can step in from a logical counter-trend play. Intuition and a few major indicators are the key to sensing this situation. This play is deadly because it is infrequently seen; thin volume today helped to make it happen.

Using prudent stop losses if we get it wrong is a must; never jeopardize our account to a major draw down because we are careless.

Another summer Friday that the boys hit it in premarket.

Speaking of waves, summer is rapidly moving along; there’s more to life than just the market; time for some R and R at the beach. See you in a week after vacation.

 

micro wave and the geometry of markets

micro wave and the geometry of markets

Grinder day

 The market opened near today’s low, chopped around, then made a steady climb to fill the 73+ gap. After a soft pullback on profit taking, the market continued to grind higher until the last half hour when traders took their profits.

The secret code traders were well rewarded today by staying true to their belief in the magic numbers. They are so consistently reliable that they offer the knowledgeable trader a significant advantage.

What’s your edge?

If you can’t define it, you don’t have one.

No system works 100% of the time, and it doesn’t need to for us to make money. A positive expectancy arises from having the discipline to take only the best trades and take small risks.

Defined risk trades like today’s long entry gave a huge risk/reward bias to the long side. Learn the secrets of the pro’s so you can play right alongside them.

 

grinder day

grinder day