Tuesday, April 17, 2012

Automatic System:

There's a lot of information to absorb for new traders -- and the wrong information can lead to bad trades but simply too much information will lead to hesitation and then before you know it... you missed the better part of the day.

First thing I would look for in the morning: What are the Market Signals saying?

Was the European indices up?  Was there a catalyst?
How does XLF, XHB, and the big techs (AAPL) look?

Where is the market you're trading coming from (let's say /tf).  Today, /tf was recovering from an overnight dip.  Plenty of room to rally. 

Next: Before trading starts -- look at a higher timeframe.  Hourly candles reveal  809.3 was a previous top -- but through that -- there's no resistance until 815 when  /tf tanked on some China GDP news.

So the market opens and within 5 minutes - /tf pops and Market Signals are raging.

We can immediately assume it's going to be a trend day and we KNOW there's room to run before resistance hits.   So one can attempt an entry at the first pullback at  10 am - EST.  You wait for the bounce and enter late-ish at 804.  But Trend Days are very very forgiving.     This entry is good for 8 points (10 if you're perfect).

 It looked like this:

 Had you been very aggressive - one could have attemptted a short at 3:32 as the  Moving Avgs. crossed over and the final push fails.   (Note by this time there were a few signals to support a pullback:  1) the ominous gravestone doji back at 815ish,   2) euro was weak  3) oil was weak.  Either way - the stop on this short would not be more than 8 ticks.   (The downdraft that ensued was good for +70t),

So to sum up:

1) Market Signals provide clues of direction
2) Moving Averages keep you IN a trade for the entire move
3) Relative Strength of the Similar Markets keeps you in the right market. (i.e.: /tf was a better vehicle today than /es -- it was stronger off the bat and thus - had more bang for the Trend Day buck)

Keep it Simple.  You don't need to look at much else than the charts, your Market Direction Signals and check in with your own emotional/physical state. 

Less is more.   These Trend Days seem easy and they can provide big rewards -- but how many traders sold too early because they feared losing their profits?  You accept the charts and trade what they say.  Leave your emotions and opinions out of it - they have no place in trading decisions.

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