My Notes

This is a set of rules/notes I keep on my computer:


                                           Futures
Rule #1:  Charts and Market Signals dictate direction.
Rule #2: TRADE PATTERNS BASED ON HIGHER TIMEFRAME SUP/RES. AREAS
Rule #3: Take a break middle of day
Rule #4: Wait for it.
Rule #5: FOCUS ON STRENGTH, GO WITH FLOW.
Rule $6:   morning   10:30  and 3:15 key times
Rule #7:  Only focus on 1 market:  /tf 

BEAR MARKET:  shorting tops -- always higher probability. Market
oversold:  enter on double/triple top bounces - at major support only.

RANGEBOUND: set limits to catch tails at 3 touch horizontal support lines

OVERSOLD: Wait for  HIGH VOL. PUKE CANDLE.  watch for breakout of channel for major rip...   <-- entry long.

OVERBOUGHT: need to see BLOWOFF CANDLE and TL down before entry.  TRIPLE TOPS

BULLTARD  WEDGE B/O: Only in direction of market. Tight stop entry.

Patterns:
1: triple tops bottom at clear  sup/res: Check Higher Timeframe for double confirmation.  PLUS: must see divergent signals

2. Sharp Trend leading to break and small double bottom - enter b/o

3. Enter breakouts in wedges on Trend Days

Finally:  I don't discuss exits much... but using 5-minute candles or even higher helps finds larger trendlines which  often act as support / resistance.  Whenever it's unclear, keep looking at a higher timeframe.  Sometimes the market will just chop around because a clear support or resistance area hasn't been established.  Once it is, you can use that area to find an entry.

triple top: bottom VOLUME BLOWOFF

The top was fast -- the big triple top completed just as the bell rung at 9:30  -- and then it was 100 ticks down.  Not bad.

Today's learning lesson is how to get back in.  First -- we need to see big PUKE candles which is the big stops being taken out.  There were several.

 But that's not enough.  Finally, the trendline broke and that would be the first time to enter - and as it turned out... the market rallied back 60 ticks...  

 Knowing it was  Friday, end of quarter, and the Market Signals were not bad (xhb, xlf, iyt, slv) -- there was no doubt a small rally would ensue.

 So when trying to catch a bottom -- the key is looking for big volume blowoff candles and then a bit of stability -- or simply take a first stab as the trendline breaks.  The key thing is -- do not try to enter early -- you just set yourself up for failure -- and will end up getting caught in the PUKE moment. 

 You enter as the order flow changes and then wait for the next resistance area to be established and reverse.

Major Time Frames

I actually saw the triple bottom as it happened -- sort of.  Not really.  I was wrong but then it resolved a few minutes later.

 What I learned today was -- I should have been switching back to the 5 min. candles and realized going into Friday, eoq -- (I was thinking about this ) - the market could easily run back into the descending trendline -- not changing the structure -- but it was a 100 tick run from the triple bottom.  There was every reason to take a chance and hold with a rising stop.

 /gc did a similar move -- after getting crushed -- it ran all the way back up to form a triple top -- easily seen with 5 min candles.

And furthermore -- the triple bottom on /tf today was very tradeable as  it was just past a nice round number, 820.  Notice it essentially ran to 830.   /tf loves round numbers.  

 The Market Signals were keeping me too cautious.  Market signals were saying trend down day - but I think I also learned -- give the CHARTS priority.  Charts were saying up we go and only at the end of day did a few markets like gold and silver turn green.  You don't need to wait for it.  You do need to wait for the chart patterns but after that... you just follow the charts...    

 Much of everything else -  news, your thoughts/opinions are noise.  Filter out the noise.  It will help a lot.

FOCUS

Must focus on /tf only for futures trading -- otherwise will never get to CP.

The same patterns are emerging over and over.   Triple bottoms,  Double bottoms, wedge b/o and retests. 

Mornings and 3:15 are the times to watch for but looking for large moves on large patterns and small moves on small patterns is all that's necessary 1 or 2 good trades a day.

This is simple stuff but doing it requires the patience and discipline of a strong person.

waiting for key time - breaks

Market signals were bearish but mostly mixed... so trend down all day but slow... no reason to trade

But then 3:15 -- we know funds enter and the break lead to a super trade with no heat.  Waiting for key times during slow/mixed signal market is key.

The only other thing to do was to trade the edges and get 10 or 15 ticks here and there as there was not going to be any big moves until larger players entered end of day.

using MAs

moving avg. lines show you order flow -- so  you should be going WITH the lines.

 The Market Signals tell you  Market Strength.

 Today should have been all long, all day... and I was trying to short.


 This is not just wrong, it's a complete failure to understand what futures trading is all about...

 strong stocks are strong --    Monday, end of month with Bernanke QEIII talk -- there's not even a shade of weakness. 


  Must be one kind of trader and not another.   Flow trader goes with flow.  Either follow the signals or do not trade.


  Making it too hard today with all kinds of thinking.  Thinking is ruining the trading process.

 Observation and acceptance will outperform every day.


You know what's strong.  Buy it.  You know what's weak -- don't buy it.

wrong:

market drops at the open  --   IBD list weak...

tf hits new lows but XLF is green - and then rallies 60 ticks -- not on board even after the TL break.


Gotta think contrarian.


oil and coals and XLF were all suggesting a bounce  despite the obvious weakness. 

 LESSON: MUST PAY ATTENTION TO DIVERGENT SIGNALS -- they matter most.