Wednesday, 28 October 2009

Day After the Trend


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After  the move of yesterday I expected the market to trade in a range in a fairly normal distribution. Not a prediction but based on observation, after a day like yesterday we get a day like today.

It was the Dow Euro 50: I went Long @ 2818 against the VAL as buying came in. I traded it all the way to the other side of value to VAH and exited the whole position @ 2833. Next was the top of the Keltner channel where selling came at a very overbought area. A failed auction. I went short @ 2835. After some sideways action which saw a lot of selling, the market rotated back down and extended the range. I covered 2/3 @ 2815 and the balance @ 2804, both @ my predetermined S&R points.

As the market had range extended down, I was looking for a short which finally happened @ 2830 back at the VAH. I coverd the whole position on the rotation back down @ 2810 at the oversold Keltner.

The day unfolded as expected. I don't get married to expectations but it helps to visualise the possibilities ahead of time so you can react, K. had a couple of issues. After the first short, she got faked out of the trade because of the sideways chop. Position boredom without quick gratification. She should have looked more carefully at the order flow which was mostly selling during the chop. Second issue for her was that she bought after the range extension where we covered the second part of the short. Problem was she went long without the order flow being clear enough and got shaken out on the pullback. Buying against range extension is difficult because the market is wanting to go in that direction and you get waves of late entries making it hard to hold on, even if you are right. Better usually to wait for a trade in the direction of the range extension.

1 comment:

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