Friday, 22 January 2010

I Wear my Trades Inside Out

I read Kiki's post yesterday and today's post is a part answer to it about getting into a trade..

Additionally, there was a question by Chris in a comment in the day before yesterday's post about whether I still trade inside out when both the EMAs are horizontal.


I said that as long as there was room between the entry point and the Keltner Channel to make the first scale, I would take the trade. I also said that yesterday's market was a good example of why. The criteria I use for these types of "horizontal" trades are more VB and CCI based than other elements.

Click to enlarge

I have mentioned that one of the best pieces of trading advice I have ever received was from Pete Steidlmayer when he said to just "get the trade on and then manage it," I need to be in a trade to give myself a chance to make money. If I'm not in a trade when the market moves, a subsequent entry is a worse trade location with a much higher risk. As soon as they shake the branches I would be stopped out.

When I enter a trade, my only assumption is that I will get to my first target point. That's all. My hope is that the trade activity  after I am in my position will bring in other traders taking a position or covering that will move the market vertically until it gets so far from value that the move ends. If this happens I make a good profit with little risk.

If you look at the ES chart of 21 January you can see the horizontal EMAs with trades around them giving small profits until finally the market took off and gave you your pay day. If I had not been in the trade I would have missed out on a lot of profit and had a much more nervous short using re-entry techniques. Had I been trading outside in I would have made some smallish profits until the last trade when I would have lost probably half what I had made and then had, perhaps, analysis paralysis while I tried to change my thinking to an inside out mode.


  1. Tom,

    Thanks for the reply to my comment and the more detailed blog post.

    Hope you and Kiki have a great weekend.

  2. Thanks for the insightful post. What is your first target on the EC? Is it two range bars like the ES?


    Mike L.

  3. If you trade the EMA cross and a little later there's a bar closing on the "wrong" side of the EMA, is that an automatic exit for you?

  4. How did you manage the ES today especially in the first hour of RTH? I got chopped up quite a bit since nothing moved for a 2 point target up or down. I persisted and finally got out of a big hole on the down move.

  5. Hello EL & Kiki,
    Thanks so much for sharing your knowledge of the markets and for the informative webinar. Glad to hear your health is better.

  6. Mike, usually 2 bars, sometimes first s&r.
    Mpe, No.
    Anon, the horizontal superimposed EMAs were the clue that it was chop.