Friday, 25 June 2010

Trading Boundaries

As the time for the beginning of our training effort gets closer, I'm finalizing my notes and lists of what we are going to cover.

One of the topics will be talking about is knowing where you are in the market.

In sports, there is a football pitch or field with lines that sets the limits of play. In tennis we have a court with a net and lines setting out the field of play. Everyone participating knows where they are. They can see what they are and where they have to go to win.

I look at my charts in a similar way.

I define my field with the keltners. When price is outside the keltners I am looking for a trade to go in the opposite direction because that is the field of my play. I divide the field into upper and lower with the 33EMA. I use the Profile in a similar way. There is the VAH and VAL, both previous day and developing. They too are boundaries and exceeding them leads me, all things being equal, to looking for a trade going back to value.

This simplistic look at the charts is the first basis for learning to trade. We then start building on this and look at order flow when we get to those important areas. Not complicated but important to define where you want to do your biz.

Today's trades started from the short side until the Profile balance needed a rally up to the VAH. Strategy from now will be to sell VAH.


  1. EL,

    Trade #1 was a sell at 69.75, which was right into yesterdays VAL. If you are looking for trades back to value at the edges like you mentioned in this post, how does this trade fit that view?


  2. Hello. I've been slowly reading through your whole blog trying to make sense of your methods. Great stuff.

    Just wondering your thinking on trade #4. Not a trade I could have made at this stage of my development. Coming off the lows, the ES put in a higher low. Flattening moving averages, flat VB. Not sure if it's how the bars developed as I was at work at that point, or if it's a MP thing, I'm still pretty green in that area. The only thing I see is the short term CCI falling. I'd be looking for the pullback to go long, if the low holds, like trade 5.

  3. AaronP, Tonka, Its the picture at the time that is important. If it looks like a support or resistance will not hold because of the rest of the picture then it's worth going for it because usually in those situations there will be stops there that put me in profit and give me time to get out without loss if I'm wrong.

  4. Tom, if you would to take one exit strategy from the bad trade, what would it be?

    Previously you indicated, that if next bar momentum went against you 6cci or 45cci you would exit the trade.

    Please comment on the strategy, where it would be prudent to get out of the trade right away and not wait for the hard stop to be hit...

  5. Anon, Scaling out at logical points is the best exit.