Thursday, 8 July 2010

Trend Days

Pete Steidlemayer said that trading the next day after a trend days are especially great as you can get "free exposure". He said that there is a very high probability (I can't remember the % he put on it) that the market will open at the same price as it closed if the trend day had closed at or near its extreme. That means that with the ES yesterday's high at 1059.75 and the close at 1069.50 ish, we should AT LEAST trade at 1059.50 in the ES RTH.

That means that if I can buy below 1059.50 before RTH,  I should be able to get out at 1059.50 in RTH.  Its about 8.30am in London as I start writing this. I've had one profitable trade so far and I'm long again now at 1056.75. I'll take profit again before RTH if it stays quiet as I think I'll be able to re-enter again lower than whatever my exit price becomes.  If it gets cheaper, I'll double down and buy more. We'll see what happens.

There are lots of these techniques you can discover if you think about what the people are doing. Its not all about indicators. The charts just tell us what the traders are doing. If you take it one step further and think about the context you can work out, with a reasonable degree of probability, what the consequence of the present actions will be.

As of this moment, we still have a couple of groups of people who must buy. Firstly, there are shorts who are wrong and being squeezed and secondly, money managers who have missed the move up from 10000 and who have to get on board or they will lose customers. In this scenario, buying below 1059.75 for the next few hours seems like a good bet. Now we add our technical look of order flow and momentum for timing and we have a picture that can trigger. Q.E.D. as my old maths teacher used to say.

There are lots of support numbers below due to yesterday's trend day. I'll be looking at those all day.


  1. EL - could you post your pre-RTH trades???

  2. How do you know there are shorts being squeezed? Is it he magnitude of the yesterday move?

  3. Tom, can you tell us how you managed trade #1 and #4 as far as exits concern?

    At what price did you exit? When you have decided order flow for short is not with you?

  4. Was messing around with Paint Bars in MD and thought this was kind of cool. Paint Bars by intensity of Delta +/- 1000 VB for 1.25 Range chart. Plus Cume Delt div indicator. Useless on trend days but nice on rotational days.

  5. FutureCP, I was just buying the lows of that congestion and taking 5 ticks until the 45CCI broke above the zero line and order flow buying came in.
    Anon 21:41 It was easy to see the buying and then the market action made me think it was short covering. My vision before the market was that scenario. I wrote that part of the blog before the rally.
    Anon 00:04, I scale out and then dump when momentum slows, always looking for re-entry
    cal_trader. Great idea. Using these reminders can help a lot.