Wednesday, 2 May 2012

Outside In Trade Start

My first trade this morning was against my FavFib. I got stopped out for a loss. I re-entered again after the failure was confirmed by a lower high and lower low. The outside in trades are lower probability and need to have a bigger potential profit than the risk. My initial target was the top of another FavFib: 6812.0 and a secondary target of a hoped for close of the gap, so a sale at about 6862.5 with a stop at 6878.00 fitted the hoped for potential profits at 6812.0 and 6782.0. While these numbers look big, they are in line with the volatility of the DAX.

As you can see from the pic, the initial target was hit and held. I covered half there the first touch and waited for a break of that level. When that didn't happen, I covered the balance. Then I waited to see if there would be a break of that level or a bounce to buy.

The ADP job numbers just came down and pushed the indices down even further. The gap was filled mid morning, London time, with the market sliding downwards. I believe that unless the Friday actual job numbers overcome the realisation that the U.S. is still in transition, we have a down swing on our hands. Also, the ECB is talking tomorrow and we may see some changes there. Another U.S. number tomorrow too.

I have some bearish option positions I put on at the highs - specifically engineered butterflies and condors - and I will begin taking profits on these as the U.S. markets come down today. I'll re-instate them on rallies until I see that the swing is over. How will I see that? Exactly the same way as i do on my intraday stuff - CCIs and the EMAs. My longer term trading is an important part of my overall wealth building strategy.


  1. Hey EL,

    Great blog today. Two questions.

    1. Are there any "announcements" that you don't trade through? Or do you trade through everything?

    2. What is the setting on the ATR trailing stop? Looks like 3, but I'm not sure.


  2. Anon 08:09, I trade through everything except majors such as monthly job reports. Of course there needs to be a setup and picture. ATR is 3 but its an indicator not a stop.

  3. Firstly, this is the best trading blog, hands down, at least that I'VE found up to presently. Thanks for all the teachings and sharings!

    Unrelated to this post but relevant to the initial purposes of the blog: How is Kiki w/ her trading?

  4. Hi Tom
    I like butterflies and condor trades also. I like the unbalanced butterfly for directional trades. Do you do butterflies on weekly expiration using CCI.?

  5. Anon 08:40, Kiki's doing fine. It seems a lifetime ago that we started. Thanks.
    John, not too many weeklies as there is no time to adjust if needed. I usually have a trade on for 2 or 3 days but every now and then I'm in longer with adjustments.