Monday, May 20, 2013


1) ES opened & quickly 1662.75 drove to the back of the WHITE ZONE and closed above 1665.  This put buyers in control.  Sellers then quickly stepped in & quickly pushed ES back down to 1662.50. This type of whipy action can often cause quick losses. If traders took the short towards the back of the WHITE ZONE  a two point target was easily achieved.  For those who took the trade in the middle of the zone still had opportunity for a small profit. For the purposes of the model I will count this trade as a 3 point loss, but most should have realized some type of profit or break even trade.

Responsive buyers came back in at the 1662.50 level & once again drove ES up through the back of the 1665-the top of the WHITE ZONE.  Once above 1665 buyers kept control & proceeded to drive ES up to 1669-1671 resistance zone.

1669 -1671 found responsive sellers.  I pointed out over twitter that we had tick divergence on both the 5 & 1 min time frames. In addition .buyers pushed ES to the back of the resistance zone.  The back of the zone often provides a high odds point to take a counter trade.  This would mark the high of the day & sellers were able to drive down ES down 10 to 1661.  The zones by themselves offer excellent trade location.  You don't need any trailing indicators.

As tweeted while we were up at 1669-1671 zone, 1665 held the key for the day.  Once below buyers were never able to make a significant drive higher.  As we entered the last hour ES was trading right at 1665 and chopped for the entire hour. I pointed out on twitter, 8 out of 10 days,  the last hour is just  chop.  Most can not navigate it successfully.   Why risk taking on losses without a clean opportunity & time to let it play out.  Losing money in the last hour sucks.  Do not let it happen to you. 

Coaching que: The purpose of the WHITE ZONE is to keep a trader from fighting a directional move up or down.  Many traders dig large holes looking for a reversal point that either never comes or comes from much higher levels.  If you did not take a short once buyers established control your account should be in fine shape. If on the other hand you kept shorting above the WHITE ZONE by the time the market finally did reverse you needed the entire move down to get break even.  Its not likely that many traders rode a short position into new highs & mentally was able to withstand the pressure to cover. By understanding control you don't have to place yourself in a hole.  It frees you to wait for the next setup.

No quote tonight.  My hart goes out to the people of Moore Oklahoma.  I feel blessed tonight to tell my daughter & wife I love them.  But for the grace of GOD go I . Prayers for all who lost loved ones. 

Notice: This Blog & its contents are intended to be for educational purposes only & not to be construed as trading recommendations  in any way.  You should not follow anyone blindly.  Trading Futures & Options on Futures involves substantial risk of loss and is not suitable for all investors. You should carefully consider whether trading is suitable for you in light of your circumstances, knowledge, and financial resources. You may lose all or more of your initial investment. Opinions are subject to change at any time.

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