ES TRADE ZONE REVIEW & NOTES FOR 05/10/12

ES had a balanced day probing both initial support and initial resistance. (1)  Es opened at 1625.25 & traveled just over the back of the 1624.50 to 1626.50 WHITE ZONE.  The WHITE ZONE determines who has control; buyer above & sellers below.  Buyers tried to push above the WHITE ZONE & TAKE control but failure to close above the 1626.50 on a 5 minute bar left sellers in control.  Sellers were able to push to 1623 & was sufficient to take 2 points+ per the high odds strategy no matter where a trade was taken in the WHITE ZONE.   of into the bottom of the WHITE ZONE and probed to the top of the zone before reversing lower.

(2) ES got a  little tricky form here.  When the market is in balance the best was to trade it is from the outside in.  The middle will have a tremendous amount of chop & is the worst place to enter a trade. The WHITE ZONE was the highest volume area Friday for the second day in a row.  It is a rare occurrence & this area should be noted as a place to stay away from entering trades. That being said buyers were able to push & close above 1626.50 G a buy for the high odds strategy on the first dip back into the WHITE ZONE.  The push down had no rotation up & fell through the zone & stopped out the trade for -3 (again, this trade is for education purposes & not a trade recommendation) 

(3) Sellers pushed down to the 1622-1620 Initial Support.  I expect buyers to materialize at the first touch of Initial Support. Responsive buyers stepped in at the zone and quickly drove ES back into the WHITE ZONE. Because this was the first touch back into the WHITE ZONE after it was broken on a five minute bar, a sell signal was generated.     

Again,  this zone became the high volume area of the day making trades difficult.  Depending where the trade was placed; the front of the zone would produce a stop to the tick as the model calls for a 3 point stop.  Taking the back of the zone would produce a successful trade as buyers were unable to maintain control.  Two stops in a row shuts down the trade strategy.  My spread sheet tells me its rare to get two stops back to back & there are too many good days to risk taking a big draw down on any one trading day.  Again,  I trade multiple strategies & am simply highlighting the possibilities of trading just 1 high odds strategy.  That being said,  there are many ways to cut this cake.  

4  Sellers stepped back in at the top of the WHITE ZONE.  This is a perfect example of why I suspend the strategy after 2 back to back stops.  The move & close above the WHITE ZONE on a 5 minute would trigger another buy signal.  had it been taken a loss would have resulted.  No trade was taken.  Sellers pushed ES all the way back down to the back of Initial Support.  Again,  I expect strong buy responses at Initial Support & the back of the zone offers the highest odds for a counter rotation trade. I mentioned on twitter that the back of the zone offered excellent trade location & ES stopped at 1620 to the tick.  In addition,  1620 was a 7 point rotation down from the previous swing high and equal to the largest down rotation of the day.  Add to that that 1620 was the prior days low & this occurred on a low volume push during NY lunch & it was a powerful set up & a low of the day. Its simply very difficult to find a better confluence for a better set up.  It was the low of the day!  Just doesn't get better. 

5 Responsive buyers stepped in and again drove the market back to the 1624.50-1626.50 WHITE ZONE where it spend the better part of two hours chopping around in a tight zone before being driven up to the 1630-1632.50 Initial Resistance where buying was shut off to the tick.(6)

A couple of closing notes, 1,  I did not expect a tight balance day but as soon as I recognized something was not right I shut down a strategy which would have had several more losses through the course of the day.  The two stops back to back was important market information & I value that information.  the highest odds way to trade a balance day is from the outside in & avoid placing a trade in the middle where it will be extremely choppy.  It was a difficult day overall & over-trading probably resulted in large losses.  

I will be careful to not take a trade in the 1624.50-1626.50 range  & wait for the area to be resolved.  If we are going from a directional market to a range market--& I dont know that we are;  I want to focus on trading from the outside in & avoid the middle.  The quicker you can recognize a potential change in the market the quicker you can avoid taking unnecessary losses.  Hope all had a good week.  Tomorrow new opportunities await! 

The secret of all victory lies in the organization of the non-obvious.
Marcus Aurelius 

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.

  

  

UPDATED HIGH ODDS MODEL PERFORMANCE FROM INCEPTION TO 05-13-2013

LINK TO FULL SPREADSHEET HERE.

https://docs.google.com/spreadsheet/ccc?key=0Ap5hOyO4ONQLdEh4blB3aU81Smk0a1VBVFZZRnVqb2c&usp=sharing

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.

ES TRADE REVIEW 05/09/2013

ES gapped above the 1627.50-1625.50 WHITE ZONE off the open.  The WHITE ZONE determines who has control. My trade plan calls for a long the first touch into the zone. (1)  ES Traded into the WHITE ZONE in the first few minutes of the market.  A long at the top of the zone took only 2 ticks of heat before rotating up to the 1630-1632 Initial Resistance- to the tick. (2) In my highest odds trade it calls to pass on shorts when buyers are in control.  I do however expect some type of rotation at each of the zones & have strategies that take advantage of that opportunity. 

ES found responsive sellers at Initial Resistance & they were able to push back down & through the 1625.50-1627-50 WHITE ZONE. With the close below the WHITE ZONE on a five minutes bar triggered a sell signal on the first rotation back up to the white zone. (3)  ES subsequently rotated back down 7 ticks.  The trade plan calls for a 8 tick target.  This created a issue for me. Watching price action one could see that ES just stopped & normally i would just cover for what ever i could get. I do not intend to start trade calling my strategies, its no the point. In addition, over the next hour & change there were 4 more opportunities to cover flat or break even.  So there is a new rule,  1) If you get 6 ticks on the trade move your stop to BE.  Looking at my stats the majority of trades would survive to target.  2) If your in the trade for more the 45 min without a 8 tick rotation in favor of the trade cover the best possible.  simple, strait forward.   In fairness,  I am going to count the trade as a 3 point loss - which puts the strategy down 1 point for the day.  No problem.  

ES was able to work its way back up into the WHITE ZONE. Remember each subsequent move back into the WHITE ZONE has roduced odds that there will be a counter rotation.  ES chopped in the WHITE ZONE for an hour and change before resolving back to the upside of the WHITE ZONE.  While the close of a 5 min bar above the zone did trigger a potential long trigger, but it did not trigger before continuing back upto and into the 1630-1632 Initial Resistance Zone. (4)  I expect to see responsive sellers at Initial Resistance & they were found at the back of the zone, almost to the tick, surpassed the zone by only one tick. 

Responsive sellers were then quickly able to push ES down into the WHITE ZONE.  Normally this would trigger a buy as  it was the first push down after buyers had established control in the afternoon.  This is where recognizing change in behavior and PA comes in.  I immediately tweeted that I am not taking the long set up & that I was considering a short trade. Sure enough  ES continued down to break the bottom of the WHITE ZONE (5)   I also tweeted that I had gone short and tweeted scales at 23 & 22 & that gave room to work the trade in case it snapped all the way back-- which it did.  All the way back to the WHITE ZONE where again responsive sellers pushed in back down into the back of the INITIAL SUPPORT 1620.50-1622.50.  Both pushes down  into Initial Support were met by responsive buyers.  I expect responsive buyers at Initial Support. 

This is the 3rd time a new behavior has been shown by the market where there is a fast vicious liquidation followed by sharp snap backs.  I always believe what the market tells me & right now it is telling me that these sharp sell-offs are going to be met with responsive buyers.  I will look for these opportunities at high odds trade locations highlighted by the zones.  It is important to realize the the zones themselves are high odds trade locations.  I do not need a lagging indicator to tell me that I should get long or short 5 minutes ago.  I want to buy & sell where everyone else is afraid to so. 

Net net a very interesting day.  Tomorrow will have more surprises  Do your homework,  keep detailed journals on your trades and your emotions.  It not just about the market its about your mental state as much if not more. 

There are no secrets to success. It is the result of preparation, hard work, and learning from failure.
Colin Powell 

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.

ES TRADE REVIEW 05/08/2013

ES the tsunami of an up move continued today simply crushing anyone who dares stand in the way.   The bid is simply relentless. ES opened in the 1618 - 1620 WHITE ZONE.  THE WHITE ZONE determines who has control of the market; buyers above & sellers below. we opened down into the WHITE ZONE & the strategy called for taking a low risk short at the back of the zone. (1)  Sellers were in control until we closed above the WHITE ZONE.  Obviously,  the short was short lived as selling was quickly absorbed. ES quickly rotated above 1620 and closed there on a 5 min bar placing buyers in control.  The trade could be covered for a 1 tick loss at 1620.25. 

(2) A long setup was trigered with that close above 1620 but you would have had to be filled on the bid.  For the purposes of this blog,  that is considered a no fill.  However,  there was still a victory here.  I consider a set up that helps me avoid a loss a winner.  Knowing to cover the short is priceless.  Instead of having a 3 point loss (the stop I use for this blog) I had a 1 tick loss.  I know there will be more setups in the coarse of the day & the days to come.  Its my mindset that I never miss a trade, I am never compelled to chase.  If I had a better way of figuring out we were going up earlier & I could have gotten long earlier & reliably; I would have done so.  I did my job by following my rules, therefore, a successful sequence. 

The market continued its trek up to 1622-1624 which i had market as initial resistance.  Again, we are trading above the WHITE ZONE that places buyers in control.   Shorts are passed on in this scenario.  I want to trade in the direction that makes my odds highest for this trade.  This is a perfect example of why this is called for.  While ES paused in the 1622-1624 zone; it was just a pause. There was almost no way to enter a short position here and not take a loss. Again, not taking a loss is a win for me.   

(3) ES traded above 1624 triggering another long set up.  Again, do to the lack of rotation lower, there was no opertunity for a ling fill at or in the zone.  Nothing to do.  (4) ES did finally trade back into the 1622-1624 zone.  I passed on the trade.  It was almost the last hour which is a very tough hour to trade in; there is ALOT of air below these levels (reference to yesterdays 10 point drop mid morn) & I had no cushion on the day to work against.  Did the trade work?  Like a charm!  But I really don't care about any one trade & I am having a challenging time reading the PA other than to say it is strong as hell. 

Buyers did step back in on the 1st dip into the 1622-1624 zone and rallied into the close.  The buying shut off just 2 ticks in front of the 1630-1632 resistance zone. 

At the end of the day, trade location provided an obscene edge.  You don't need lagging indicators, fundamental news or anything else.  Trade location + knowledge of control + ability to exploit your edge is huge. You only need 1 high odds trade to make it in trading.
   
I fear not the man who has practiced 10,000 kicks once, but I fear the man who has practiced one kick 10,000 times.
Bruce Lee 

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.

ES TRADE REVIEW 05/07/2013

ES Opened the day above the 1614-1616.25 WHITE ZONE.  The WHITE ZONE determines who has control; buyers above & sellers below.  ES opened at 1616.50 and the first dip into the WHITE ZONE  provided good location to put on a long. (1)  ES quickly rotated up to 1619-1621 zone where sell supply was found.  On the rotation back down to the 1614-1616.25 WHITE ZONE sellers picked up some momentum.  The odds of a counter rotation out of a zone is reduced each time the market goes into any given zone.   This is why the highest odds trade is always the highest odds for a successful counter rotation.

ES flushed through the 1614-1616.25 zone on second touch and rotated down to the 1609.75-1611.75 to the tick.  I expect buyers to show up first time into initial support & they did. (2) My trade plan calls for a short into a zone on first touch after the zone has been broken-designated by a close below the zone on a 5 min bar.  The rotation up from the 1609.75-1611.75 to the 1614-1616.25 triggered that trade. For the purpose of this blog I use a 3 point stop on trades.  This is not a trade recommendation, its simply a number that works for this particular trade.  You as a trader need to figure out what size stop works best for you based on your risk reward profile and trade style.  The rotation I expected to develop on first touch never came & ES continued to rotate up to 1617 & triggered a stop- to the tick.  The close above the zone on a 5 min bar also placed buyers back in control.  I noted as much on twitter.

The close also started the trade sequence over again and the first dip back into the WHITE ZONE would trigger a long entry per the trade rules.(5)   ES rotated up from the WHITE ZONE back to 1619 to 1621 zone.  (6) The close above the 1619-1621 zone set up another long but as has been the case for several weeks now, the last hour has been totally worthless.  The long was never able to make an extension but no damage was done either.

Larger picture buyers are in control.  I would expect buyers to continue to step in on larger rotations down.  take note of the larger two way rotations.  This may be a new market behavior & if so would set up a nice environment to leave trailers on if that is in your trade plan.  The blog will continue to focus on two point rotations and only the highest odds trades.

Net net the strategy had 3 trades, 1 winner, 1 loser & 1 break even.  Ended the day down 1 ES point.  Had I not passed on the long after buyers established control the day would have been profitable. Noted. Hope everyone traded well.

I don't believe in team motivation. I believe in getting a team prepared so it knows it will have the necessary confidence when it steps on a field and be prepared to play a good game.
Tom Landry 

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.

ES TRADE REVIEW FOR 05/06/2013

ES opened the day above the 1608-1610 WHITE ZONE placing buyers in control.  My trade plan calls for me to buy the first dip into the zone. (1) An entry at 1610 quickly rotated up to the 1612.25-1614.25 resistance zone.  Because buyers were in control no shorts were taken here.  ES then rotated back down to the 1610-1608 WHITE ZONE/ support.  This was the second touch & the trading rules call for passing on all but the first trade.  The market was in balance and it was very choppy.   Doing less was defiantly more.  the market then proceeded to rotate back up to the 1612.25-1614.25  Again, buyers in control & second trip into the zone.  No trade here.  Finally, late in the day we broke above the 1612.25-1614.25.  This triggered a long per the rules.(2)  Unfortunately there was just no follow through.  I tweeted that it might not be a bad idea to exit the trade - 1 tick & there was several opportunities to get out flat. The stop was never hit & an exit could be had at the 3:14 close there was an exit for a 1 point loss.

Some thoughts:   First, its a skill set to move from a directional market to a sideways churning market.  Its not unusual for a trader to do really well in a directional move and give it all back in a sideways, slow consolidating move like we had today.  Second,  by avoiding the short, my trade plan let me relax and not have to work through hours of chop. It is mentally difficult to sit all day waiting for a market to come in. Your mind races with thoughts like - what if we get squeezed up to 1620.  My guess is most shorts covered above 1615.  The best rotation down was about 3 points.  Best rotation up was 5 points.  The range for the day was 7 points.  Just not a great deal of opportunity.  

What I love most about the way I trade is that I dont have to figure it all out.  I only had two triggers.  1 worked 1 did not and net net I made a little money.  IMHO figuring out what the market will do tomorrow  is almost impossible.  All I have to figure out is what I will do a certain levels & let the market do its thing.  Bigger picture buyers are in control & I expect buyers to step in on the dips.  Bull market corrections are fast  but short lived and I would expect any up coming corrections to fit that profile.

“He will win who, prepared himself, waits to take the enemy unprepared.” 
― Sun Tzu, The Art of War

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.

 

   

ES TRADE REVIEW FOR 05/05/2013

ES had a significant gap above 1600 & pretty much left me with nothing to do.  As A trader I have 3 choices  in a gap like this. 1) go long right off the open & risk an attempt for any type of gap fill will stop me out.   2) fade the gap.  This is just a really bad idea.  There is nothing to lean against & no way to know when the buying would shut off.  3)  Do nothing without a proper set up.  I went with 3.  My first resistance was at 1612-1614.  This was based on my own calculations and I had no prior trading levels to work with.  The level turned out to be almost perfect.  The HOD was 1614.25. Still, the high lining up with my level i will attribute to luck.   The WHITE ZONE was 1604.50-1602.50 meaning buyers were in control off the open.  It also means i pass on shorts setups in this strategy.

No trade set up and no money was lost.  Avoiding a losing trade is as valuable to me as a winning trade.   My focus is purely on the highest odds trade.  If I don't get my set up I just do nothing.  The only thing I could have done Friday was guess.  My guesses are 50% & I can not make money at that rate. So to wrap it up,  there were no trades, I lost no money and I am looking forward to next week.  Boring but profitable. The need to produce at any risk on a daily basis is the road to ruin for most traders.  Knowing your set up will come will bring you riches.

“The good fighters of old first put themselves beyond the possibility of defeat, and then waited for an opportunity of defeating the enemy.” 
― Sun Tzu, The Art of War

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.