Saturday, August 22, 2015

5 Lessons From Friday's Market

YM TS TradePlan E-mini Dow Chart Review - Friday August 21, 2015

 A closer look at Friday's YM chart. I used 30 second candles in the 2 charts below so you can better see the price-action.

1 Short Trade #1 - #4 and 1 Long Trade #5 - #6

1 Momentum Short Trade #1 - #5

What can we learn from this?

It took a while to copy/past the private client feed above. The reason I did is because I think there are a few lessons to be had that could be beneficial to the trading community. I really hope they help someone reading this! 

1. The trades you see are the only YM trades we took as we were focused on CL and GC earlier in the session. Notice the first one wasn't until 9 AM PST. This is 2.5 hours after the U.S cash open. Lesson # 1 "Opportunity is always present." We just have to look for it.

2. The next lesson is something I have been harping on lately, but it is so important. Before I enter a trade, heck before I even start stalking a trade, I want to know if I am going to stalk long or short so one of the first questions I ask myself is "what is the market trying to accomplish." To me this means context, and to understand what it is "trying to accomplish" I look back in time to "what it has done." Anyway Friday at 9 AM PST I determined the context to be "market has broken under Range Long and is trying for Highest Odds Long FTD target." Hence I wanted to short bounces. There, I had direction (knowing I wanted to short) now needed something to lean against. Used 16739 (not a TS # but an Exhaustion Level from the private client feed) and leaned against that, using Highest Odds Long FTD at 16597 TS # as the main target. So lesson # 2 is "Get your target first." Oftentimes the target of a short trade is a Long Execution/Target Zone, as in the example above. 

3. Lesson # 3 is "Counter-trend trades are okay." We just need to keep context in focus. In the long trade we took keyed to Highest Odds Long FTD we scaled to hedge risk then ratcheted up open risk quickly as the trade (a long) was counter-trend to the dominant direction of the market at the time (short). Still BSO (best scale out) was + 99 ticks.

4. On trade # 3 the best entry was when we scaled the last of our long at 16994. High tick of that rotation was 16698 and it never ticked that high again for the rest of the session. We scaled last long at 11:01 AM PST and you can see at 11:18 AM PST I noted "may have missed the turn down." At 11:20 took a break, refreshed, then came back and stalked the last trade of the day. It ended up being a momo short for continuation down to Friday's Extreme Long (still the likely target for this Sunday - Monday). Lesson # 4 is "It's okay to take a break." When it became apparent we might have missed the turn down, and being unsure if we actually had, instead of stalking something again right away — I walked away. Took a little break (23 min) came back refreshed and with a fresh perspective (and 23 min more of price action to gain context from) and feeling refreshed, better prepared and more confident to stalk something new.

5. The last trade we took was a momentum down at 16561. I might add nearly 150 ticks below where we scaled the last of our long at 16694. I rarely trade momo (and especially in equity) and my thoughts on momo are contained in the notes in the chart above, but lesson # 5 is "Adapt to the current market context." While I rarely take momentum entries there is a time and a place and being able to identify those times and places and take advantage of them is what separates the pros from the novices. If you want to up your game you must learn how to trade all types of markets. It wasn't easy for me to adapt momentum into my strategy, but I did it. 

Hopefully this post helps! What other lessons can you learn from this post? What lessons did you learn in your own trading of Friday's markets? Share them in the comments below, or privately via email.

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