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Swing Trading the ES - simplicity and understanding price levels
I think they are already doing what you said , have delayed talks multiple times in the 4 month timeframe each time, and they sure got trump a big shovel for him to dig his own hole. They are letting him self inflict wounds that don’t lick off so easily, like subsidizing farmers’ lost revenue. How long can that last? Other countries are producing more of these crops to attract Chinese business , increasing supply and lowering the price that the farmers could get if they ever sell to China again. Also, they are seeking to sow divisions in the Republican Party by increasing pressure on the HK situation, which they have now tied to trade. In the words of Sun Tzu:
“If your enemy is secure at all points, be prepared for him. If he is in superior strength, evade him. If your opponent is temperamental, seek to irritate him. Pretend to be weak, that he may grow arrogant. If he is taking his ease, give him no rest. If his forces are united, separate them. If sovereign and subject are in accord, put division between them. Attack him where he is unprepared, appear where you are not expected .
The Art of War
Can you help answer these questions from other members on NexusFi?
Now China buying low amounts of soy beans from US. Has the supply chain already been altered? Just think before q2 2020 mkt is due for a decent 7-10%drop and if mkt is already pricing in a 'partial phase one deal', why buy risk?
Been trading away and haven't looked and updated this thread.
Interesting posts about China and the various issues surrounding the economy, and they're actually a great example of the challenges we can face as shorter term swing traders.
To put it simply, the issues that are being discussed in this thread are far more detailed than swing traders need to concern themselves with.
All we need to know is this:
What is driving markets at the moment is the expectation that there will be a trade deal with China.
Whether it is realistic or not before the election is interesting to speculate about but largely irrelevant. The market is pricing in this deal and is rising accordingly.
As traders this info is handy in the following ways:
In the absence of any new info that furthers the chances of a deal, or that scuppers or delays the chances of a deal, then price will continue to react off major support and resistance levels. Moves to the downside will be halted, and whilst the situation remains bullish, moves to the upside will be dominant but will not go too far/start a large trend move before reversing as there is no fundamental news to justify the higher levels.
Any news that calls into question a trade deal being signed, or shows that there are further obstacles or delays, will result in a sharp sell off that should be jumped on by us traders. This new info means that higher prices cannot be justified on a fundamental level and price will have to move lower to reflect this. Of course this depends on the severity/impact of the news in question, and that is a judgement that us traders have to make.
Surprisingly good/bad US economic figures that are way out of line with expected results will of course drive the markets as they normally do and are tradeable as usual against the backdrop of what has been stated.
For the broad market, expectations built around news are well known by most - So it is easier to gauge whether the move is news driven or not. However, for individual stocks, common expectations are not always apparent. Would you be able to discuss how you use Price action/volume in these cases to position for Mean Reversals?
Agreed r.e. stocks. It's one of the reasons why I don't do trade them as there are too many variables e.g. you need to know about the individual stock and what drives it's performance and therefore what news will affect it, then take into account what issues are affecting the stock's industry sector at that moment, and then take into account the broader market sentiment at that moment.
I would disagree with you that 'expectations built around news are well known by most.' Most people on here (I would guess) are primarily technical traders who give a nod to fundamentals without ever really knowing what is relevant and what isn't, and then applying it to price levels and movement. Hence why I tried to break down the process of why price moves in certain ways and reacts to certain levels on some days,and while it ignores those levels on others.
In terms of price action then I should state the following thing first:
For swing traders, the market mainly consists of traps masquerading as opportunities to enter a position.
They are traps because set ups based on price action occur at levels that are not that important in terms of where buyers and sellers really want to do business.
Therefore knowing which levels to look at is the most important thing.
Previous day/week highs and lows, the US open and close and the swings/highs and lows that are set around these periods are of utmost importance. Same as 1 hour and 30 min major swing highs and lows.
When all that is taken into account, then I'm looking for either an engulfing bar or a pin bar on a 10/15/30/60min chart, or a pin bar/engulfing bar on a 4 hour chart for longer term moves.
The UK morning session today provided great examples.
Engulfing bar on 10 min chart at 8am UK open which occurred off a major swing high set on Friday US session. The brief pullback afterwards gave a great entry. Price continued above the Previous Weekly High, which is then when one of the key lessons from my first post comes into play. What justification is there for an extended move higher in the absence of no new fundamental info? There is none. Price makes a pin bar on the 15 min chart signalling rejection and a reversal.
A pin bar sounds simple but it actually can hide a great amount of info in a 15/30min chart. If you go to a 2min/5/10 min chart, it can show you if buying had dried up, or all activity had just stopped or reduced which suggests a lack of appetite at these levels.
A pin bar at a weaker price level means nothing much at all as it is not an area where price can be expected to reverse with a high probability of success. I could go on a lot longer about the price action I look for but I'm in a position at the moment so need to manage it effectively as price is reaching a key area. Back later.
Well China is in a very fragile position for a number of reasons.
1) Trump is a master at knowing what the weakness of the other person is. That's how he won the election. He knows China is the factory of the world are is heavily dependent on manufacturing. They do not know if trump will get reelected or not (Most Americans want him reelected anyway)
If they refuse to sign a trade deal, he could just reimpose sanctions and that will ultimately disrupt the supply chains even more. He is extremely unpredictable. he just reimposed tariffs on Brazil and Argentina this morning out of nowhere. This is a signal he is sending China ahead of talks.
3) Not everybody in china is happy that Xi will be president for life (starting to manifest in Hong Kong. Dude they were holding the american flag and chanting the national anthem on thanksgiving. That is absolutely incredible)
4) China is more dependent on the west than the west is on china (semiconductors, education etc....)
and Trump has actually been able to convince most consumers in the west that China does not play by the rules (his favorite mantra).
There is a lot more to say here but i'll just limit myself to that. Will be very interesting to see how it unfolds.
That is good analysis and is interesting to read and then have a think about it.
So here is a question to you which is the most important point in all this:
As a swing trader (this is a swing trading intraday thread after all!), how would your analysis/talking points have helped you trade the ES over the last few days? What about in the next few days in the future?
Would you have used those talking points as a reason to go short or go long? And when/where would you have gone short or long?
The point I am trying to make is that while your analysis is interesting and thought provoking, it is not really helpful when it comes to trading the ES futures. Unless I have missed something
As I stated quite clearly, the market was going higher on the expectation that a trade deal was imminent. When news came out that this was unlikely, and then combined with surprise poor economic data, the market dropped and then continued lower on further bad news regarding the trade talks/trade war.
Everything else is an interesting geo-political dinner conversation but is not geared to making profits in the ES in the shorter term/mid term timeframe.
It is important to note the first 30mins of the US open on the ES, and to also mark down the close on the chart.
These 2 zones act as excellent support and resistance.
For trading in UK session, you use these areas as S/R along with any high volume candle that has been posted in the overnight session.
Even better, a high volume candle or pin bar that has been beaten as this will now act as support.
And then you are looking for the following. Not my own words but very succinct. Taken from this thread, and the user is Private Banker. Heed his words. Emphasis is mine.
I felt that we needed a thread dedicated to the discussion of Volume Profile.
Some basics, you can hover over these and click on most of them to get more info in the wiki. I also encourage you guys to improve the wiki articles by editing …
" If you see a large player entering or better said, passively absorbing up price, that is your key signal. Their exit points shouldn't be the main concern as you would then simply implement your standard trade management such as taking off risk, etc. But in terms of my previous explanation you probably won't know where they're looking to exit but the order flow and foot print will show you the volume.
I personally just use the foot print to confirm my order entry area from a predetermined level and then focus on a standard price chart to manage my trade. Just a personal preference of course but that's one way to look at it."
Note that the first thing you do is DEFINE YOUR KEY LEVELS.
This morning had a great example, see chart 1. Dotted line is the close. Then see the high volume pin bar in the overnight session. Then see the two entry points as price retraced back into this area at the UK open.
Second chart is more zoomed in so you can see the volume better as well as the two entry points. The volume delta also shows a good amount of delta sellers rejected.
Finally, look at the dotted line when price returns to the previous high of the morning session and look at the volume. Then compare it to the volume that would have made you long on the first place with the two pin bars.
Can you see that the volume is lower at the retrace back to the highs? Therefore there is no short and you hold for a continuation as there is no "large player entering or better said, passively absorbing up price."
Where price is currently residing is hard to call but using a combination of fundamental understanding (will price be able to go much higher in the absence of further news?) and where price sits longer term I am looking to exit up here. Might be wrong but hey, that's trading.
I read somewhere that the only way you can be successful at trading is by "looking at the market through the eyes of other market participants." Who are those market participants? The buy side, the sell side and us little discretionary traders. The buy side looks at fundamentals, the sell side is there to provide liquidity, the discretionary traders are just completely clueless.
Remember we are still in a secular bull market. Earnings season is over and , 74% have beaten EPS expectations. This continues the trend seen in earnings for the past several years, especially since 11/8/2016 when earnings began accelerating. "hold price constant and move time forward and the market becomes undervalued". Assuming the S&P grew earnings 15% over the period, SPY should move to 334. Also The bull market is not over as we still in phase 2 of the economic cycle, the longest phase. Even if we drop to 2500 on ES now, I wouldn't be concerned. Most buy side analyst see us reaching 3500 because it's time to really start getting super cautious (of course a number of factors can invalidate this assertion as nothing is ever set and stone when it comes down to investing. But for now, I agree with their view)
It's important to know how this games works. The buy side closely track the real valuation of the market. The sell side is there to play both sides and help the move money for the buy side and act as liquidity providers for the big boys. They do this by using the news and other binary events to provide liquidity for them to reorganize their books.
To illustrate what I am saying, I will take a very simple example. Read this article:
Do you really think the market bounced on China trade deal hope? Absolutely not
this is what actually happened:
Donald Trump reimposed sanctions on metal (Argentina and Brazil) to send a signal to China that this time around he won't be messing around and at the same time tweeted about delaying phase 1 deal to get the market ready for the possibility of a "delayed resolution". Some algorithms induced selling on the news and the crowd followed. Price went pass the expected move triggering reaction from the market makers. The result is this mean reversion that we are currently observing.
When looking under the hood of the market, it was a purely mechanical move, yet it is reported as china trade optimism. Truth is, market makers are super exposed (look at third week of December SPX options expirations' and it will provide clues) and they always seek to remain delta neutral.....so when the price deviates too much from their "gamma neutral lines" they have to readjust their positions accordingly. This is a huge topic so I won't even open that door.
But I hope you can see where I am going with this. All indicators are completely useless. The only thing that matter is only to be able to see what the other side is doing. Let me know what you think.
