I am not saying this is a technique or method, but maybe a direction in how to trade for some, as I use the following, to guide my own trading.
There are 3 outcomes for the current day's closing results on any particular instrument, in relation to the previous day's closing price.
- Positive "UP" day
- Negative "DOWN" day
- "No-Change" day
I am thinking higher odds for end of current day to be an "UP" or "DOWN" day, and a very-very small percentage to end up a "No-Change" day.
Percentages may be the following (not accurate by all means, but trying to give an example to get my view point across):
49.5% - Positive "UP" day
49.5% - Negative "DOWN" day
1% - "No-Change" day
I use to over trade and scalp in all directions without regards to the over all sentiment trend.
My results, blown accounts in tiny little pieces. I asked my self, "why am I doing this, if the ODDS are strongly in favor to end in an "UP" or "DOWN" day? Why don't I just take 1 or 2 trades, and hold on?"
I always thought and told myself in hind-site:
"why didn't I just hold -on to that trade till the end of the day when that news-announcement set the trend tone early on?"
Time and time again, I asked this after every day that I ended up a big loser, making 5-20 trades or more on the day, arrgghh.
So the key for me is to be educated to learn to read the days trend and trade accordingly in that direction.
This has helped me a great deal in making that turn.
I have learn to trust the days sentiment trend, and just take 1-2 trades going with the "days" overall trend.
These trades tend to last 3-6 hours and at the end of my day, I am a happy camper.
It seems just defining a trend day, even with hindsight bias, is not so easy... much less doing it in real time At least from a methodical approach.
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The following user says Thank You to Big Mike for this post:
Just read your Trending thread.
Looking forward in reading others input in the thread.
My goal and direction may be a bit more simplistic (don't know if it's good or bad, but so far overall, it works for me).
What I do every morning, is to review what major news US announcements are coming up on the day.
I look for 1 or 2 major news announcements.
Important, I look for 1 or 2, no more (more on this later).
I only trade the major US indices, my favorite is the Russel-TF (2nd is the Dow-YM).
I then review CNBC.com for the overnight London and Asia sessions' sentiment.
I then review the overnight pre-market sentiment on the US markets, in comparison to previous days close and sentiment
I then "stalk" price action on the open bell (9:30am-est) once the 8:30am-est news announcement has been released.
By 9:30am-est, I already know the over sentiment on the markets due to the 8:30am-est news announcements.
If the 8:30am-est announcement is bad news on the economy, and this is in-line with the bad price-action sentiment of pre-market, then I am "Shorting" the market (usually the Russel or Dow).
I don't use a stop what so ever.
I trust my "read" on the market and news, and trade a higher time frame chart.
More often than not, price action will be in my favor and i'm in positive territory.
I hold on until price action tells me, the move is over.
These trades usually last about 1-5 hours, and I earn a nice chunk of change.
If there is another major news announcement coming up, lets say at 10:30am-est, and I am still in positive territory with my initial trade, I will closely watch the heavy price action whip back and forth at the announcement, and I will decide to hold my initial position or close it out.
If the 2nd announcement forces me to close out, I am done for the day with a nice win (usually about 40-90 TF ticks).
If the 2nd announcement tells me my initial position is spot on and pushes further into the money, then I continue to sit in front of my PC and continue to work it with a smile.
Early I mentioned I only want to see 1 or 2 announcements.
If there are more than 2, such as 4-5 announcements being bombarded on the markets, I then tend to stay away, because the chances of all of these announcements agreeing with each is very slim.
If I fell the itch, I will ONLY scalp for small targets to pay for lunch (LOL).
You usually get 2 that are bad, and 2 that are good (or whatever the combination, because it's very slim that ALL announcements will be all good or all bad), and then the markets are chopping with no trend or direction.
I know this is not scientific, but it sure works for me.
As for the "no-stops," it works for me.
When I used a "stop," I got killed and whipped out of control.
So lets say I do place a trade using the above preparation, and its the wrong trade direction, so what, I close it out and take my SMALL lump loss and go the other way.
This SMALL lump (loss) is a smaller loss in comparison to the sum of many tiny stop outs. (hope this makes sense)
I think i'm rambling now, LOL
In summary, I try to decipher the over trend by "reading" the overall sentiment of the overnight action of the London, Asia and pre-market US sessions, along with the sentiment of the news announcements.
I then pick a direction and enter into the market.
Whats my odds of winning?
Lets say there are only 2 options, the markets end in either an up day or down day ( we wont worry about the market closing at the previous days close).
So I have a 50/50 shot at this.
If I'm wrong, I go the other way for the rest of the morning.
Too simple? maybe...
Maybe this will help others, as this HAS convinced me to trade this way now.
I use a higher time frame chart.
Look at the attached pic.
I am on Pacific time zone.
The black background is US open session.
Look at price action on each of these days for the past 4 weeks on this chart.
You usually get 1 or 2 different directions on the day.
So in the past, I was trading on small time framed charts getting chopped up in every which way possible.
Now with this chart, I can breathe and relax and go with the flow.
Little too early to read, because we just have Asia markets now.
London will open in few hours.
But this is what I have, look at my chart on the far right for current price-action.
Red down price bars.
Look at CNBC.com for current Asia sentiment,
"Asia Stocks Slide on Renewed Spain Debt Fears" -CNBC.com
My bet now is to the down-side,
BUT, look at how many major US news announcements due for release tomorrow morning, there are about 5, but you can lump some of these together as they are related.
The first round of announcements (CoreRetailSales, RetailSales, Empire State-MI), if these are all bad releases, OH MY, lets do it "Short" !
Last edited by marker; April 15th, 2012 at 10:47 PM.
The following user says Thank You to marker for this post:
Sure, I actually took a small short trade, few hours ago, based on my red price bars, and Asia down sentiment.
Since it's sunday and overnight action (and I'm taking care of my 7yr old and 10 month old) I set a 12 tick target short at 790.5 at 16:34 pacific time.
It went against me for 17 ticks, remember, I use no stops.
So what, I trust my longer trend red bars and Asian sentiment.
Then my hard target hit at 17:46 pacific.
Done and off to clean the mess my kids made.
I'll confess, its only one contract.
Danger for me trading overnight action, so slow and boring. LOL.
PS, i hope to get into posting a journal soon on my charts to detail my indicators and what not....no rush, dont want to jinx myself, yet, LOL
Just wanted to post a thread on how my mind works before open bell. hope it helps.
The key, is HIGHER time frame charts, and CNBC market sentiments.
Plain and simple.