I am creating my own "system" or method of trading and will craft it into a trading plan. It is based heavily on price action but also has some elements of market microstructure, or being aware of order flow - i.e. where are clusters of supply and demand and where are the liquidity vaccuums? Kind of a blend of Al Brooks, Don Miller, Carol Osler, Sam Seiden.
Anyway, I digress. What I am trying to establish, and I realize this may not be easy, but I would like to try and find a method to find out in the first half hour or so of trading (futures) what kind of day we are going to have.
I have classified typical days as:
Non-volatile rangebound day, including slight bull and bear channels
Volatile ranging day
Non-volatile, sluggish trend
Volatile, urgent trend
I know this will be dependent on probabilities but the variables probably depend on the one or more of the following:
What kind of a day did we have yesterday?
Where are we with respect to the weekly open?
What is the daily chart looking like? i.e. trending, rangebound, etc
What does the hourly chart look like?
If anyone has come up with a rough guide as to things to look for I'd appreciate it. My setups will depend on the expected type of day, but will not be rigid as we all know the market is constantly evolving. But if it is clear we have a non-volatile rangebound day then I will be looking to enter on limit orders rather than stop orders for example, or if we have a strong trend wait for a pullback and enter on a stop order, simple stuff like that. Any help, thoughts much appreciated.
The following 2 users say Thank You to keymoo for this post:
I do not have a way to predict or even estimate with any great accuracy what kind of day we will have... but I find that reading price action with respect to yesterday is very helpful:
- gap or no gap? (tends to be more rangy without a gap)
- RTH trendlines, channels...etc.
- S & R, including Y's open, close, high, and low
- volatility characteristics
- any longer term S & R, price magnets, multi zero price levels...etc.
Then watch the first 15 mins and see how the market participants interact with the most important levels you have determined.
"...the degree to which you think you know, assume you know, or in any way need to know what is going to happen next, is equal to the degree to which you will fail as a trader." - Mark Douglas
The following user says Thank You to Anagami for this post:
Like you said, nothing is chiseled in stone but I look at what happens at 10:00 to 10:30 to tell me which way it's headed.
If the 10:00 turn around is good you should know by 10:30....if it doesn't turn around it should maintian direction....
I suppose you can pick out something in the first 15m but I wait till 10:00 most of the time.
The following user says Thank You to kbit for this post: