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This post is almost unbelievable, there's an old saying that goes something like, "You can't provide enough evidence for an unbeliever, but believers require no evidence."
I took a short trade that was banging on the door of the Buy Number and thought I'd post a chart of how I watch price rotation in a existing trend and decide on entry points. As I was marking up the chart the U.S. session was opening and I just kept mapping out my thoughts. There are several charts and I hope I can do them justice with my commentary.
This first chart shows the entire Globex Session form the open to the "taking out" of the Buy Number, a nice trend for sure. During the last few hours price "walked the line" of the -2 SD of the VWAP. Entering a move like that can often be intimidating if I feel I've missed the move and ought to just let it run, without me.
That was the initial purpose of this post, showing a method I use for entering the 6E when, the train has left the station, or maybe more important when not to enter. This chart shows a bunch of white lines and dotted lines (the angle of these lines means nothing). The idea is, that I believe normal price rotation of this market is +/- 14 points. So after a new low is put in and the next bar fails to make another new low, I look for an entry 14 ticks above that low, simple enough. As can be seen on this chart there were a few opportunities to enter this down trend using this method. Also, if I use this method to get in, I can also use it to bail out if I need to. If price pulls back to deep I'm out. What's to deep, +/- 20 ticks seems to work well for me. If I see a pull back against the trend of 20 ticks or more and the market doesn't continue in the original direction, the trend my be "fix'n to turn around."
Yea, but. Nothing works all the time. True, but I believe traders have to hitch their wagon to something, whether it's Gann, Fibonacci, candlestick charts or phases of the moon. This is just another piece of the puzzle, something I use to augment my other studies. Also remember the 6E is the tail, the cash market is the dog. This chart is a close up of 5m bars as the U.S. session opened while the market was trading on the Buy Number. After the low at '04 was put in the market traded above '18 (+14 ticks) and rotated above the Buy Number. Since this is the Buy Number I studied this movement and took a long trade, my risk is minimal, my stop is "anywhere" below the low. I wanted to see price reach up above +20 ticks off the low, and it did.
I wanted to see price reach up above +20 ticks off the low, and it did. This chart shows price poking it's head above the +20 ticks level, this (to Me) is an indication price my be reversing at this level and my long trade is with the correct direction of the market.
This chart shows price holding above the +20 ticks off the low. I also added the VWAP study to this chart. This movement above 1.3025 also coincides with the -1 SD level, this to me is another indication this trend may have found it's bottom.
There's always another piece to the puzzle. On this chart I removed the VWAP and added the Volume Histogram, this move UP has brought price back to the POC of the Globex session. I identify a target, the high volume area at 1.3043, however to get there price is going to have to make it's way thru the low volume area in the 1.3035 level.
Price moved up and entered the low volume area, the market is going to have to work it's way thru this level and I expect plenty of price rotation to reach my target at 1.3043 "ish."
As I did on the down move, I watch for those (-)14 tick pull backs in the up move. I trailed entry orders behind this market hoping to add two contracts on a deep pull back.
The reason I targeted 1.3043 "ish" is because that level also aligned with the VWAP, however the VWAP was still falling due to the big down move, so as the market went up the VWAP was inching it's way down toward price. To complicate things a little more, this is a Volume Profile and VWAP which began calculating at 2 am est, the upper value area is sitting near my target '42 and the VWAP of this session is '39.
I took profits at 1.3040, my trailing orders to add had one opportunity, and didn't fill.
Throughout the night the Mighty Euro clawed it's way to the big number 1.3000. IMO, everyone and their Brother-in-law were looking for the possibility of a short squeeze, maybe a run to the Sell Number at 1.3058. I've written this many times, hopefully to drive the notion home in the minds of new struggling traders, the market is an enigma, it's made up of countless moving parts and participants. Big traders, small traders, short, and long term traders are only a few examples, add in the methods they use and the diversity of these participants is compounded greatly. There is no, "one way" to trade the market, but the chosen method must align with the psychology of the trader, that's all I have to say about that.
Just prior to the market trading at 2am price was trading above the rising +2 SD level of the VWAP and made a high of 1.3012. The 2am bar opened at even (1.3000) and went straight up and traded at '15, since this level is above the +2SD level and within the range of what I call normal rotation around a whole number I entered sell orders at '05(+2SD Level), '14 and 16. The '05s and '14 were filled but the '16 was left behind. The target on this trade is normally the VWAP but today the Pivot was also sitting within a few ticks. As price fell and traded just above the VWAP and the pivot I began to consider the possibility of traders entering into this market long with the intention to stage a short squeeze. I took profit on one contract at the Pivot. I believe the market is driven by a force greater than the sum of its participants, bullish traders may want to move the market higher but when certain levels are breached sellers "from out of nowhere" can decide to initiate positions and thwart even the most powerful bull run, IMO, this theory plays out continuously throughout the day. To stage a significant short squeeze the market needs buyers to lift prices into the area where the shorts are forced to cover their positions, this short covering (buying) is the fuel that will propel prices higher, offering profits for the longs who need to sell their positions, to "someone." The reverse is true if an attempt is made to squeeze the holders of long positions. Where am I going with all this "basic" market crap, the point I want to make is, this bull bear fight exists on many different levels. I believe, this morning's price movement was indeed an attempt to force a short covering rally into the area of 1.3050, but as it was forming the tide was silently turned on many of the traders who positioned themselves long, with hopes of a run to '50. As price traded back up above the +2SD level, still within "normal" price rotation around the whole number, I added to my short trade on the +2 SD level. My target was just below the POC (1.2988) in the range of the -14 and -16 ticks below the whole number 1.3000. When price returned to the Pivot the long traders who were looking for a short squeeze, were now looking for the door. As price tested the session's low, the stops of the short time frame long traders who were hunting for the stops of longer time frame short traders offered the fuel to move prices to my targets. As I write this post the market did reverse again and put the squeeze on those traders at 1.3050, however, I'm not satisfied with the pressure of that move, I believe we may return during the U.S. session. There's an old saying, "If you want to take the market up, you have to take it down,,, If you want to take the market down, you have to take it up." I think this morning's early move was a good example of this.
When time permits, could you please explain how you traded (would trade) this morning's price action.
This price action appears much like the above post in "Just Try To Follow Along." Once price traded 20+ points above the low and ABOVE the -1 SD, it would be a "plan" to buy near -2 SD...target the VWAP...stop below the LOD.
Time to pull out another tool, Bollinger Bands, I haven't been giving them much credit on the charts I've posted lately. Yes, the move prior to 2am was similar but the one difference that might shake traders out was the fact the move was prior to 2am. Last night's move was not generated by the same traders as the "Just Try To Follow Along," example. I believe the different sessions need to be traded based "on their own" price action. At 2am the move down became "context" for the price action of the session that was about to unfold.
This chart shows the move down was still in progress at the 2am open, heading straight for 1.2900, the Buy Number, yesterday's low and the bottom of yesterday's Value Area. These areas aren't going to move they'll be fixed throughout the day at these levels, no matter which session we're trading. Also, the Bollinger Band study, its average and the SD bands will remain "true" throughout the entire Globex session. True, in the sense that it is a calculation of a simple 20 period moving average, not a volume weighted average like the VWAP. This volume weighting is why I start a new calculation of the VWAP for each session, IMO, it allows me to "get a read" on those particular traders trading that particular session. The second chart shows this, EU traders traded thru "their" VWAP from both directions many times between 2 and 6am. Also. it usually doesn't take long for the POC from a previous session to "come to the session that's in play," why, because it's volume. Usually the EU session volume soon becomes greater than the total of the Globex since it's open and the POC will "run home to mama." This happened at 2:50 am this morning, (just prior to the London Open). I believe the same idea holds true for the US session but the fact that the EU traders are still there (or maybe most of them) makes the shifts of the POC a little harder to read. But the US session VWAP with all the volume it consumes is a force to be reckoned with, if the Globex POC runs home to mama, think of the US session VWAP and POC as PaPa grabbing all traders by the scruff of the neck and dragging them along.
I chart all these different calculations of session VWAPs and keep an eye on the POC shifts throughout the day. The bridge between them all is Bollinger Bands. At the 2am open the upper B Band turned down (red) just below the Globex -2SD level and 14/16 ticks above the whole number 1.2900. When I see the upper band turn down in a down move I look for an attempt to test the most recent low. This was a pure play of the 14/16 tick rotation, I had orders sitting on the -2SD line that never filled, I moved them to 15 and got filled. Since the 6E never traded on even yesterday that was my target, I got it, and sat out the rest of the session, actually I slept. After the low was put in and the EU session was underway the market went range bound for several hours.
Keeping an eye on the B Bands during opens will often give a good indication whether follow thru is real or just a head fake. I took this trade at the U.S. open, using the "new" VWAP the market went one way, up. But if you look closely at the B Bands they show volatility was not a given (red areas signify contraction) compared to the earlier B Band chart (all green). I shorted this "weak/struggling" up move first at 69 (a few ticks above +14/16) then again near yesterday's EU session high (I sold 1.2978 yesterday). I'm looking for a pullback to the B Band Average, or 50, or the Pivot at '47 I took profits near the lower value area of the U.S. session Volume profile.
I moved my target after first probe went to 1.2946...covered at round number 1.2950.
I'm in the early stages of learning this OLD SCHOOL methodology. I'm not totally sure this trade even meets cashish's trade criteria. Just trying to get as much screen time as is possible.
Maybe a little more (maybe a lot) ???? down to '50 ?? I'm not going to touch it, long or short. Pigs get slaughtered !!
I'm adding charts to this post
The test of the recent low occurred (B Band signal) sometimes they come sometimes they don't. It's a hard trade to take in either direction and a hard trade to stay in if you're already short and are looking for continuation of a move. Buying the "new" low works too, the hope is a deep pull back or reversal, but often I've just been mired down in rotation for hours.
