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Trading the 6E Old School, With a Twist
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Trading the 6E Old School, With a Twist

  #321 (permalink)
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There's no School like the Old School


Just wanted to post a couple quick charts, but it took me longer than expected to get things right. I screwed up a few things this morning and feel like I'm all thumbs. This is pretty basic stuff but I find it helpful to remember why these charts look the way they do. This first chart shows price moving UP and across Yesterday's High with some nice volume, notice the "next" bar's Low, sitting right on Yesterday's High. After price cleared this area it began to consolidate around the TR Sell Number and build out the profile on the second chart. The point I wanted to make is, that's HOW the low volume area was "built" on the chart, a fast move through the price level around Yesterday's High. Also, after price rotated around the Sell Number making a couple new highs for the day Today's 50% Line inched higher and higher. I've written in a post above how I keep an eye on retraces back to this level. On this day, the "stars" were lining up at this level, the VWAP (1.3064), Yesterday's High (1.3062), 50% (Mid) Line (1.3058), Prior Settlement Price (1.3052) and the Whole Number 1.3050 ALL within this low volume area. IMO, each of these price levels deserves my attention, when they become clustered together the whole area takes center stage. Price has been consolidating for a couple hours just under this area, IF this market tries to stage an UP move these levels will be back in play. The market usually doesn't just continue to slice through levels like this, IMO, old traders leave and new traders come in, some have a history with the area in question and proceed cautiously, others just see a move and want to jump on, oblivious to the significance of the price levels in the area.


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  #322 (permalink)
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There's no School like the Old School

Follow Up



This post is a follow up of the price movements of Friday June 28 (last post). Price did stage an up move back through the area of low volume caused by the "slicing through" of Yesterday's (Thursday's) High. This time however price nibbled its way through the low volume area in a slow grinding trend with tight rotations and very small pull backs. A final surge lifted price above the area (6:15am) into what I call the gravitational pull of the TR Sell Number where it rotated for a bit before testing the high. This chart shows a nice thrust to 1.3092 and a quick pullback below previous highs. I believe this is a good example of the significance of prior Highs and Lows, 1.3092 was the High of the day on Wednesday. IMO, the fear of trading in this area to most traders was the news (and Fed member speech), but opportunity was there and I believe the area between Yesterday's High (1.3062) and or the 1.3050 level which was (at the time) a strong support level ought to have been viewed as an acceptable level to allow a trader to limit the risk on any long trades targeting the Big Whole Number of 1.3100 or the 2X Sell Number at 1.3111.



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Sell Numbers are for Selling

Readers of this post won't have to look back very far to negate my following comments but I invite those who do read these posts with an open mind to "do your own homework," and derive your own conclusions, don't take mine as gospel. In one breath I'm suggesting to Buy the Sell Number and the next I suggest Sell Numbers are for Selling, what's up with that! Context, the C word, the fly in the ointment, the uncertainty of trading.

IMO, context is dependent on YOU your market, your time frame, your studies, your risk and your profit goal on each individual trade. I'm going to back peddle again and mention a few things I keep in my head when trading the 6E.
  • 1.) The futures market is the tail, the cash market is the dog.
    2.) Take profits going to a whole number not going through a whole number.
    3.) 3 Standard Deviations away from the VWAP is extreme.


In these charts I compare the price movements of the above charts with the Volume profile and VWAP charts. In this Context things take a different look, (IMO). The UP movements of the second rotations around the Sell Number (7am to 8am) is outside the Value Area and reaching above the 2 SD level. This time these rotation have much more importance because these levels are calculated with much more volume than the previous times price traded on these levels. The failure to trade on the 2X TR Sell Number may be (or obviously is) directly related to the Cash/Spot market capping price at 1.3100. Combine all this with price trading above the 3SD level and the probabilities of price "running home to mama," (VWAP) increase dramatically, IMO. So what about the third chart below? Price traded below the 3SD level and never looked back! Context is King. The Yellow circle marks a level where price crossed below the -2SD level, this level also marks, a.) prior swing low, and b.) Yesterday's Value Area. The notion of Yesterday's Value Area opens up another can of worms. Yesterday's RANGE was NOT "normal," anyone who tracks the 6E should agree that a sub 60 tick range is rare. This asks the question what is "normal" if the average is 100 ticks, knowing this kind of information can be beneficial when price is dropping like a stone and I'm standing on the sidelines looking for a entry. There is another view of the market that I use, a topic for another post. Two more thoughts, price left Wednesday's low untouched and the COT report shows Large Spec remain Net Long!

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  #323 (permalink)
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Old School


@Cashish,
Please check your PM.
It's been a while but glad to be back. Very busy lately with a health issue and family matters. Has really hampered my time at my trading station. Still unable to be here as much as I'd like.

Waited for the London open...sold break below the 60ish level based on what I saw on my charts...price couldn't get above vwap and 20SMA and some eager sellers. A lucky guess

emini

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  #324 (permalink)
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eminitrdr View Post
It's been a while but glad to be back.

Waited for the London open...

A lucky guess

emini

Nice,

Nice to see you back, Nice trade, Nice guess and most of all, Nice pictures,, thank you so much, you are one "Lucky Daddy."


I'm not buying the "guessing" part, you're better than that! I'll add this line for you, for those who come after us .

After making his best assessment of the risk to reward on a short trade in an environment of total uncertainty , @eminitrdr followed his analysis and entered the short which he believed held an opportunity to achieve any multiple of profit targets, Once again his experience proved his analysis was correct, and he closed the trade with a nice profit.

All in fun, but a bit of truth I believe. I sit at "the machine" and call upon my experience to assess the market's movements, when I'm correct there is a roar from a crowd of one, this can be a lonely business if we let it.

Welcome back


Last edited by Cashish; July 2nd, 2013 at 01:27 PM.
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  #325 (permalink)
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There's no School like the Old School

Holiday Trading


This might be a very interesting Holiday trading session, last year the Mighty Euro dropped more than 400 points during the July 4th Holiday trading week. I'm just saying, if this market moves, the traders will be there.

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  #326 (permalink)
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A quick chart, FWIW.

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  #327 (permalink)
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Old School

When I arrived at my trading station at 1:40am EST, I saw a very tight, paltry range (1.2987-1.2965) prior to London open. My expectation was range expansion some time after the London open. Based on my analysis, I had targets in both directions. My initial target was ahead of the whole/round number 1.3000 or 1.2950 as Cashish has so often mentioned.
Based on what I saw on my charts, I took the trade on the break below y-day's low. My R:R was fine...initial target was ahead of 1.2950...final target the BUY number. Does this make logical sense to anyone? Just curious.
Anyways, I must run...a very busy day ahead.

emini

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  #328 (permalink)
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There's no School like the Old School

July 4th 2013


I'm going to come back to these charts when time allows. These are the price levels I had identified prior to the session open. Knowing President Draghi was stepping up to the plate to speak this morning and the early close for the CME futures, I figured the overnight action would be limited, trade-able but limited.


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  #329 (permalink)
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eminitrdr View Post
When I arrived at my trading station at 1:40am EST, I saw a very tight, paltry range (1.2987-1.2965) prior to London open. My expectation was range expansion some time after the London open. Based on my analysis, I had targets in both directions. My initial target was ahead of the whole/round number 1.3000 or 1.2950 as Cashish has so often mentioned.
Based on what I saw on my charts, I took the trade on the break below y-day's low. My R:R was fine...initial target was ahead of 1.2950...final target the BUY number. Does this make logical sense to anyone? Just curious.
Anyways, I must run...a very busy day ahead.

emini


"Does this make logical sense to anyone?" it does to me.

"...initial target was ahead of 1.2950...final target the BUY number." Yes, often if you take profit before the whole number you can "reload the boat" for another move, NOT always and NOT always immediately, but whole numbers most generally offer opportunity in their rotations. As for the Buy Number, I have a lot more information about those that I want to post when time permits. Here's a chart you might enjoy.

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  #330 (permalink)
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There's no School like the Old School

Livermore, Taylor, Raschke, Crabel, Fisher

There's not much new, when it comes to selecting an indicator to slap on a chart these days. Sure, we have intraday data that is much more refined and delivered to us almost instantaneously but the underlying currents of the market remain the same, supply and demand still rule the day and these levels are seen on charts as support and resistance. Livermore's trend trading method used swing highs and lows and these levels turned to pivot points as the trend picked up steam. Taylor also measured distances from swing highs and lows in his 3-Day trading method. During the 1990's everybody and their Brother-in-Law developed an intraday breakout system, most were based on an expectation of price moving out of a previous range (swing high/low?) by a predefined percentage. These intraday systems were "cool," because now (1990's) traders were going electronic, with real-time data and point and click trading software. Still today, there are dozens of ways to calculate a pivot number, name a trader, and they probably have their own Signature calculation.

I suggest, find what works for You. Maybe it's DeMark, Fisher or basic floor pivot numbers. I've noticed some scuttlebutt being generated about the Taylor Trading Technique mentioned in the latest Linda Raschke webinar. Linda has a few comments/suggestions published on how to read/study the Taylor Method in some of the editions of the Taylor book. She claims she has organized much of her trading around the works of George Douglas Taylor. In one edition (that I know of) of the Taylor book is another chapter written by George Angell, which defines a 3-Day Cycle Method he devised using the core of the Taylor method. George Angell is one of those guys you either "like or hate," he crossed "the line" in advertising and marketing his system and got himself railroaded out of the "business" for a few years. Honestly, I think I have all his books and I would recommend them to any Newbie Trader. This old book in particular is probably one of the most informative books on the many aspects of futures trading, a bit dated yes, but I believe any Newbie will get a little bit of everything out of it,, for 20 bucks.

Winning In The Future Markets: A Money-Making Guide to Trading Hedging and Speculating, Revised Edition: George Angell: 9781557381460: Amazon.com: Books

I believe both, Linda and George have a lot to offer anyone looking for "something" to call their own. I studied the Taylor book and at the time Globex was just coming of age. Since more and more trading was moving to the screen I shortened my time frame from days to minutes. Although I never hold positions overnight, I still use some of the basic concepts/theories of the Taylor method. I believe both Raschke and Angell went their separate ways with the Taylor Method, and IMO, both continue to do very well.

Your not going to find a red light green light trading program in the Taylor book nor are you going to find one in the rest of this post, but you may find an avenue for further study that you may build on for your own trading method. Below I will begin to outline how I use bits and pieces of the above mentioned traders to add to my own trading style. One of the things Taylor looked at heavily was averages, averages of "penetrations" of prior highs and lows and also averages of point moves from lows to high and high to low on what he called 'sale' days and 'buy' days. Remember, Taylor is writing these moves in a note pad he's holding in his hand and keeping in his pocket! In fact he has more than one, of these little "books," he has one for each of the markets he's actively trading, hence, "The Book Method." FWIW, I doubt Steve Jobs or Bill Gates are even born yet, when Taylor is scratching all this in his little note pad!

So here's the idea, take 4 measurements, (see below) and write them in columns, Rally, Buy High, Buy Under and Decline. The Rally number measures the distance prices moved from Low to High over a two day period. The Decline number measures the distance prices moved from High to Low over a two day period. The Buy High number measures the "penetration" of the previous high, the Buy Under number measures the amount of "penetration" of the previous low. These are the calculations, there's more to this but I had to start somewhere. The idea is a pattern will emerge, e.g., when price trades above a prior high this data will tell you on average over the the last (N) sessions price "penetrated" the High by (N) points/ticks. If, these numbers fall inside of another study you may have like an average range, then knowing the "average penetration" of the previous high may be beneficial to your trade. I made two little diagrams, the calculations are exactly the same on each. The reason I made two was to show how these numbers would look in a rising market or a falling market. I'll post more on this as time allows, this is just a starting point.
  • 1. Rally, Today's High minus Yesterday's Low
    2. Buy High, Today's High minus Yesterday's High
    3. Buy Under, Yesterday's Low minus Today's Low
    4 Decline, Yesterday's High minus Today's Low


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Last edited by Cashish; July 8th, 2013 at 01:08 PM.
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