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

  #71 (permalink)
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Congratulations on your journal!



In the spirit of our March Trading Journal contest, I am asking everyone to spend a few minutes and share their journaling experience.

A) What are the top five benefits you have seen as a result of regularly posting in this journal?

B) What are the top five problem areas you have identified as a result of regularly posting in this journal?

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Thank you for taking the time to answer my questions. I appreciate your posts, and I hope you have benefited from your journal. I also know that others will benefit as well, just by reading about your own experiences.

Enjoy your weekend,
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Thank you for a great journal and very thorough analysis. I have just started trading 6E so this journal helped me a lot.

Please continue, it has been very useful to many of us, I am sure.

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

A Few Great Trades

I've been thinking about breathing a little life back into this thread and just couldn't come up with a topic, I still can't, so I thought I'd share today's trades. For me, this was one of those days where everything went as planned. The first chart shows two attempts I made last week at taking out that POC sitting at 1.2791. I got caught in that big spike down on Wed, 5-16. Thursday I caught some of the Asian up move but the push into the Frankfurt open fell flat. I was out of the market Friday doing lawn work when the POC was taken out.

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The next chart is Friday's volume profile. With the huge amount of shorts in the market I figured this low volume area between 1.2757 and 1.2740 would be tested soon after the open on Sunday night.

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The area was tested down to 1.2750 but not 1.2740 which is the upper value area of Friday's profile. I took a buy signal during the Asia session and took profit at even 1.2800. When price traded on my sell number 1.2808 I sold, when my buy signal failed to take out the high at 1.2814, I sold more. My target to cover was 1.2784. Just prior to the European open I took profits on half my shorts. The market dropped and triggered my 2am return to mean trade, I covered the rest of my position. The market went range bound and struggled above the falling VWAP so I sold again, with an intention to test 1.2740. When price dropped to 1.2760 and started "walking" the B Bands and continued to trade below the -2SD band I moved my target to my pivot 1.2726. Price bounced off 1.2733/32/33 a couple of times minutes before the US open, it felt like forever. I shoved my target to 1.2730 and covered. This was a long night, I called it a day. I think this market is still searching for balance (as always) in a totally out of balance world!

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Last edited by Cashish; May 22nd, 2012 at 04:45 AM.
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  #74 (permalink)
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Welcome back

Mike

Due to time constraints, please do not PM me if your question can be resolved or answered on the forum.

Need help?
1) Stop changing things. No new indicators, charts, or methods. Be consistent with what is in front of you first.
2) Start a journal and post to it daily with the trades you made to show your strengths and weaknesses.
3) Set goals for yourself to reach daily. Make them about how you trade, not how much money you make.
4) Accept responsibility for your actions. Stop looking elsewhere to explain away poor performance.
5) Where to start as a trader? Watch this webinar and read this thread for hundreds of questions and answers.
6)
Help using the forum? Watch this video to learn general tips on using the site.

If you want
to support our community, become an Elite Member.

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

Some days make it all worthwhile, I had just that experience this morning. If it wasn't for my children (and Grand children) I probably wouldn't be as patient as I am today. In fact that's why I started trading leveraged futures in the first place, to make a lot of money in a hurry. Maybe that's not the best reason, but it's mine. On a day like today what patience I do have still struggles with my desire to take profits and my trust/commitment in the readings of my indicators. Today wasn't as pretty as it could have been, but my trust in my analysis and my commitment to my indicators won out, and the trade slowly continued to unfold as planned.

When it all Comes Together, it's a Beautiful Thing

This chart shows what I was looking at prior to 2am. With only the GFK Survey on the economic release docket, I felt this session could be traded without interruption, barring any breaking news. My plan at the open was to buy or sell the first tag of either the +2 or -2 SD level, the target would be a retrace of the value area a potential profit of 20 ticks. I felt buying the -2 SD level held the most risk since this level was only 6 ticks off the session low and 9 ticks off yesterday's low. If the -2 SD triggered the buy I'd put in a tight 10 tick stop, 1 tick below Yesterday's low at 1.2515.
I found a typo and ain't gonna' change the chart, Yesterday's VWAP is 1.2569 not 1.2576

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The GFK report was released at 2am as the session opened, the number was good for the Euro but the market fell triggering my buy @ 1.2525. The market paused and traded in a tight range for several minutes, never testing the low again, then slowly moved higher. Price rose to the VWAP and rotated there for several more minutes but again never moved lower. About 20 minutes after I put the trade on my target was hit as price moved above the +2 SD level, I took profits as planned.

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After the +2 SD level was penetrated the market pulled back to and thru the POC but failed to trade on the VWAP. I usually try to get flat before the 3am open, guarding myself from a common pull back that sometimes can go quite deep, and often reverses an existing minor trend. But given the price action on the pull back to the VWAP I thought if could get into this move I could catch a continuation to my Pivot, exit and still be flat at 3am. I was filled 1 tick above the +1 SD level @ 1.2543 and again took profits at my target, the Pivot @ 1.2555 just prior to 3am. The market moved higher and I began to consider the possibility of the 3am traders joining in on this move and continuing this trend. It does happen, not very often, but it does happen.

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For this market to get to 1.2555 it had to enter into the previous day's Lower Value Area, that level was 1.2550. After taking out the pivot, price rose to 1.2561, this represents 42% of the LVA and this move is showing no signs of slowing. I decide to enter again and target Yesterday's POC. When I look at this chart I can see volatility expanding, price action above the B Bands and price action building distance above the +2 SD level. I start trailing a buy order under the market one tick above the +2 SD level and trail a stop along the +1 SD level. On the 3am bar my buy order is filled and I'm back in this thing!

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This time I didn't take profits on Yesterday's POC. Volatility was still rising, price was trading above the B Bands and price remained above the +2 SD level. I held the trade and targeted the Sell Number @ 1.2594. On the close of the bar on the hard right edge of the next chart the lower B Band began to turn up (turns red). In my previous posts on B Bands I've detailed this signal as an exit signal. I've also mentioned a final test of the latest high of the trend is also often attempted when this signal appears (second chart).

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Volatility is contracting, the recent high was tested and exceeded, but I stay with this trend, why? Several reasons, first, the market is close enough (in the 80's) to begin rotating for an attempt at even (1.2600). With this price rotation in mind I'll move my stop to 16 ticks under the most recent high, if price rotates beyond that level I'll be stopped out. Secondly, it isn't that uncommon to see the lower B Band turn up, volatility contract and price continue to inch higher as the market hits a significant resistance level. Third, since the recent high was tested and exceeded is a major distinction over a high that was tested and failed, yes 6 ticks ain't that much higher, but price is now in the upper 80's, that is significant. Lastly, and most importantly (in my experience) is the fact price has maintained it's ability to remain above the +2 SD level since this trend got it's legs. If at any point the +2 SD level is breached it's time to head for the exits.

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I said it wasn't pretty, and I know nothing works all the time, every time, but this morning everything worked out fine.

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There's no School like the Old School


Early Friday Close, Sunday Night Globex Open, Asian Trade, European Whit Monday and U.S. Memorial Day

I usually watch the Sunday night open and often place trades during the Asian session. This Sunday is a bit different, but the FX market is trading and for lack of subject matter I thought I'd post a few charts and explain what I look at on the 6E Sunday open. Basically, I treat Sundays like any other day after spending a few extra hours during the weekend analyzing price moves of the prior week. Since Monday (5-28-2012) is a Holiday on both sides of the Atlantic I start with Friday's Globex early close. I consider the 6E the tail and the FX Cash market (FX) the dog, so the first thing I look at is the last printed price of the Globex 6E on my chart in comparison to the last printed price on my FX Cash market (FX) chart. Sometimes when the Globex closes early like it did on Friday I'll notice a greater difference between the two prices (usually depending on the time of the Globex early close). Same is true with the Globex open compared to the FX open, since the FX market opens at 3pm est on Sunday and the Globex opens at 6pm est the difference in the opening price can be significant if the fundamentals of the market have changed or a breaking news event is influencing price movement. Using this weekend as an example, the early close Friday on the Globex left 1.2516 as the last (posted) price on my 6E chart and 1.2514 an hour later the last (posted) price on my FX chart. OK, OK, OK the settlement price of the 6E was 1.2518 I'm not concerned with that, I'm just comparing the last printed prices on the two charts to get an idea if FX prices moved away from the 6E when the Globex was closed and the FX continued to trade (in this example, for an additional hour). Friday's FX price movement remained relatively flat after the 6E early close on Friday.

I look at several volume profile charts of the price movements of the prior week and look for overlapping value areas (consolidation) or value areas separated by thinly traded low volume zones (trending). Here are two charts of last weeks 23 hour Globex sessions.

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I also use daily Trend Reaction Numbers and review those charts prior to the new week. This chart shows last weeks TR Numbers and how the market traded in reference to those levels, this chart also has the TR Numbers calculated for the Monday session.

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This chart is a "rainbow" histogram, same data as above just a different visual effect. The highest volume (hot) areas are highlighted in red and the lower volume (cool) areas are charted in blue/black, this chart also has the TR Numbers for Monday.

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On Sunday's the Globex 6E session opens 3 hours after the FX cash market so I watch the price movement at the FX open and compare the first few bars ranges in reference to the TR Numbers calculated for the upcomimg day. Todays FX open on my chart was 1.2555, it made a low of 1.2549 and a high of 1.2578 creating a 29 tick range prior to the Globex 6E open at 1.2570. This gap up begs the question why, why did price gap up, political comments, civil unrest, a change of trader's sentiment or lack of liquidity could all be possible "reasons." IMO, what is most important is the fact price did gap up, not the reason why. Before I begin any trading session I check the news and read a couple trusted market commentaries. After a quick review of current news, I found nothing Earth shattering to suggest an all out panic in the markets. If I examine the chart above, the 6E open at 1.2570 was at the lower edge of a high volume area which encased the 1.2582 TR Sell Number. Below is a chart showing the Sunday night price movement of the 6E within the high volume area below and above the 1.2570 open. Trend Reaction Numbers often seem to provide a contradictory purpose. The Buy Number can serve as support in a rangebound market and also serve as a breakout sell number in a trending market. Vice versa for the SN, the Sell Number can serve as resistence in a rangebound market and also serve as a breakout buy number in a trending market. Knowing the market I'm trading can be most beneficial in determining whether to buy or sell these levels. Looking at the volume profiles of the last three days I conclude this is a consolidating market, bound within a rage from 1.2580 to 1.2520 with occasional attempts at each extreme over the last two days.

The Sunday open in the high volume area offered an opportunity to either buy or sell the the projected TR Sell Number. As price rotated around this level I concluded another test of the low volume area between 1.2605 to 1.2623 might be tested. My studies have shown if I use the Sell Number as an entry for a long position in anticipation of a breakout or continuation of a trend a likely target is a distance equal to in points the distance from the Pivot to the Sell Number. In this example the Pivot is 1.2539 and the SN is 1.2582 a distance of 43 ticks. With this information, my projected target for a long trade with an entry on or below the SN would be the SN plus 43 ticks or 1.2582 plus 43 ticks placing my target for the trade at 1.2625.

The decision to enter this trade long is based on the notion that price must not return to or trade in the proceeding day's Upper Value Area at 1.2555. The "hot spot" on the above histogram or the high volume area is where I expect the market to continue to trade. If the market trades lower and into Friday's Value Area, a test of the Pivot would be expected, and a short trade off the SN would be in play.

This chart shows price rotation after the Sunday session open and into the Asian open, the market traded lower and found support, traded lower again and failed to make a new low, I entered long on the POC at 1.2570 (the open).

os128
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This was as I expected, a long slow boring trade with very light volume. I trailed my stops on the VWAP locking in profit once price traded above the +2SD band. I put target orders in the area between 1.2620 and 1.2625, all were filled.

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Below is a chart showing the Sunday/Monday session at the Monday early close 12:00pm central time.

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  #77 (permalink)
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This is an EDIT of my previous post. It appears, I didn't post a few charts properly, silly me.
Anyway, here they are, for what it's worth.

If anyone does look at these charts, they may notice these levels came back into play on Yesterday's (Sunday's 6-8-12) open.

This is an EDIT, These charts are from the May 20, 2012 open thru the May 25, 2012 close.


Cashish View Post

I usually watch the Sunday night open and often place trades during the Asian session. This Sunday is a bit different, but the FX market is trading and for lack of subject matter I thought I'd post a few charts and explain what I look at on the 6E Sunday open. Basically, I treat Sundays like any other day after spending a few extra hours during the weekend analyzing price moves of the prior week. Since Monday (5-28-2012) is a Holiday on both sides of the Atlantic I start with Friday's Globex early close. I consider the 6E the tail and the FX Cash market (FX) the dog, so the first thing I look at is the last printed price of the Globex 6E on my chart in comparison to the last printed price on my FX Cash market (FX) chart. Sometimes when the Globex closes early like it did on Friday I'll notice a greater difference between the two prices (usually depending on the time of the Globex early close). Same is true with the Globex open compared to the FX open, since the FX market opens at 3pm est on Sunday and the Globex opens at 6pm est the difference in the opening price can be significant if the fundamentals of the market have changed or a breaking news event is influencing price movement. Using this weekend as an example, the early close Friday on the Globex left 1.2516 as the last (posted) price on my 6E chart and 1.2514 an hour later the last (posted) price on my FX chart. OK, OK, OK the settlement price of the 6E was 1.2518 I'm not concerned with that, I'm just comparing the last printed prices on the two charts to get an idea if FX prices moved away from the 6E when the Globex was closed and the FX continued to trade (in this example, for an additional hour). Friday's FX price movement remained relatively flat after the 6E early close on Friday.

I look at several volume profile charts of the price movements of the prior week and look for overlapping value areas (consolidation) or value areas separated by thinly traded low volume zones (trending). Here are two charts of last weeks 23 hour Globex sessions.

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I also use daily Trend Reaction Numbers and review those charts prior to the new week. This chart shows last weeks TR Numbers and how the market traded in reference to those levels, this chart also has the TR Numbers calculated for the Monday session.

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This chart is a "rainbow" histogram, same data as above just a different visual effect. The highest volume (hot) areas are highlighted in red and the lower volume (cool) areas are charted in blue/black, this chart also has the TR Numbers for Monday.

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There's no School like the Old School


Gap-and-Go or Gap-and-Crap

Wow, what a move during the Monday session. Spain finally asked for some aid money and the 6E opened up 135 points from Friday's close. I've been wanting to sell that POC @ 1.2660 for weeks, but I thought I'd be closing out a long when I did! I watched the cash market open and waited for the 6E to open, when it did I went all in and sold above the POC. Three times that area around 1.2620 held off up moves (see first chart). During the first two attempts I figured if the market would just get to that POC a major short squeeze would air this thing out, but no. I sold the third attempt last Thursday, my Sell Number was sitting right there and the trade went profitable quick. So that area around 1.2620 was my target for Sunday night's short trade. It didn't take long to go profitable and price stayed below the VWAP, keeping me in the trade. I covered in the twenties and stayed flat, I'm glad I did because it took 7 hours to make a lower low (second chart). When that low was finally taken out the market never looked back, price walked the -2 SD of the VWAP most of the day and made it's classic rotations around the 50's and 00's (last chart). Why didn't I keep one of those shorts from 1.2660? Because I thought it was going up! And I slept through most of the move sitting in my chair slobbering on myself.

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There's no School like the Old School

Trusting those Squiggly Lines

I've gotten a few requests to elaborate on the signals provided by the studies I use in my trading. First, I want to thank everyone who's continued to follow and view this thread. Secondly, I want to make it known I like big charts and a lot of them. Most of my charts show the same thing, just different combinations of studies and time frames. I have Volume Profiles and VWAP charts that start at the Globex open and charts that start their calculations at the European open, and the US open! I don't like clicking here and there to see a different perspective so I display them all, all the time, with a few exceptions of course. So, I look at many charts to make even the simplest trades, that's my style. The problem I have with posting trades is to decide on which charts to post, and which comment about which indicator is most beneficial when reading the thread and viewing stagnant charts. The following are my two trades from this morning, not real pretty, but I thought they held "special qualities," that may be of interest.

This first chart shows Yesterday's completed Globex VP and Today's VP at 1:55 am Eastern. I also display a chart that captures several days of profiles (not shown), usually from a point in time that captures the latest significant move, for instance, back through June 10th. This allows me to see at a glance any Virgin POC's that may come into play as the session unfolds, as well as the levels of intra-day POC shifts.

This chart shows the VP, VWAP, Today's Pivot Number, Yesterday's High/Low and today's High/Low. I removed the price bars to enhance the view of several things. These are things I noticed when I opened my charts for this morning's session. The VWAP and POC are "on top of each other" below yesterday's value area. When I see the VWAP and POC "on top of each other" this alerts me to the high probability that price can move freely in either direction, usually between the -1 & +1 SD levels, often in a single 1 minute bar! Today's POC has been shifting around below yesterday's value area. Today's Pivot is in alignment (same level) with a POC shift from yesterday. In the last few minutes price moved up and traded on the pivot, which is sitting on the VWAP's +1 SD level (price is highlighted on the Y axis). Today's High (made at the open) is one tick under the virgin POC of yesterday (on my chart). This one tick difference isn't that significant, what I do consider significant is the fact the market left that level at the open and continued to trade lower.

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This chart shows the first trade. This market is showing no direction, I believe price can move freely between the +1 & -1 SD levels at will, and I expect it to! With yesterday's (virgin) POC sitting on the session high and price trading around the Pivot, VWAP and POC, I'm looking for a fast (long) scalp trade from the area around the previous POC shift, lower value area and -1 SD. I enter a buy order @ 1.2680 and target the pivot. Price quickly dropped below the value area @1.2676 but failed to touch the -2 SD level. Price traded back up, thru the POC, and VWAP, and returned to the Pivot, sitting on the +2SD level. A note, when I see a VP that looks "square" or "chunky" meaning it has a "flat face" I continue to be cautioned because, most often, when this pattern appears price can travel up and down "the face" at will, with little or no resistance.

At this point, I'm still not sure of the markets intended direction. There's a lot of economic data to be released during this session and I'm keeping a close eye on the release times. However, given the wild high volume moves of yesterday, I'm leaning towards a range bound session between yesterday's low and yesterday's POC.

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Given the shape of the VP, the range of the session, and the anticipation of economic data to be released, I decide to take another swing at a long scalp, this time a little deeper on the entry. I place my order to go long just under the -2SD level at 1.2672 and again target the pivot. I believe eventually this market will test the upper level of the VP and yesterday's POC.

As you can see on this chart, this is where everything started to go wrong.

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As you can see on this chart, this is where everything started to go wrong.

The first indication was the intensity of of the down move thru the -2SD level. That was the high volume bar for the session. When I enter trades I place a hard stop 20 ticks under my position, most times I never move it. If my analysis is correct the trade should go profitable and never look back. This is not to say I don't tighten the stop after entry, often I do, but if I put on a trade I'm comfortable with the risk at 20 ticks if my connection goes down or if I need to nurse the trade. The down move thru my buy order had break/down written all over it. But price only traded once on 1.2651 just one tick from my stop. The market rattled around there for 20 minutes and slowly lifted. Then quickly lifted, then returned again, but only traded down to 1.2655. So WHY hold on to this trade bearing down on my stop? To explain, I need more charts.

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This chart shows the "special qualities," I referred to in my opening statements. Nothing really "special" but this chart does show what I look at and the amount of trust I have for the readings generated by the studies. I believe, if I don't trust the studies on my charts with the maximum amount of capital I place at risk on every trade, they shouldn't be there. In this chart I've highlighted the Bollinger Band Study. This is a great study if used properly, understood and trusted. I've written about this study before but this example is a different perspective. This trade went sour at the entry and a decision had to be made to cut and run (take the loss) or stick with the trade and "hope" it could be nursed back to life. Remember, I was absolutely comfortable with taking a 20 tick loss on this trade, that isn't the issue. The "special quality" of this chart is showing/posting how I use the B Band Study.

My buy order was filled @ 1.2670 on the 5th bar to the left of the fuzzy yellow line. This was originally a counter trend trade, my expectation was price would touch or slightly trade thru the -2SD level of the VWAP and quickly repel back into the value area and return to the pivot. The key here is counter trend trade. When I'm trading counter to the trend, often times my indicators are signaling an entry position in the other direction! That is the case on this chart, the entry signal for a short trade was also the 5th bar to the left of the fuzzy yellow line. With the expanding B Bands and price trading tru the -2SD level going short is the signal. If I use the -2SD level as a entry for a short position where's my target? Where's my exit? If I took this trade short, my first thought for a target would be 1.2650. But, knowing the 6E as well as I do I have a simple rule that often pays nice rewards, that rule is take profits going to whole numbers, not going through whole numbers. In this case a short would have worked for me. But I took the long trade, and stayed with it. The decision to stay with the long trade was also defined by the B Bands, here's how. First let's agree if price traded on 1.2650 I would have taken a 20 tick loss. The fact that it didn't could be just plain luck, I'll give you that. But also remember I had a decision to bail out of this trade at any time, I also had the opportunity to add to this position at or near the lows of the day (at the time).

When taking a short trade with the trend I look for price to trade below the B Bands and stay and trade below the -2 SD band. When this market failed to trade on 1.2650 and stop me out I watched the price "lift" and trade inside the B Band. The long up bar (yellow line) STAYED inside the B Band and traded back thru not only the -2 SD level but also the -1 SD level. I'm not "out of the woods" yet on this trade. During the painting of the big up bar the upper B Band turned down, this is an indication that the trend (down) is over. However, many times after this upper band turns down price will make another attempt to test the most recent low, and sometimes continue in the original direction. The yellow circle shows the failed attempt to make or test the previous low. This indication of this indicator was the reason I held on to this trade. The rest was just sit back and let the market slowly churn and turn it's way back to the pivot.

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It was a long wait, this chart shows resistance (green circle) which was expected after spending more than an hour trading below the VWAP and POC. During the time the market traded in the lows (below-1 SD) a high volume area began to build, if the POC was to shift to this level, the outcome of this trade could have been much different.

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A Bonus Trade

While I was writing this post the 6E came tumbling down. I threw in a buy order on the Buy Number and set a tight target on the US session VWAP level, a quick bounce and a quick fill.

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Cleaner Chart


Simply observing price action. How it reacts at certain levels on both the VP and VWAP. Just taking my time trying to learn all that I can.

Cashish, thanks for all your posts. Insightful, and I'm sure most agree, very educational.

emini

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