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RT'ers
In response to Queries from Dennis Peterson and others, here is a gif
of the short-term trading set-ups mentioned in the "So You Wanna be"
post.
Three varieties of short-term opportunities are presented:
Expansion bar reversal day (Red OHLC Bar): these bars represent
a short-term "over-sold" condition. You will be looking to be a
seller the next day. Since the odds are very high that the market
will trade higher the next day, we don't want to enter the trade
until it has either penetrated today's High, or come very close.
final entry into the postion can be made in several different ways
depending on your prefernces or level of aggression as a trader:
1. ) You can wait until the market trades over yesterday's High
(In the case of a SEll signal) and then place a Sell-Stop underneath
yesterday's High by a few points, so the market will pick it up on
the way down.
2. ) You can wait until the price trades above or near yesterday's
High, and move to Intraday charts, now looking for confirming
oversold conditions such as High RSI's....etc. to enter the trade.
Keep an eye out for MA's, Fibb's, Bollinger bands, or whatever you use,
That might suggest a handy reversal point as well.
OPP # 2 Contraction Breeakout Set-up (Yellow OHLC Bars)
Breakouts from the High or Low of this bar can often present an
excellent short-term trading opportunity.
Methods of entry:
1. You can simply place a Buy Stop above the High, and a Sell Stop
below the Low, before the Open, If you are aggressive.
2. larry Connors and Linda Raschke have both mentioned the number of
times that this bar can be whipsawed, and suggest that when one side
of the trade is filled, that traders double up on the other side, so
if they are stopped out, they will also be reversing their position
to remain in the trade. The assumption is that the movement out of
the bar will be sufficient to make u for the loss, plus add profit.
2. I prefer to trade it the following way:
A. market must trade for one hour before placing orders.
B. Price must be inside yesterday's range, before stops are placed.
It's OK if the market is trading outside the range, and then moves
back inside the range, just as long as the current price is within
yesteday's bar length when the orders are placed. Basically trading
it this way greatly reduces the chance of the Floor taking you out
on an early false break. Sometimes, you will miss trades doing it
this way, but I get much fewer whipsaws, and smaller drawdowns.
Opp # 3 Multiple Swing Bars.(GREEN dot on High or Low)
For buying opportunities, the Green dot will be on the bottom of the
bar. For Selling opportunities, the dot will be on the top of the
bar.
These can be lucrative, but are tricky to trade. Points of entry
can be attained at two levels.
1. The bottom of the "swing bar"
(In the case of a Buy set-up) where the green dot is. You can wait and
see if the market trades through this level, and then place a
Buy-Stop above the dot by a few ticks. Don't Buy the market "cold"
This is one trade where we want the market to come back to us. we
don't want to step in front of a freight train. :)
If the market trades near the dot, and then starts to move up,
consider buying it, with a stop under the dot. If you get stopped
out the loss is very small, and if you are right, the rewards can
be quite good. If you are going to do it this way, you might want to
go to an intraday level and look for intraday confirmation of the
Buy.
2. You can simply Buy any breakouts of yesterday's High, after one
hour of trading. I don't like to do this unless I am trading in the
direction of a larger trend, or I have support from a MA or other
source.
I would like to note that at times when these swings present
themselves as small "retracements" of a larger mid-term (10-
15 day) trend, I become much more aggressive, because these trades
can be excellent entry into a position held over the next few days
as the market resumes the trend. Conservative traders might want to
take only these set-ups.
Exit Strategy:
with the 1 exception of the above mentioned swing bar taken with the
trend, I am VERY defensive of profits. These are usually extremely
short-lived set-ups, and you need to take the money and run. :)
I usually will trail any profit at 50% of the total profit accrued.
All of these set-ups lend themselves very well to Intraday Traders
who wish to have a basic idea of which way the market will probably
be heading , as well.
Also consider the build-up of swing bar dots in one location as
a level where a lot of longer term money may be hiding. If the
market ever trades through them, it will sually take off. :)
Well, Hope you enjoy the gif.....
Walt Downs
CIS Trading
http://www.cistrader.com
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