I usually close all my positions 10-15 min before 4pm. Apparently, I've violated my own rules today by initiating a new position at 3:40, but didn't close it until market close. With the vol spike at 3:45 and TOS of SPY, the swing high should be very close to 1132.5. The pull back is very likely to retest EMA20 on 5 min chart or the slanted inverse HS neckline aroun 1131. However, I didn't pay enough attention to time factor. The mistake has turned a potential winner to loser (price dropped almost a point after future market reopen at 4:30). Another thing has to be careful is when fading the trend (look at the higher high and higher low of all the 5 min bars since 2:15, the uptrend is apparent), I have to be extremely nimble and should close out the fading trade if price pullback didn't occur right away (3-5 bars 15-25 minutes). The tiem period depends on the market volatility and time of the day. At open/close, price moves much faster than other time of the day, so if anticipated price move does not occur for 5-10 minutes, it probably won't happen at all.
I am reviewing intraday charts of YM and ES again after market close. On 2 min YM chart, it was a triangle with false break out to downside. Price reversed at the moment where apex forms and broke up thru extended triangle lines. The final move was at the same direction from yesterday's price trend. A long position can be initiated as price breaks above apex level and hold a little longer. I did recognize the triangle on YM in real time, but failed to acting on the last most powerful move after the false beakout on the down side. I actually just read it again yesterday from Richart Schabacker's classic TA book, which is my favorite TA reference. Chapter X Measuring rules and formation (False move and shake-outs) Page 333.
Ok, since all indices made new 52-week high either yesterday or today. I did some statistics study on SP500 daily price range breakout (Donchian channel) from 2000-2009. I used range 10, 15 20, 30 day 6 month and 12 month. The first breakout day is labeled day one. If next day (the second day) close is lower than the first breakout day, then it is considered pullback on second day. If the second day close is higher than the first breakout day ( 2 consecutive days) and the 3rd day's close is lower than second day's, then it is considered pullback on 3rd day. I did statistics up to 6th day, which is the 5th day after first day breakout (day one). In other words, if price pulls back on the 6th day, it means there are 5 consecutive breakout days. This is quite rare since SP500 is a mean reversion since 2000 based on my backtesting of some automated strategies (for instance, Dochian channel, moving average, naive strategy etc.). Since SPX has made 2 days consecutive breakout of 12 months high, there is 60% chance it will pull back on the 2nd day, 89% chance on 3rd day(tomorrow), 96% chance on 4th day.
01-06-2010 Today is FOMC day. So I expect the price will be in very tight range 1-1.5 hurs before 2:15. SPX pivot zone is 1133.1 to 1135.4. SPX tested lower pivot zone for the first 30 minutes after open and found support. Price made new high afterwards. I started around 11 ET. Price retest intraday high, but didn't exceed it after touching 1133.75. There was some vol spike. It could be double top, but for 10 minutes from 11, price didn't make lower low. Ok it could also developing a cup handle and will retest high at second time. From 11:20 to 11:50, I tried to do some quick scalp, but price didn't really move as expected. I exited with no gain/loss. 12:20, price hit lower channel line, I went long since YM shown triangle forming and it was third touch of the lower triangle line. Around 12:10 price hit the micro supply line and halted. I exited long thinking YM might break down the lower triangle line. I didn't take short here. Around 12:40, I shorted again thinking it could be a bear flag/penant. Since the vol was not higher at 12:30 at swing low as compared to 12:10. Selling was pretty much done at the moment. I took stoploss as price broke the micro supply line again. On ES, it looked like th eprice wants to retest big channel line (a throwback). I shorted at 1 PM at 1133.25 and covered at 1132.50 (probabaly the best offer at that time). Another reason I shorted there was it also looked like a HS forming. I didn't expect it would retest neckline before 2:15. No position since 1:10. It looked like some early bird selling at 1:45. My rule on FOMC day is no trade 1 hr before 2:15 (often too tight range-3 tick bars, hard to scalp) and no trade within 30 minutes after 2:15 announcement due to extreme volatility. At the moment I am down 0.25 pt. I'll resume trading at 2:45.
Ok. It is 3:44 and I am done for the day. It is a little strange that there was not much volatility after FOMC minutes released. Total trades: 7 RT winner: 5 loser: 2 net P/L: 1 pt I didn't initiate any trades within 15 min to 4pm. I got a lesson yesterday though my judgement was all right, I had to take the loss when time is running up. I don't keep any position after 4pm period. ES looked like a batman shape (w in the center and two wings on both sides). I made it up. Anyway, YM is a bit easier to read. A triangle shape. Selling the bulge at 2:36. I didn't catch the absolute high, but went short after the nice reverse bar formed at 2:40 and covered at 1133.50 The neckline of W between 11:30 to 2:30. Vol dried up at 3:15, short again expecting another leg down, but covered seeing the price could not break the neckline. I was thinking going long at 3:36 seeing potential bounce from the neckline after some period consolidation. However, YM could not close above the microsupply line. I didn't not go long. I didn't take short either as YM broke the lower triangle line because 1. I am running out of time, 2. based on today's price action, neither seller nor buyer was in good control. Price breakout and retest/throwback, so unless I took the trade early, otherwise the potential profit margin was not very good. Besides, there is atriple head neckline not very far away. Anyway, price did quickly bounce to the micro supply line again. Since I am still a beginner daytrader, I am trying to set my priority to be protecting my profit when it is 15-30 minutes to market close (4pm) rather than try to pick more. If someday I have enough money to meet the standard margin to keep position overnight, I might be able to extend my trade a little into overnight period. There will be some change to my working schedule. I would not be able to watch the market from 9-10am pacific time. I am planning to get up a little early to be able to trade market from 9:45 to 10:15 ET. I'll do paper trading for that specific period until I get a good read of the market shortly after openning. In general the volatility is often highest for the day for the first hour after market open.
have not read your whole journal so forgive me if these questions already covered: 1-trading just ES or YM also? 2-how many contracts per trade? 3-how many trades per day? 4-what hours trading? Thanks!!!
Hello, increasenow, I trade ES exclusively for now. I might try YM due to its small increament (5 USD per pt) as long as I trade small contract size (liquidity concern?). I trade only one ES contract 95% time now. I will occasionally add second one if I am seeing extremely good setup. I trade from 5-10 RTs per day since I went live trading about 2-3 weeks ago. Since I live in west coast and my job schedule in the morning, I trade from 11:15 am to 4pm ET (8:15 am to 1:00 pacific time). Most time I will close all my trades 10-15 minutes before 4 pm ET and I do not initiate any trade after 3:45 pm ET. Cheers!
So far, I am breakeven in my future account after all the commissions. It cost me 5 USD for every RT. I feel I am gaining some experience on price reading as well as trading. I understand it is going to be a long journal and I hope it will eventually lead to my goal. Well, trading is more or less like any other professions. No one can learn to be a great pianoist for a very short period. It takes time and practice to be proficient. By the way, I just saw your notes in pair spread trading thread. I noticed that DOW-SPX spread is a wonderful divergence indicator to the indices price. This is very interesting. Thanks for coming by.
my indicators are showing a sell ES vs YM buy SPREAD trade now...entered it now via demo...2 contracts each...will update tomorrow...IMO