and here is the same chart with Monthly and Daily pivots in place Notice that price continued to move south and may reach down to tag the pivot at 930. Currently that proposed short trade on the failure at 935 has a cushion of 4 es points. We would not be surprised to see it hit that pivot, bringing in at least 5 points. A decent payday.
For those looking at this along with me this evening we did this because we want to show some of the possibilities for developing a systematic approach to the overnight market. Clearly trading the overnight require different skills and interests and just as clearly one has to have the ability to monitor, anticipate and interpret the economic reports that cause Asian and European markets to move. In our opinion, tonight's move is probably not over. Generally speaking we anticipate moves of about 10 es points (or multiples of 10) from the overnight high to low during times of elevated volatility.
and before we sign off here is the same chart again and as can be seen we have tagged the 930 pivot. This trade (if one were on it) would have brought in about 5 ES points, and of course it may very well continue on down. Notice a couple of things here. First, the high is up at 940 and the current touch of 930 is (yes you guessed it) about 10 points lower. Secondly notice the reaction at 930 as buyers came into the market looking for a tradeable bottom. Is this a bottom, we don't know, but if you employed a scale out money management method you would have taken at least some profit at 5 points and you would have the luxury of being able to wait and see what happens. There is one more item of information that may interest traders who use Market Profile in their trading decisions. Tonight my worksheet shows Previous Value Area High at 945 and the Previous Value Area Low at 937.50. If one were to re-visit the chart, you would quickly see that we had a confluence of the weekly pivot and the Value Area Low nearby at 937.50. For me anyway this would have been a high priority short entry (I did not take it as I was busy doing my homework). Now my priority is to get some sleep before the RTH market opens. I hope this helps and good night
Here is a step-by-step approach that often produces good results We begin with a "blank slate". The attached chart uses 22,500V candles. I have marked the open only.
Okay now we scroll to the left so that same chart displays the overnight and the previous day's price action
and then we scroll back to the right to see the result of our work. and we mark the tests of each of the S/R lines we drew using the previous day's price action. As can be seen, one could simply trade the chart as it is, using the S/R lines from the previous day.
and our next chart includes the daily, weekly & monthly pivots as well as the Previous Day's Value Area High (at 945) and Value Area Low (at 937.50). Of importance here is the "confluence" of pivots, and Previous Value Area High occurring in the area of 945. From our point of view one could have successfully traded the chart using only the S/R lines, the pivots, and the primary Market Profile numbers.