I use a 20-bar EMA for a quick visual of where we are right now and I have a look back time window of about 70 price bars to place that in context. So if I'm looking to day trade the ES I'll use a 5-min chart with a 6-hour view and a 20-bar EMA. At the hard right edge this morning 5 minutes before the open I see an immediate trending move to the downside. However, placed in context, the context of the previous 6 hours, there is not a trend. There's a range just shy of 6 handles and price is moving up off the range low. So until that range low breaks with some conviction, I assume that price is every bit as likely to revisit the range high as it is to break the range low at that moment in time. The opening bar takes price through the 20EMA and closes above it. This is a signal to go long for a test of the range high. Still no trend. The break through the range high is weak and price drops close to the 20EMA. The move through the range high was rapid, though, and the 20EMA is rising. If it holds as support, I will assume that the beginning of a trend is possible and I would look to get long again or add to an existing long if I traded that way. How do I get long on a pullback to the 20EMA? I use a secondary chart, the 1-min chart, and look for the early entry off a 1-2-3 pattern (see Trader Vic 1-2-3 pattern). At 9:54am ET price comes very close to the 20EMA, turns up from it and prints a very shallow pullback before pivoting back up through the 9:57/9:58 bars. That pivot up is the early entry of a 1-2-3 type pattern and that's how I'd get long off the pullback to the 5-min 20EMA. The break to a new high is stronger than the initial break of the range high. The initial break of a wide range rarely produces much follow through, but what happens next is what's important. By 10:05am I can define an uptrend based on a) break out of a range, b) rising 20EMA, c) pullback to the rising 20EMA, and d) breakout to a new high. I then begin using the 1-min chart exclusively to trade only to the long side and either scalp these pushes in the trend or add to a winner on each pullback. I keep a 20-bar EMA on the 1-min chart as well because in a strong trend it serves as a guide for initiating a with-trend position or adding to the existing position. ADD: I was trading CL this morning, not ES, but you can see how I did the exact same thing described above but to the short side with CL.
Thank you for posting. It's good for people to see that it's possible to trade profitably using price action and hard stops. It's not easy, but it's possible.
Nice trade. Better entry than me in fact. Having to cream the ES to make up for my CL losses this morning, lol
Initial 5min LTL break off daily chart major R level. Initial breaks usually fail, but a second test and a break with conviction could signal a deeper pullback. ADD: Deeper overnight LTL, range low and 5-min VWAP all sitting around 1729 now.