Professional Day Trading

FRI - 12-10-2010

MACRO - On the daily charts, the ES has broken out of the 1200-1050 bracket on the way to the 1280 area.

Currently price is in a 1230-1216 consolidation area.

OPEN - Like yesterday, ovenight action has taken ES up to 1230 area, so we will monitor this resistance point as Day Session Part 1 unfolds. It seems like price will break through this time, but you never know. A lot of open ended room to run to the upside if so.

Like yesterday, mechanical trend remains up until 1224 area is taken out to downside, or if failures to break above 1230 develop.

 

12-10-2010 DAY SESSION PART 1

Gap/First Move/Retrace - Price/volume pointed lower at the open in the key 1230 resistance area. A sell developed right at 8:30 that either provided a scalp gain or a breakeven result
as prcie consolidated in the 1230 area for the first half hour of trading before breaking to the downside to start the first move of the day lower towards the overnight lows at 1226.75, but still
within a bigger picture uptrend as long as 1224 holds.

This is a tough trading area with some conflicting developments.

As long as price holds below 1230 intra-day structure remains down with a first target of 1224, yet we arent quite in a mecahnical downtrend until overnight lows break at 1226.75 or if price hangs around 1230 area for a while, cant move higher, and the trend starts to roll over to the downside.

If price can break above back 1230, and hold on a pullback, then consider intra-day bias up and look for long setups knowing you are in a key resistance area.

The key will be to see follow thru above the overnight highs at 1233.25 if an up bias develops.

 

12-10-2010 DAY SESSION PART 2

Price gapped higher and then moved lower during day session part 1. Follow through to the downside below 1230 never developed, and a new swing high around 10:00 was the first sign the big picture trend up was re-establishing itself, confirmed for sure with the swing up at 11:00.

Although the up bias was clear, price action was again very slow. Typical end of the year,December price action.

With no upside resistance in the way, price worked its way up to 1236 in a slow moving uptrend after the 1230 area held and the intra-day bias turned up.

With slow moving price action and a big picture type breakout, it was best to trade much like a trend day and patiently look to exit after deep pullback new highs, etc

Its just tough holiday trading condtions in terms of price action, but there were a host of ways to at least take small gains with long trades setups in a very clear up bias condition after 11:00.

 

MON - 12-13-2010 DAY SESSION PART 1

MACRO – On the daily charts, the ES has broken out of the 1200-1050 bracket on the way to the 1280 area. Currently price is in an uptrend with big picture 1230 pullback to swing support. If 1230 is re-entered, look for a move to 1220 based on the 1230-1220 balance area

OPEN – Overnight price moved up to 1241 overnight resulting in a strong gap up at the open. Price/volume led the way to an early fade the gap sell at 1239 looking for a move to 1236 pullback to swing support area to start the first move of the day. A C2 buy then developed at 1237.75 as price made its first retrace of the day higher.

Day session Part 1 sets an up bias to start the trading session as long as the 1236 area holds. If 1236 is taken out, 1233 overnight low is target/support, and if this area fails then price will move to the key 1230-1228 key support area.
If price fails at attempts to move up beyond the overnight highs in the 1241 area, then look for price/volume counter-trend sell setups that may develop later on after swing high failures.

 

MON 12-13-2010 - SUMMARY

Looking at the daily chart, price has essentially moved straight up from 1167 to 1241, and a pullback to 1220 swing support looks likely as daily price action moves higher above the 1200 bracket.

The gap up to 1241 today, coupled with a wide overnight price range and a deep pullback to the middle of the overnight range right after the open was a sign that 1241 represents a short term resistance area.

On top of this, you have very slow holiday trading conditions in place, so you really have to expand focus to the bigger picture to get in tune with the slow rhythm of the market

Day Session Part 1 signaled an up bias as long as 1236 holds.

Later in the session 1239 became the level to watch to maintain an up bias, all the while knowing the 1241 area appears to be a resistance point based upon wide overnight price action, and a bigger picture view that price is over extended and due for a pullback soon.

If you took long set ups during most of the session, the lack of follow through was a signal to take small gains or exit at breakeven, wait for further developments, etc. If you wanted to stay aggressive, the option was to hold longs to new intra-day highs with a 1239 area stop.

Again, this is just slow, end of the year trading and sometimes the best trading is no trading- or at least, very patient trading.

The second swing to new intra-day highs just before 2:00 created a volume divergence and set up a small price/volume counter trend sell opportunity at 1240.25 which lead the intra-day bias down with a new swing below 1239 (combined with a new down volume extreme), which set up a target to the intra-day lows near 1236 during the last hour of trading.

 

MON - 12-14-2010 (OVERNIGHT-OPEN)

MACRO – On the daily charts, the ES has broken out of the 1200-1050 bracket on the way to the 1280 area. Currently price is in an uptrend with big picture 1220 pullback to swing support if a new daily low develops. 1230 is first support. If 1230 is re-entered, look for a move to 1220 based on the 1230-1220 balance area.

OPEN – Overnight price has tested yesterday's low in the 1236 area, and has moved up to 1240 pullback to swing resistance.

The bias is down until 1240 is taken out to the upside.

If a long price/volume trade develops early price has to take out 1240 to form an overall up bias.

If 1240 fails and/or price volume holds its' overnight down bias, look to the sell side early first for a test of overnight lows, and maintain a down bias for as long as retrace attempts confirm. Look for 1230 to start, if overnight lows break..

 

TUES - 12-14-2010 - (DAY SESSION PART 1)

GAP/FIRST MOVE/FIRST RETRACE - The slight gap higher today was a normal pullback in the bigger picture downtrend that started at the end of yesterday.

This placed expectations for a swing lower below the lows of yesterday (1235.25) with a likely test of overnight lows as well (1233.75) as price made the first move of the session lower.

C3 sell trades early resulted in a small loss when price only reached 1236 before turning higher.

An aggressive C1 buy then set up at 1239.50 to see if price could take out the key 1240 resistance area to confirm an early up bias for the day. This trade resulted in a either a small gain or breakeven result as price probed above 1240 area before pulling back.

An up bias is now in place for the trading session, but price must move and hold above 1240 area. If the 1240 area proves to be resistance we could be heading for 1240-1236 chop for a period of time.

A move below 1236 later in the session would turn the mechanical trend down.

 

I am a trader just like many other traders here.

Therefore my posting of this journal is as much to focus my own thoughts and maintain discipline for my own trading. That is of primary importance as I write this information each and every day as a way to organize my thoughts.

Second, I have no problem if this is real trading info that helps others.. I think this information is very dependent upon one's trading style, so clearly it will not be of interest to all.

Finally, I have written a book about my trading experiences and what works for me probably for the same reason others write books--(1) I feel I have something of value to share. (2) I'm as passionate about the world of trading as anyone else (3) I actually enjoy being on the educational side of the industry...etc.

How many books I actually end up selling is not my primary motivation, and I don't claim the way I trade is the best way to trade, or even the best approach for everyone, but since this is a traders forum its seems like an appropriate place to interact with other traders, which is always enjoyable even with everyone's unique point of view....

 

I happen to use consistent trade setups for entry--the same ones over and over again.

So, I think there is merit to this form of simplicity and consistency, whatever the form of set up may be. Clearly, the same setup will not provide the same exact outcome each and every time because the participants are never exactly the same each time, even though same setup pattern develops.

So, when I use the term Professional Day Trading, what I am really referring to is being able to take simple setups and place them into a bigger picture context--in other words look at day trading from the top down rather than from the bottom up, or big picture first, and trade set ups last

This shift in focus has had the biggest positive impact on my trading after years of trying to be "too mechanical...."

I think the lack of a bigger picture focus is what makes trading difficult for many who are looking for an "easier way out," and I think when you read from many of the successful traders who often discuss the hours and hours of screen time and experience that is necessary to succeed, they are ultimately referring to being able to develop a sense of context for their trades, often related to the type of trend in place ( i.e. new breakout versus a more mature trend, etc) and how these types of trends relate to movement around key support/resistance, or balance areas etc.

So on one hand trading is fairly simple in terms of entries/trade management, and on the hand it is somewhat complex in terms of context.

At least this is what I have found to be the case, and that's why I spend 90% of my time focused on the developing the flow of context first....

I'm not saying there aren't much simpler ways to approach trading, but I would guess even the most simple approaches to trading that succeed have some form of context built into the approach-knowingly or unknowingly.

 

TUES - 12-14-2010 - (DAY SESSION PART 2)

MIDDAY UPDATE - A long bias resulted in a long set up around 10:30 in the very tricky 1240 area, that has resulted in only a 1-point gain in over an hour's time

Slow end of the year trading, a mechanical trend that turned up right into key big picture resistance near 1240, and a FED announcements coming (should be out of all positions before announcement), are all reasons to stand aside for now, until after the market digests whatever FED announcement is coming....