Bid - Ask spread Support - Resistance (Range) ATR Support - Resistance (Range) See how it works, the most minute support resistance is the current Bid-Ask Numbers.. You look at daily data and create price intervals of 20 points 40 point or another number ranges or ATR's, so when price moves into a certain range or ATR, basically position trades should be buying the bottom ATR and selling top of ATR. So our current range is 1395-1415, even though you give up the spread on entry and exit (bid-ask) you can still 'market make' at ATR ranges. so buy stops above the ATR, sell stops below the ATR, to capitalize on the price moving into another ATR, and buy and sell within the ATR. if a scalper in the pit is hand signaling the current bid-ask, and floor broker hits his bid, the scalper immediately offers at the ask, and another floor broker takes his ask, thus he made the spread. If the bid is hit and price shifts down, and his bid turns into the current ask price, the scalper will immediately offer at the ask to get out at breakeven. Thus if you sold within the ATR at the top your immediately trying to buy it at the bottom of the ATR, but if price breaks the top of the ATR, you immediately have to buy outside the ATR top range to get out or reverse. The algos effectively created a ATR scalp range, selling and buy repeatedly at the borders within the ATR.
So when prices shoot above or below ATR, Algo is driving price to the point that it recruits as many participants that it can then it does a 180, the recruits are left buying at the high end of ATR and selling at low end of ATR, before price heads to the other end of ATR. If price truely breaks out of ATR it's again driving prices to force counter parties to take the other side of the trade but this time it doesn't let the counterparties to exit by keeping price in a new ATR. Time and trends eventually force counterparties to exit in the new ATR at a loss. It's zero sum.
It's riskier to be short a derivative that's been uptrending for a few years. Unless you feel significant money flows will leave equities and change dynamics of long term trend. Every long for the past few years has been made whole versus a short, where price hasn't gone back to let them exit. If your banking on a turn in the long term trend then odds are against you. A low vol run up kills shorts.
its counter intuitive, but markets with the fastest changes or activity, are the most inefficient. And thats where the gold is. When markets are 100% efficient prices wouldnt change. Prices fluctuate because new factors come to impinge on future perception of that price. If all factors are known and price is stable, it means the market has achieved 100% efficiency. So price is always trying to seek that efficient point. An algo that drives price can bully price by killing the solvency of existing participants. Thus price is driven into a inefficient zone to force the pseudo solvent individuals to enter or exit at these points. The algo being the counterparty to their trades.
The banks and 'working group' .. Have a mandate to prop up equities, they will sell them but on the whole low vol run up ponzi scheme.
Bad trades, price rarely comes back to let you get out. Good trades, price rarely comes back from being profitable at the outset. True direction, False direction can be elucidated on which parties get to exit. And if your allowed to exit from a bad trade at break-even, it means you shouldn't.
ES is traded by algos pattern recognition..price patterns adhere to lines. only way to capitalize on first leg is to create the second leg. The shear quantity sold needs the second leg to create a buffer for exits. By creating second leg, the daily breaksdown..
you can look at other price structures on the 60 minute to get an idea of how ES likes to form tops, the patterns it uses.
So how do you make it happen. 1) trade at the extremes of ATR 2) place entry points at extremes 3) place stop loss interval, the size being dictated on 'if price hits my SL, the market is doing something unexpected to shift the trend anticipated'. 4) if stop loss intervals are too large then, your take profit points have to compensate for the large SLs. 5) if your take profit point interval from entry point is too large for the price structure then the trade becomes nullified, and shouldn't be placed. Because your take profit point will rarely be hit if trading counter long term trend.