Consolidation zones after major breakouts

This is going to be a big week for the markets and its resiliency is going to be tested. It looks like we’re developing a major consolidation zone after breakout. We’re going to want to sit tight today and see the markets develop. Don’t rush into signals or chase after trades. The most important rule is to look for the clear signal and trade the system. Stay out of consolidation zones and wait for the trade to develop. We expect to see downward pressure on the NQ mini and possibly continue throughout the week.

 

Trading major trend reversals: Real-time live trade example

Continuation from the prior post, here is a live trade I acted on. Even though you miss the initial ideal entry point, you can't be afraid to go with the trend a little bit away from the initial signal if you may have missed it.

Here is a live trade based on the long signal I posted about earlier:

Entered, moved stop above entry, bought more above high of previous candle, adjusted stop higher and higher.

Outcome: Met target on half a POI (blue line). Stopped out on half by an L1 for profit.

Chime in! How did you guys trade today's volatility? What were you looking for? How did you react to your signals? Did you follow your plan?

As always, questions encouraged!

HT

How to spot reversals: Patiently waiting for the signal is key

Fundamental and technical bias was short all day. All long signals should have been avoided UNTIL a solid reversal signal emerged. Trying to pick the bottom all day would have resulted in stop after stop. A) when you're pushing lows, the higher probability trade is to short the lows vs. thinking final low of day was put in.

In a down trend you will eventually get a reversal signal. This tells you two things: 1) You should exit your short position and 2) consider long positions since bias reversed to the upside. The most important thing is to wait until this happens.

The key is for the signal to generate enough of a move in your favor for you to move your stop above entry so that you are risk-free. If the move breaks down and it was a false or shallow reversal, you're risk-free and cannot lose money on the attempt since you got stopped out for a slight profit! So it's worth recognizing the signal and taking a shot at a high probability trade.

Here is a real-time example:

Stop is placed below lower high initially, once market moves in your favor, move it above your average price no matter what.

Please feel free to jump in with your opinion.

HT

NQ YTD Price Action - Trend Review

Hi All,

The last 10 days have been very exciting and filled with opportunity on both ends of the spectrum. We broke the high of the year 4 times in this period and we did it in a sideways fashion. Yesterday we saw a major reversal of over 60 points and broke multiple resistance levels. For the futures trader this was a day filled with opportunity. The question I ask myself is where we go from here. The chart below illustrates the NQ action YTD.  

After hitting highs in late January we struggled to get to the 2778 level in February. Once we did the resistance was pretty steady on both ends. We hit highs 3 more times and after hitting the high around 2782 we had a major reversal of over 60 points. There is only a 50 point spread between the low of the year and the previous low resistance levels in February. I think in the next week we might test Level 1 low and if that breaks it'll continue to the Level 2 low and so on. In the short term we might see a relief type rally and find opportunity there, but I think at some point we will test the year’s lows.

The Sequester is quickly approaching and we all know how close Congress likes to cut it. Unfortunately this issue is more complicated and we are in serious danger of stopping the economic recovery in its tracks. This is not the only issue facing the market, but this is what I’m monitoring into next week or two. So, with that said we are traders and I’m looking forward to the opportunities coming in the next days. The current pull back of this magnitude and current events we believe are going to add selling pressure to the NQ. I know this is day trading and we look for hourly signals but an outlook helps too.

We’ll be looking for the NQ to test Level 1 in the next few days and if that breaks then we are headed to Level 2.

We would love to hear from you on your current outlook and what the last few days of price action is trying to tell us.

Introduction

Hi everyone. My name is Greg Oray and I’m Timothy Hanna’s new associate. We’ll be working together trading futures and maintaining this blog with up to date trades and strategies. We’re going to learn a lot as we move forward and with a bit of luck we’ll make money along the way. I’m looking forward to working with Tim and sharing our work with the trading community.

Trade Results- 2/18/13: +5 ticks (HT)

Market holiday today, futures closed early. I only had 1 trade last night which I will discuss regarding entry and exit.

NQ had a seller failure in early after hours. The entry has an H1 following the SF bar. Target was @ most recent swing high due to low volume because of holiday session. If I had multiple contracts, final target would be at major swing high (blue line).

Blog Starting Back Up

I'm starting the blog back up this week. I began working with Greg Oray who will also be posting on here with daily trade analysis, system explanation, and various other topics. If there is anything you want us to touch on or discuss, please let us know and we will be happy to do so! Good to be back and looking forward to talking with everyone again.

HT

Knowing when to change directional bias at the right time for a profit

I met a reduced target on the short from earlier for a profit of 10.75 points, and as I said, it was placed where it was because of the high probability of support at that level. When price trades are PDL or PDH you need to recognize which side of the market is controlling. Here is an example of how you need to know when to switch direction and stop pushing a side of the market; basically, do what the market is telling you.

How to hold on to a trend trade and not exit early: Major support breaker signal

I've been really busy with things lately so I haven't had much time to commit to the site. I figured I would post today though since I decided to trade today and take a break from my other project.

Its important to know when to enter a trade, but its even more important to know when to exit a position. The major mistake of most traders is exit too early on their profits and staying in too long on their losses. I make it a point to cut losses quick and keep them small. I also try to hold a trade as long as possible, until its invalidated. Here is an example of a major support breaker entry signal with a max target at previous day low. If you look, I'm risk-free in the trade now, and have a very large target. This target will get adjusted if certain conditions occur, which are mentioned on the chart.

Counter Trend (CT) trading the high probability way, be realistic with target and risk

Counter trend trades pose a higher risk because you are fighting the trend, BUT when weakness in a market side occurs, they became high probability; or should I say the dominant trend trade becomes low probability? It doesnt really matter how you justify it, the most important thing is to recognize the buyer or seller weakness or failure, and act on it. You want to be safe with these types of trades, and only take then when the weakness if recognized. I have a minimum of 1:1 risk to reward on these setups. I try to be realistic on how far the move may go and I assume a pullback over a reversal. For example, if I can see a pullback going 2.5 points, $50, I'll place my target there and start with a stop of $50 max. Once I get movement, I adjust it to one tick above/below entry.