Daily Update Main Page: 7.75pt Gap Down = Early Reversal to fill the gap

Monday, February 27, 2012

7.75pt Gap Down = Early Reversal to fill the gap

Today we had a 7.75pt Gap down and traded lower on the open to 1353 then reversed to rally into the 1563 area on the 3rd time Interval.

Recap Notes:

Technical difficulty with video

Trade Selection - Good, started rough taking poor trade against the developing trend, but was able to cut and reverse on 2 lots hitting my target one and just short of target on the 2nd.

INTANGIBLE OBSERVATIONS:

Trading the premise is key, sometimes the campaign ignores all signals- today we had mixed signals but the long campaign after the early selloff was persistent nullifying most indicators.

A rally thru all Ti's then a break above the 8:00 bar signal higher prices on the day and possibly a hold till the close

GENERAL RULES OF THE TRADE

BACKGROUND: Strength/Weakness Must Always Be confirmed Prior to Qualifying ANY Sequence
QUALIFY ALL SEQUENCES: Never enter random trades! Always qualify a sequence to Ranked Criteria Prior to Entry.
AVOID TRADING THE DEAD ZONE: Dont trade after 7zone (8:00 bar) unless it is a Clear Reversal and your prepared to hold for +1 hour
GIVE TRADE TIME TO WORK: Hold at least 15-20 minutes to play out before reassessment.
TREND: Never Buck 4500 Tick Trend* Unless its a Qualified Reversal Sequence
AVOID ALL ICE BREAKERS: Never take an "Ice Breaker" If I miss the Pre-open and Globex. Always get a directional clue in the preopen prior to entering an Ice Breaker
AVOID ALL "ICE BREAKERS": Never take an Ice Breaker Trade on FOMC Days. Especially late speeches after 7:00am. They have Choppy opens Usually on Wednesdays
NEVER LET WINS BECOME LOSES: 3pt rule says: When price moves in favor by 3pt, lock in 1pt and consider closing if tape reads to do so. Better to exit with less profit than a Loss
MISTAKES: Close ALL whenever We enter by Mistake. Never let a mistaken entry run
3 MAX STOPS IN A ROW: Stop Trading after 3 Max Stops, You are Benched!
SIZE: Never Trade contracts above Battle Plan Rules and Confort Zone

Terms & Concepts to Remember

PDT - Prior Days Trend
PDC -Prior Days Clos
"Act so as to keep the mind clear, the judgment trustworthy." Dickson G. Watts said,
A great Exit Strategy is to Listen For any Hope, Wishing or Praying, If herd CLOSE OUT!
A winning trade will show signs of continuation
Absorption Volume - Specialist Filling All Buy orders with shorts
Accept and Act
Accept whatever happens in the present moment as if you chose it. Work with it Not against it.
Accumulation & Distribution
Accumulation - Buying at wholesale price lows
All Warfare is Based On Deception "Sun Tzu"
Allow the good trades to work to your favor
Always Anticipate a trade, by watching for signals falling in place prior to entering
Always consider Lower Highs when shorting and Higher Lows when entering Long
Amateur's Average Down
Amateur's go broke taking large loses
Ameture Traders Try To Avoid Loses at all cost
Analysing Mistakes is the fastest way to get better
Anger and Greed are Fundamental Causes of Defeat
Anticipate the Event - Not React to Events.
Anything Can Happen at Anytime
Ask "What's Going On Inside me at this moment". But Don't Analyze or Judge
Ask yourself Are you on the WHOLESALE or RETAIL side of the trade?
Be Aware of High Volume Spikes in the DOW )DJI
Be Curious When Entering a Trade
Be the Knower Behind the Thinker
Be Willing to Bu or Sell or Reverse if needed
Block Trade - Hidden Contract traded by Private firms usually 10,000+ but NO reporting is required!!
Campaign Manipulation - When the tape shows volume increasing in one direction but prices continually jump/are marked back up in the opposite direction, This is evidence that specialist have an specific agenda for the day. This is clearer when we had Con Gap after trend or consolidation days or when price is @ strong support or Resistance.
Confidence is key
Dark Pools - Private Investment firms that trade in Blocks of Hidden sizes
Decreasing Volume on UP moves is "Bullish" this is the specialist covertly marking prices up
Demand Increase - higher prices
Dis-Identify From Any Mental Position
Distribution - Selling at Retail price tops
Do Battle Only when Its to Your Advantage
Dont Identify with the mind, Intellect has NO place in Trading
Dont Over Analyse
Dont Scream in your head when making decisions
Dwelling on Past Trades can lead to Ego Based Fears
Ego Wants to Avoid the Present at all Cost.. Because it Doesn't Exist in the Present
ES Rollover Months are March = H, June = M, September = U, December = Z. Add the Year for 2012, ie ESH12
Every Moment is Unique in the market
Expect Nothing, be prepared for Everything
Gaps Down After Strength has appeared is bullish
Gaps Up After Weakness appears is Bearish
Good Trading Should Be Baoring
High Volume on Wide Spread UP bars is " Bearish"
I accept Loses With no Problem
I Accept the Loses by Minimize my Risk
I am in the Gaming Industry
I Can Never Elinimate Risk only Minimizing Risk
I dont Need to Know what will happen Next in order to be profitable
I Will Never Be "Right" In Trading
Identify When to Attack and When to Retreat prior to Entry
If I cant ID a Strong or Weak Market, then it is probably Ranging
If the person on the other side of your trade is in a losing position, they MUST take action that will further your position
Im NOT loyal to any direction.
Increasing Volume on wide spread Down Bars is "Bullish"
Just Be an Observer of the Action
Keep a Neutral Bias as often as possible
Kill Expectations At All Cost
Know where your going to EXIT before you enter
Liquidation-mrkt seeking lower prices
Liquidity providers guarantee transactions at the best price and boost the volume of transactions in the order book. "Best Prices in the Wrong Direction"
Losers take Small profits and Big loses
Loses are a part the game
Manufacturer Prices - When wholesale prices are tested and broken with signs of divergence and other signs signaling Weakness or Strength
Master Strength. Dont Trade in Fear
MAT - morning after a trend
My Enemy is My Ego. Not the market players
Never Be tempted into Desperation Trades
Never Chase the Market. Trade From a Position of Strength NOT Weakness
Never Fight in a River - "Narrow Choppy Markets"
Never get married to a Trade
Never judge the Present through the Eyes of the Past
Never Underestimate The Market
No Expectiations = No Pain & No Disappointment
No Wishing, Hoping or Preying in this game
Odds Makers Trades the System, Not their Feelings
OverTrading is Financial Suicide
Path of Least resistance
Patients will allow you to pay for loses by allowing your edge to play out
Pre Determine Levels to Add To Positions
Pro Trader NEVER calculate money made or lost while trading
Professionals Average UP
Qualified Trades should be Very Obvious!
Recognize Your Environment
Recognized Your Own Mentality
Remain outside the possibility of Defeat and Wait for your opportunity to defeat.
Retail Prices -highs
Rule Of 3- 3 loses in a row = Benched
Stay Flexible By Questioning Your Perspective
Stay Focused on the task without being overly concerned about the outcome
Strength & Weakness
Supply & Demand
Supply swamping Demand - selling to buyers at highs
Support & Resistance
Test of Supply - down bar close in the middle/high on LOW Volume, happens in rising markets
The Best Trades Will feel Uncomfortable
The Calm Warrior is usually the Victor "Sun Tzu"
The Ego is a False Self Created by identification with the mind
The Ego wants to Avoid pain, by Not accepting Loses
The Ego will Delay closing a bad trade
The Ego Will Say "Exit Early.. Take this Small Profit" So that it can be "Right"
The Longer the Consolidation the Larger the Break out
The Market Gets Choppy Prior to BIG Economic News - Dont Trade Choppy Opens
The Markets dont pay when your too comfortable
The more Perfect The Setup The Less likely the odds are to work in your favor
The More You Identify with Your Thinking the Stronger the Emotional Charge will be.
The Need to be "Right" is a form of Violence
The Pinnicle of Knowledge and Strategy is to make Conflict Unecessary
The Present is all there is. Give No attention to the past or Future Trades
Think ahead of the Crowd
Think Contrarian to the Overt Press
Think Contrarian to What is Commonly Known
Think in Probabilities Not Opinions
Think Like The Specialist.. What would He Do?
Thinking is Not Being. Dont Think and Be In the Zone
Wholesale Prices - Prices Extremes in either direction, should have signs of Dis/AccLows
Trading Should Be EffortLess
Undercapitalized accounts will have you in a position of Weakness
When a stock declines 2.5 points we can look for at least a 1.25 rally unless the pressure is still on. Richard Wykoff
When entering a trade ask: what will tell me that my trade is wrong?
When Entering a trade: Can you describe exactly why?
When entering a trade: know where you want to Exit for Max profit
When Markets hit supports from the prior day there is Low chance that they will be broken
When thing are going well Get BIGGER, When Things are not going well get Smaller
While Trading Think like the Specialist
While Trading.. The Market is my Master.. Listen and follow with a still mind
Winners take large profits and defined loses
You are the odds Maker
“Feel the market,” “feel the pace,” based on this, “have a bias,” then “sense, trust, and act.” Don Miller’s daily drill
“have a bias, but make sure to trade what you see, not what you think;” “the ups and downs, manage them, but stay in the game, you have to be present to win;” “the minute the sequence ends, look for the next one, mentally delete old sequences, only look forward.” Don Miller

BOOKS & RESOURCES

Monday, February 27, 2012

7.75pt Gap Down = Early Reversal to fill the gap