Commodity Futures Trading- The S&p 500 And E-mini - Preparation For A Big Move Up - Part 3
As traders all we really need to know is when a market is going to stop moving in one direction then turn around and head in the other. The rest is noise. I try to concentrate most of my energy on identifying these times. The day trading information presented here is applicable to longer term position trading. Read on to learn what a market requires to make a turn.
Observation From Trading Notes:
"Higher lows on the five minute chart."
This is the obvious and classic rule to define an uptrend. Sometimes in our wish to buy the bottom of an e-mini futures move, we fail to see the market is still making lower tops and lower bottoms. But isn’t that what we want to see? No. We want to be buying a correction within a bigger uptrend. If the one minute bar chart is making lower lows while the five minute chart has already established itself as an uptrend, that’s what we want to see.
The market might continue down after we buy,. but that’s what taking risk is all about. There are few perfect set up outcomes. If we wait long enough for perfection, we will hardly ever trade. And when we do, the e-mini futures market has a way of taking the best set ups and going the other way to take out the followers of this "perfect" technique.
I’m convinced all commodity futures markets are simply live organisms that do whatever they need in rotation to beat up every participant they can. The e-mini futures market has clever tricks to beat up the trend followers, the break-out guys and the counter-trend traders. It will sometimes even take out a few different types of traders at the same time.
Ever see a “search and destroy” move? That’s when the previous high gets spiked, then the previous low gets spiked, then the market goes back into a middle chop. At that point, it’s disappointing no matter what technique you used. Just grin and bear it and keep watching for your next set up. If you survived with a small loss, you were successful. Remember, you don't have to be perfect to make money - just better than most.
Observation:
“Daily chart is UP. The last 2-3 days was just a correction.”
This is a repeat of the last point. It's the same basic pattern, but on a larger scale. When looking to go long the e-mini, you want the main trend to be going up, while the minor trend is correcting. A 2-3 day daily bar correction can look devastating on a 15-minute bar chart. That’s why it pays to continually scan all your time frames to put things in perspective and be ready for the big turns. "Don't wish it to happen - don't want it to happen - just let it happen." (quote from the movie, "The Untouchables")
Observation:
"The bearish advance-decline line has improved throughout the last day. The A-D numbers were better than 1:1 and bullish at day’s end."
When the A-D line starts out one-sided, but improves throughout the day, add this to the indications that MAYBE a big change of trend is about to take place in the e-mini futures contract. The bigger the price clean-out that has occurred, the more likely its indication is true. There’s nothing like a gap opening and negative A-D line below 3:1, with multi-bottom chopping and the A-D line improving. You may not see the e-mini futures market make its big move up that same day, but if it opens higher and holds firm in a flat price plateau the next day, this is another indication that it wants to rally.
Part Four of Five Parts - Next!
There is substantial risk of loss trading futures and options and may not be suitable for all types of investors. Only risk capital should be used. By: Thomas Cathey Article Source: http://www.ArticleDashboard.com
Thomas Cathey - 27-year trading veteran heads the managed futures division of Thomas Capital Management, LLC. View his market forecast TimeLine Trading charts and get his complete 44+ lesson, "Thomas Commodity Trading Course - all free." www.thomascapitalmanagement.com/commodity/welcome.htm Main site: www.ThomasCapitalManagement.com
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