15:30
This week the SPI has sold off from a higher Weekly open, and from two important higher timeframe levels:- The January lows (expected Resistance), and the rotation away from the Monthly 50% level.
Throughout the book I mention a number of important Price patterns and highlight the risk and Rewards using certain techniques:- Support/Resistance and Spiral Points.
I also mention that I believe that there are only 1 or 2 high probability trades per Week, and the rest of the time we need to manage and minimise Risk.
We can see how important the R87 ranges have been this week, and a number of spiral-points providing robust swing points each day.
The high probability pattern this week was the Reversal from the top this week, using the 5-day range highs back towards the 5-day 50% level @ 5755. This was based on the 2-day reversal pattern at the start of the trading week, along with higher timeframe Monthly resistance.
Once that 2-day Reversal pattern had played out, I personally only want to capture 1X 44 point range in the market using certain patterns that I have seen happen on many occasions before, and believe the same pattern will repeat again.
Yesterday was a 22 point fade against the open, because I have seen on many occasions before, that a 'gap' open will move down 22 points and swing upwards 44 points before stalling, or heading much higher (87 points)
However I'm not really concerned on what happened afterwards, because when markets trade around the middle of the 5-day range it has an each way bet.
The same on today's open, however I didn't have a high probability on open, but I know that 5574 was a Risk play, and I also have an understanding of where the market is trying to go towards (DOWN), and I've seen 22 point reversal fades in the opposite direction. That's why I shorted, using Resistance and repeating patterns
Once again, all I'm interested in is the first 44 point completion.
Everyone who knows my work and who has followed me for a few years, know that I miss major trending days. I don't often sit in daily trends, but often those daily trends can provide a number of trades that I can capture as it moves from 1 level into the next.
For Example:- Monday's expectation that 5962 was resistance along with 5993 (5-day high)
If a trader entered shorts and held with the expectation of a reversal down into the 5-day 50% level @ 5755, there was over 200 points to trade down. The same pattern and analysis is there for all of us. It's happening and it's there for all to profit by.
Now imagine that 200 point move happen over 1 day, and it happened without reversing up 44 points. That position-swing trader would have done nicely out of the trade, but for a trader like me, I would have only been able to trade the first short on open and missed out the rest of the move.
But it didn't move down, it rotated around 44-points, which allowed me 3 different trades in the market, trading 3X money patterns.
Today:- After the open and 22 point Up move, I wanted to short below 5574 down to complete 44 points.
If the market moved down into the 44 point low on my first short, I would not have shorted again or traded again. But it didn't move down, it kept on moving back up into 5574. Even though I had a view of where price was going, price action allowed me the opportunity to trade a number of times.
Tomorrow is Friday:- the past two Friday's have had massive rallies back towards the highs. The Daily-Trend has been defined by the Dilernia Pivot. the 5-day 50% level, and a 2nd UP move occuring around 14:36....
I will look to see if this pattern is going to play out again, because the last two Friday's I've missed the open, only to make some money in the latter part of the day.
Therefore for position traders the 5-day 50% level is going to be important along with the Dilernia Pivot....
In a final Note:- I have hundreds of patterns inside my head, that I have seen over and over again. I try and analyse the market and then work out the best trading set-up for everyone to trade before the market opens.
Regardless of how I trade during the day, I still trade the exact same levels that everyone else should be using to minimise Risk and hopefully proft by.
Some days are perfect because of robust support and resistance levels, other days the market opens away from any support and resistance, therefore we need to rely on spiral points to manage risk......
"Any Individual can use this information to enhance his or her own way of trading. Whether you are a small-lot position trader, a short-term intra-day scapler, or using a systematic approach with mechanical systems:- this book provides a clear understanding that the market travels a certain distance over a certain time, and highlights the phenomena of high probability patterns with realistic expectation of follow through" (page 53)
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