Here’s Why Today’s Reversal Was For Real
On Friday I wrote about missing
“the move” but not a trade, as there was no developed edge according
to my rules. In Monday’s trade, the ETFs have all but given up the quick
gains witnessed in the prior session. This intraday action has also produced
what I consider to be an intraday trade with edge.
In today’s session I’ve put out two posts within
our TM chat room about a 1,2,3 reversal entry forming.
How will this trade ultimately resolve itself? I
don’t know, to be quite honest, because it’s only one individual trade within a
tradable strategy with edge. Just because the technical setup is there (the
reversal 1,2,3 pattern), as well as some of the technical supports that I like
to look for in establishing contra-trend trades (1.25 – 1.5 volatility band
tests, retest of Friday’s lows — within .15 — and implied volatilities at higher
levels than last week) doesn’t mean that this trade will produce a profit.
What I do know is that the many of the criteria
that I need for a reversal trade were present, and that another trade with edge
was there to be taken. As this midday piece is being finished the second half of
trade has resolved itself…..scratched out on the balance. In this particular
case an entry at 81.70 (13:05 bar) would have produced profits of .28 on the
first half, and netting .14 for the full load, after using our money management
rules on the remainder.
“Could have been better, could have been
worse…but bottom line, with risk defined and edge available, this trade was
there for the taking.”