Anatomy Of A Trade

• December 19, 2002
• Raghee Horner

This ESH3 chart gives us a look at
the closing action of Tuesday through lunchtime Wednesday. The
levels I have carried over are gaps and support/resistance from previous trading
sessions.

(1)  897 — “AM” top pivot

(2)  893.25 — “AM” bottom pivot

(3)  896 — could have been considered an “AM” top pivot

Since the MACD
(our morning session filter/confirmation tool) was negative, the short play was
the set up we were patiently waiting for. After entry I must consider the 888
gap level for an initial exit. For those traders who trade one lot, I would
recommend that this must be the exit. For multiple contract traders, there is
more flexibility although, I would recommend that at least ½ the position be
taken off the table at 888.  Next is 886.75. It has been a level I have been
carrying over since Dec. 13. Again, this level requires another exit. Since this
was the lowest support level I had on my charts, I would have to look at a 10×10
chart (ten minute, ten day) or a daily chart for another support level.

By 11am (EST) my chart
looked liked this:

With this chart setup I can
manage the remainder of the day. I will use my stochastics to filter and confirm
any afternoon setups. Afternoon confirmations — just like morning confirmations
— must start with a “trading level”.  In the afternoon these levels are
typically gaps and Fib Retracements levels as you can see on the chart.  I’ve
highlighted two afternoon set ups that met my three criteria for entry:

First, the set up occurred after 2pm
EST

Second, a trading level was met

Third, the stochastics were in the
confirmation range either above 80% or below 20%

I also feel compelled to
mention my rocket ship vs. freight train analogy, as I hope it is something we
can carry into the New Year: Unless the nature of the market drastically
changes, the morning session will continue to be the best time for trading.
Therefore, it is important that we start each day ready to watch our charts and
mark our trading levels at 9:30. We start the day like a rocket ship — all
energy at lift-off vs. a freight train, which picks up momentum slowly. Being a
freight train will have you “ready” to trade by lunch and into the afternoon
session. And this is a sure way to losing every dime in your account. Spend the
day like a rocket ship, focus your energy on the morning and then slowly “cool
your jets” as you approach lunch and the afternoon. 

Questions? Comments:

ragheehorner@yahoo.com

Yours in Trading,

Raghee

 

Raghee Horner is a private futures and stocks trader in Boca Raton, Fla. For 12
years she has specialized in price action, charting, and trading psychology for
intraday and swing trading plays. Her focus is on trading the E-mini S&P 500,
E-Mini Nasdaq 100 and the stocks she feels have particular synergy with those
futures contracts.