Do you need a new approach to trading?
Today’s ES session peaked at 1186 in the
morning. Then price action dropped to 1179 at session lows. Next swing upward
went to 1189. A pull back to lower support near 1183 bumped its way upward to
1191+ for the final swing for today. Total tally was -7pts lower, +10pts higher,
-6pts lower and then +8pts higher to trace out the day.
Normal market action has finally returned to
stay!
Return To Normalcy
Now, you don’t for a moment think that all those 6pt total-range ES sessions
this year were normal… do ya? I sure hope not, because they ain’t. This
session here, Friday’s entire structure of gap-open, drop to filled gap and
stair-step upward was the absolute description of normal. One glance at the ER
chart shows an even more orderly uptrend than that.
Some of these recent sessions have been a bit
on the wild side. Quite a bit, I may add. That type of insane whipsaws up & down
the charts is certainly preferred to micro-range chop, but still is a challenge
to trade. Days like Friday are what skilled traders look forward to, and the
near-term future sure looks bright.
I’m sure there are numerous reasons why volume
and volatility has been shrinking over the past two years. Cycles tend to ebb &
flow. Likewise, there are enough present and future catalysts in sight to keep
stock markets rolling for quite some time to come.
New Approach
Traders who either cut their teeth in or learned to deal with low volatility
markets have some adjustments to be made. Some of the very tight initial stop
loss orders will no longer hold thru normal market action. The good news is,
they don’t have to! S&P 500 trades good for +4pts (minimum) to +8pts are offered
up several times per day. No need to target little ES +2pt blips as a trade, for
those who know what to do. There is a whole lot more money on the table these
days than that, so why let it go to waste?
From the opening bell until cessation of
trading each day, I have two measures on a chart at all times. One is measuring
upside bias, the other measures downside bias. Recently, trade signals would
take off in one direction and slam back the opposite way to give clear reversal
signals. it had been so long since we saw any type of price movement like this,
I could scarcely believe my eyes.
“Trade what you see and not what you think” is
an adage for good reason: trust your own method signals and they should take
care of business over the course of time. Market moves surging off in one
direction for big gains will often come back hard the opposite way, sometimes
for as big or even bigger profit potential. When a session has structure like
this one did, sticking with the trend makes sense. When trading thru a slammer
session where price action forms an “M” or “W” chart by noon is usually destined
to continue the same. Taking long and short signals with equal aplomb usually
works wonders inside days like that.
Friendly Advice
I dislike being referred to as a mentor or much worse, a “guru”. Please think of
me as just a fellow peer in the trenches, carving out a living alongside
everyone else.
Trading for a living is lonely. Have you ever experienced
that? Those of us married to our screens are divorced from most real world
interaction with others. We have no co-workers to fellowship with. Just try to
explain what you do for a living at the next social gathering, and see how that
goes. Tell the poor souls who mistakenly ask what you do for a living all about
how this week’s volatility was rocking, you caught some moves here and missed
some there, etc. Go into a bit of detail and see how that flies. Listeners will
look at you as if there’s a third eye jutting from your forehead. They might
mumble something about their 401K being up or down, and the subject will quickly
change.
Been there, done that… still doing that today. Many of you
are, too.
Writing some words in these forums offers me a chance to
socialize with like kind. Preening with birds of a feather, so to speak.
Exchanging my time (the stuff life is made of) and hard-earned knowledge has
much more benefit than pure monetary. The “teacher” part of me really gets
satisfaction out of sharing info with others. There is a big personal benefit in
watching that process take place. I am absolutely thrilled when traders are able
to learn some things we share, and it pains me when for whatever reason(s) they
don’t.
That is why I am here, and I’m guessing the same is true for
most if not all the esteemed writers & bloggers around me. Humans only do what
works for them. If some benefit is derived from banging one’s head on a wall,
guess what? You’ll watch said person bloody their forehead over and over again
until that act ceases to fill their void.
I expect and hope that our exchange of information, free or
otherwise will lead to benefit for both of us. if such were not the case, I
would not be here. The personal satisfaction of helping others succeed and
having them think more of me afterwards than before is my primary personal
payoff. Make sense? That’s what works for me on a human level, and that is what
keeps me in the educational arena on both sides of this here screen.
It just so happens that I have sat thru almost every trading
session (very few exceptions) since mid-1999. Six long years of steady action
have sure taught me a lot, and offers a few things to share firsthand. One of
the biggest lessons? Markets are ever changing. Just when we become complacent
with anything, it soon evolves to something else. From late 1999 thru early
2003, market ranges and volatility were normal to absolutely out of this world.
That offered great opportunity for intraday traders, but came with its own set
of challenges as well.
Without question, many of today’s active traders began within
the past two years and in many cases within the past year itself. I know how
difficult (i.e. impossible) it may seem to believe that price action can
actually cover this much chart between the bells. Those of us who’ve lingered
awhile longer and historical data archived in charts have different information
at hand. We know that this type of market behavior can and probably will
continue for quite some time to come. Expecting the tapes to settle down or low
volume – volatility to return are not realistic expectation, in my opinion. We
can trade those dull markets profitably, but these normal range days offer many
times the potential for profit instead.
Summation
Market volatility will ebb and flow thru the entire course of your trading
career. Some periods of extreme may last for months or even years at a time.
None of them will last forever… it is a cyclic process along the way. Make
sure your method, outlook and trader’s expectation for highly active trading
sessions are properly aligned. The trading account balance that grows
exponentially as a result may very well be your own!
Please feel free to join us (as always) inside
www.coiledmarkets.com on Saturday
night for the open-access Weekend Outlook section. There is a lot to cover in
the charts there this time around… that is for sure. See you then, and please
have an excellent weekend.
Trade To Win
Austin P
(free pivot point calculator, much more inside)
Austin Passamonte is a full-time
professional trader who specializes in E-mini stock index futures, equity
options and commodity markets.
Mr. Passamonte’s trading approach uses proprietary chart patterns found on an
intraday basis. Austin trades privately in the Finger Lakes region of New York.