How To Tell If You’re An Offensive Or Defensive Trader

January 14, 2004
Chris Curran

The
March SP futures opened Tuesday’s session with a small downside gap
despite positive analyst comments on the Chip Equipment and Telecom sectors.
The session started out as a stare contest before the bulls blinked to give an
early test of the Daily Pivot at 1,125.50. The ensuing downtrend gave good
examples of price fading and waiting for MA resistance to catch up with enough
pressure for another leg down. The contract bounced off of S3 support and
clawed its way back to its 38% retracement off the lows, and Monday’s low
resistance, before resuming the morning downtrend to post a new session low.
Position squaring the last hour was able to lift the contract back to mid-range
at the close.

The March SP 500 futures closed
Tuesday’s session with a loss of -7.00 points , and just managed to finish in
the top 1/2 of its daily range. Volume in the ES was estimated at 739,000
contracts, which was ahead of Monday’s pace and above the daily average. Looking
at the daily chart, the contract breached the lower trend line of its trading
channel, and spiked below its 10-day MA, but was able to close back above that
support. Open interest increased on Monday’s up move, which might explain the
“run for the exits” drop due to trapped longs. On an intraday basis, the 30-min
Gartley pattern panned out, and then some, and aside from any overnight up
moves, the contract will be staring at 60-min resistance in the face at 1,122.

Are You
Playing Offense or Defense?

What constitutes playing
offense in the market, and what is a defensive stance? Defense means trying not
to lose, and usually taking the second or third opportunity. It means trying to
hold your own, and waiting for the perfect opportunity. In general, it
means not being in control. An offensive stance, on the other hand, starts with
being in control, clearly seeing the potential and making trades when they first
appear, not dwelling on negative outcomes, bouncing back after making mistakes,
constantly attacking the market in a consistent way, and making trades
when, and only when, the opportunity exits. Comparing trading to
sports, on the field a strong offensive team will control the ball longer. An
offensive trader is more likely to be in tune with the market and aboard for the
bigger moves. Defense is basically trying to stop the market, characterized by
quick entry and exit, and generally calls for more perfection in order to get
good results.