What Made You Choose The Set-Up You Trade?

• January 5, 2005
• Chris Curran

Stock index futures opened
Tuesday’s session with slight upside gaps, but quickly gave them back
in the first 15 minutes.  After finding a bid on a rumor that al-Zarqawi had
been captured, the sellers stepped back in to sell the market to new lows and a
test of Monday’s session lows.   The futures broke to new lows with accelerated
selling after the December FOMC minutes were released and indicated that the Fed
may be changing its tune a bit with regards to inflation, and lowered the odd of
a pause in the rate hikes.

The March
SP 500 futures closed out Tuesday’s session with a loss of —15.25 points, while
the Dow futures tumbled – 103 points.  Looking at the daily chart, the ES and YM
each broke its 20-day MA but managed to find some support off of its 34-day MA. 
A retracement here back up into the 20-day MAs at 1203 and 10704 would be
healthy.  On an intraday basis, we’ll be starting Wednesday’s session with
30-min and 13-min bear flags.  For you daily 3-Line Break followers, the YM and
ES remain short with Break Prices of 10866 and 1217 respectively.  In the small
caps, the ER2 also broke its 20-day MA and cut right through its 34-day MA,
leaving next support at its 50-day MA at 626.25.

                   

 

The only
economic report scheduled for Wednesday is the December ISM Services at 10:00
ET, which is expected to remain steady at 61.  That is followed by the weekly
API numbers at 10:30.  With the VIX pretty extended here after 4 down days, I’ll
be looking for a healthy, inside retracement on Wednesday.

What Made You Choose the Set-Up You Trade?

The set-up I’m most comfortable with and have
historically made the most money from consistently is a trend reversal/pullback
set-up (i.e. 3-Line Break).  Largely I think my style comes from simply getting
my feet wet when I first started trading. My head was probably clearest at this
point and the first things seemed to have sunk in the most. So even when I have
traded other set-ups, I have always had trend pullbacks and reversal in the back
of my mind (for better or worse). Plus, this approach makes great intuitive
sense and reason to me, and is able to be applied over any timeframe and any
chart.

However, I have also played around with a few
other approaches over the last few years. Like clothes shopping, you need to try
it on for size and see how it fits. Everything from multi-day to weekly set-ups,
fundamental to technical analysis, mechanical systems to discretionary, and
simple chart patterns. Yet for some reason I seem most comfortable with
short-term, trend reversal/pullback-type trading.  I’m not really sure why,
apart from I think this style suits my personality the best. It’s certainly NOT
that this is the only way to make money. For me, trading has been an experience
of learning too much and making things too complicated, only to throw out
everything but the most simplest elements.

 

Please feel free to email me with any questions
you might have, and have a great trading week!

Chris Curran