one step away from unrestrained terror

I am far from home but am sneaking in a bit of work at the end of my holiday to try to be in tune with the markets on my return. I took some longer term trades and did pretty well with them. I was trying to discipline myself to take trades with smaller stakes and wider stops with wider objectives. I was pleased with the outcome and it also meant that I could relax that I was not really missing anything.

I took a lot of pdfs with me and if I missed trading I would read one. I included some info here. Instead of writing 2 posts I will throw everything into one. Some of it is trading knowledge and the rest are very basic charts – why complicate things, anyway I dont have my Investor RT program with me.

I found this amusing in mark douglas, the disciplined trader:

A lot of people say “set your levels and enter your orders”. This is easier said than done when you dont know what your levels are supposed to be and you end up overtrading taking reactive pot shots long and short.

mrtopstep mentions 10 handle exhuastion:

Over many years of watching the S&P we believe that the S&P often move in 10 handle increments. For example, the S&P may open at 1194, trades up & down & all around. By mid-morning it makes a low of 1188 area. The equities then proceed to retest THAT 1194 area and slowly trend higher throughout the midday (to our previously mentioned resistance area) 1198 (1188 + 10) area. That is when the 10 handle tendency / rule goes into effect. Often times the S&P market will reverse as a bit of an exhaustion takes place. This depends on the level of program trading but at each 10 handle move there tend to be a bounce or even a low made close to the level. This works in reverse on the upside.

I have been observing this in practice and have been closely watching the weekly webinar and charts and twieets of 50pipsfx.com (highly recommended).

A note about the basic looking charts with lines which seem to fit the data in hindsight: as the week progressed important levels from earlier in the week became important again. This chart shows the NFP news spike from last Friday and Mon-Thurs 24 hour sessions this week.

The high and close of last week are shown. You can see price respected these levels all week. I just now realised that I have not marked the initial 10 handle down move from Fridays high to Monday’s over night low. You could call some of the moves 9-12 handles and others have a lot of chopping around until the move completed however you get the picture:

more from mark douglas:

A dax chart for Friday last week and Mon-Thurs this week – this does not trade 24 hour. It is tightly correlated with the SPX. It closes at the same time as US Equity traiding. Its opening gaps are determined by the SPX at 2am EST and its location 2 hours before the close determines the US RTH opening price:

It works very well in conjunction with the ES chart. The main difference is that I expected the DAX to find support on Wednesday at last weeks close, it found it at this weeks open instead. This level proved to be important again on Thursday.

jay kaepell, the four biggest mistakes in futures trading:

Other reading: borsellino lewis 2001, trading es and nq futures course

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