Today is Wednesday April 29th and the market is waiting on the Fed today.
In possible anticipation to what the Federal Reserve will do today, the market is making a move. The move looks like it is on the UPside, at least for now. There is more room in this market like I having been mentioning this week and last. We shall see what is in store. The Dow does have some pretty strong resistance around 8250, so that will be a number to watch. I will talk more about upside targets in the next day or two, but remember that number.
The trading as I write this has slowed to a snail’s pace at 9:00 am west coast time. I will write about what happened this afternoon on tomorrow’s blog. What usually happens when you have a Fed decision is the market will move early and then continue to slow as the clock gets closer to around 11 am. Then it starts getting a bit jumpy in anticipation of the news. Traders are trying to outsmart the news and take positions before hand, which is not usually too smart. Most of the time, you will get a move big enough to knock out any close stop positions in both directions and after that happens it will make its move. It’s hard to say how it will turn out, but the momentum right now is to the upside. Be careful.
Today’s trading took a total of 45 minutes, from 7:45 to about 8:30 west coast time. If you look at a larger time frame, you can see that there was only two real moves of any significance during that time, one down and one up. Seeing that the market had made a significant move already and it may just be in a short chop zone, I elected to shorten everything up, given that today was Fed day.
That strategy seems to have worked just fine for me. I had 9 trades and picked up a little over 4 points and got my daily goal. The thing is, I did it in small bit sized pieces. I followed my timing model for very short moves and easily picked up my trades that came in the form of mostly 1/2 point trades. The moves traded for more than a half point and I am just fine with that. After my fill, the trades did not go far, before they started to run out of gas and then reverse.
The thing is, I was in the reverse and then again the new reverse and so on. I could have only taken the two moves that showed up, but at the time, I did not know which way the market wanted to go and if it had follow through ability. The overall trend was up, but there was some down drafts in there.
During Fed day, there is usually a lot of indecision and rather than try and be a hero, I just took the very high percentage trades that I knew I could get, 80-90% usually. While doing this, I was running only a three tick stop, but once the move started in my favor, it easily moved only the short distance that I needed it to go.
My strategy is really only targeting for 2 points plus daily. Since I am trading smaller, 5 contracts, it takes double the the distance to get to my goal and that’s fine. Had I been trading 10 my end result $’s would be 2K instead of one, again fine. The point is, I moved in, got filled at my entry point and quickly got out. There was no struggle here, just waited until the time was right.
If you are going to have anxiety about missing a big move, this is not going to help you. You have to know when to trade for the bigger moves and when not to. After having significant moves to the upside already and coming into a resistance area, you can’t expect the market to give you what you want, you have to take what it will easily give you with the least amount of struggle.
Had I been trading earlier, I saw two great set ups for some real nice big moves. I would like to think I would have had some of that. Just after the open, a real nice Symmetrical Triangle was setting up, plenty of time to see it develop and take the move for a split trade run. First half locks in guaranteed profit, second half allowed to run. At around 7 am, a very nice Rising Wedge with a confirming break, good for a nice counter trend move, followed up with a Symmetrical Triangle continuation breakout that piled on a real mover. Again, a great split trade setup.
You don’t need many moves to pick up a daily goal of 2 to 3 points, so keep your sights realistic on a daily basis. It’s nice to think you can pick up 10 points a day and there are days that can happen, but keep it simple and modest. You will come out ahead in the long run.
The mental challenges that you will potentially face along the way will be enough of a victory to overcome, while attaining a modest daily goal. That is why it is called a DAILY GOAL, because you are expected to get it every day. It is not called a Home Run Goal. If you do the math, trading 5 contracts for an average of 3 points a day, in a months time, is $17,500 for the month and just two net points $12,500. That is only two little points, but every day. Day after day.
The problem is, that most people see that two points is not much and think that 10 points should be the amount that they should get. When you think like that, it’s like grabbing a handful of sand at the beach. Because there is so much of it, you watch it all fall out between your fingers until you realize that you don’t have any sand left in your hand. WHAT HAPPENED? Think about it!
http://www.screencast.com/t/mix1ShOmxl Today’s equity chart
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Tags: chop zone, federal reserve
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