Archive for January, 2010

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Market Sentiment Turns More Bullish – Trader Beware !

Friday, January 15th, 2010

Today is Thursday January 14th, and we have some new developments in sentiment to report.

As you know, I have watched the market sentiment numbers pretty closely and it has not given an extreme reading since the March lows. One side of the market is at an extreme reading now and has been there for several weeks now, but the most important numbers to watch is the bullish readings.

Currently, after having come off substantially the week before, the numbers came all the way back and then some. I am very confident that when these numbers reach an extreme, you had better hold on, because the volume and market volatility is going to come back and it will not likely be to the upside. We may still have some to go.

Currently the bullish numbers are at 53.4% up 5.1%.  That is a big move for one week. The bearish numbers are at 15.9%. This is a 9 year high, as best as I can see. It was not until back in 2001 that so few people were bearish. What do you think that is saying? Well, let me interpret. The majority is never right for very long, lets just leave it like that.

These numbers work in the opposite direction. Isn’t that strange? If you understand how Trading Price Action works, you would think it is really quite normal. The market takes you up, so that it can take you down and visa versa.

It is possible that we could see numbers as high as 60%. If we do, that is a super strong reading. Anything over 55% is considered the danger zone for a Major Turing Point and it could be coming soon.

We are in a Rising Wedge on the S&P 500 Index and if it gets broken, there is a statistical percentage that the market is going to go down with some significance. That is just how it is and how it works. We are in a pressure cooker, that is for sure and I can see it as plain as day. There are so many action points for traders when the market starts to roll over. Let me put it another way, we all know about the game of domino’s, right. OK, we keep setting up domino’s with each passing day and week and month go by. The longer this rally continues, the more painful it will be for those caught in the down draft to adjust themself and their portfolio.

I don’t have any answers, but, this is what I saw happening 9 months ago. We were going to trade back up to the middle of the range and at some point, the dam would break. We all had better stay clear of the path of the water and make preparations. If it does not happen, that is great, but I know of no other way to work off the excess optimism other than a decline.

We may have more to go to the upside  and that would be a good thing for others to get a better price as they prepare to sell into strength. OK, that is it for now on that. I was a little surprised that the numbers snapped back so strong. Wait and see for now.  

I will have to take a rain check on the post I mentioned about yesterday, Fear and Greed. It is a topic I will share my thoughts on in more detail. I will try to put it out in tomorrow’s post so it could make for interesting reading over the weekend.

Todays trading, was OK, but back to very slow trading. At 12 pm West Coast, there was just 1 million contracts traded. That was half of what Wednesdays volume was. There was some nice trades in the morning for anyone trading then, but mid day it got very boring and slow. I was still able to pick up my daily goal, without much trouble. I have a couple of video’s of the action below.

Until tomorrow, Good Trading !  

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Traders Pre-Market Preparation, A Must !

Thursday, January 14th, 2010

Today is Wednesday January 13th, with the market closing towards the high of the day.

That is always a good sign, when the market can close at or near its high for the day, plus 53 on the Dow Jones and plus 9.50 on the S&P 500 futures. The day started off giving traders two good opportunities to go short. If you could have stayed with the move, you would have been rewarded nicely, as there was 4-5 points in that one move alone.

After that, support came in around the 1130 area and traders quickly moved the price up. Normally, you would see a little pull back after the first move up, but it was strong and did not want to give up any ground. As the prices got going again, it was up, up and away for the rest of the day. The market slowed down for about 2 hours and almost on que, it started to take off again at 11:30 West Coast time. That is the best time to start-up again after the morning trading session if you ask me, 11:30 a.m. to 12:45 p.m.

Many institutional traders look at 60 and 30 minute charts. After there return from lunch, they have 1 new bar to interpret. After that, they often will place orders to go long, short or get out. The point is, that is a time large volume is going to come back into the ring and that is what is going to move the market, one way or another. The last 15 minutes, everyone is trying to settle out there day and position traders are looking to do just that, position themselves for a move into the next trading day. 

So if anyone was wondering, the best times to day trade are the first 90 minutes and the times I mentioned above. That is where the volume is its highest and the moves their greatest. 

In todays trading, I started just after the good moves short, around 7:30 and was then looking for the bottom of the move, I did find it, but I was a little to hasty in putting the trade on. I got in to early and with only a 4 tick safety net stop, I got hit for -3 ticks and again -3 ticks. I did not get filled on a three tick target and quickly had my second small stop.

It did get better after that, as the next 10 trades we all gainers.

The blogs that I write often times are just as much for me to re-enforce what I already know, but we are all human and need reminding. Which reminds me, I need to work on my first trade of the day. I often do not give myself enough time to get set up before I start trading. That is something I need to work on. The days I do my pre-market preparation, I start out fine. But the days I tend to rush it, because I think I am going to miss something, is when I don’t give myself enough time to look at where we were, where we are and where we are likely going. (This is a form of Fear, fear of missing the trade). There is a progression that really should take place, getting your mind where it should be, is essential.

When writting about it, it exposes my weakness and now I can do something about it. This is and should be true for you. Look at your trading objectively and ask yourself, where are you the weakest and where are you the strongest. Continue to re-enforce the strong points of your trading, so that you don’t slip in that, but you will need to work on the weakest link first. How is your trade management after you put on an order?  That is just as important as your entry. How is your money management? If you trade multiple contracts, are you increasing your size if you are getting stopped out, to recover more quickly?  

There are answers to these questions and you will only be able to get the answers if you write down the questions. If you never write it out, guess what, nothing happens, because you are not  doing all that you can to meet your trading goals.

I wanted to continue yesterday where I left off, but I see time and room is short. Yesterday, we talked about Greed and how it can negatively affect your trading. There are other emotions that can hurt your efforts as well. You guessed it, FEAR. That is a killer. I will have to start earlier in the post to more adequately talk about these two, from my perspective.

Everyone has their own story and idea’s of what these two emotions are as it relates to trading, but I will give you mine. I promise, to make a special note to continue on these two topic’s. They are so important, to long-term trading success.  I can only talk about it, because of all of my own experiences. So, come back tomorrow to here, “The Rest of The Story”.

   http://www.youtube.com/watch?v=SOZr9tRpzi8  

http://www.youtube.com/watch?v=tmklqINxwR4

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Controlling Greed and your Trading Emotions

Wednesday, January 13th, 2010

Today is Tuesday, January 12th and the momentum has slowed the last two days.

Todays Index’s were down across the board, with the NASDAQ getting the worst, followed by the S&P -10 points and the Dow, -30 points. We are very close to the extended March 6th trend line support on these index’s. If that support breaks, it will be the first clue that we may have turned the corner on the rally. But still it remains intact and all is well.

As I had thought, today we saw the first signs of life in the futures market, with volume coming in at over 2 million contracts. Just what I was saying yesterday, that 2 million contracts traded in the emini futures market is considered good volume and we hit it today. It has been a long time, probably longer than a month with this kind of volume.

As day traders, we need volume to push the market around, otherwise it becomes more difficult for traders to make money. It is always easy for them lose money and with low volume, bingo, you are there.

Most traders do not know how to trade in shallow trading ranges and end up getting beat up pretty bad. But if you know how to Scalp Trade this market, taking a little out of the middle, you can survive in any kind of trading environment. That is not easy to do for most people and there will be those that say it is foolish to try. Probably because they were not able to make it work for them. Traders are doing this all across the globe and they are taking it from those who think they can.

Some people only scalp trade and that term can mean different things for different people. To me, taking 2,3 or 4 ticks, will qualify as a scalp. Others will call taking a 2-4 point profit on the S&P emini’s, a scalp. So, the term is used widely. If I can make a profit on these small trades while keeping my losses to an equal amount 1 to 1, I am doing OK, because my percentage is pretty high. You need to have 60% or better with the better being more like 75 and up.

When I trade, I look for both kinds of trades. If the market will give me an extended move, often I position myself to capture it. At times I take half off early which gives me the extra ability to ride the move out. It’s a good way to trade.

In my trading today, I did not do as well as I had wanted, but I had a few bigger trades to cover myself. I came in late in the day and missed some big moves short. Overall I think a came a little short of my daily goal because of commission, but close. I had 10 trades 5 gains 5 losses, but had a few trades for higher point returns. As I said I was off. Lack of concentration and I did not take a break from a training session I had with a student.

My timing and concentration was off, with the first two trades as loses. They were not good entries and it cost me. I could have avoided  some of the lose by closing the trade out early as I normally would do once I start to lose the edge. To me and my method, the Trading Edge, is clearly defined and when I lose it, I need to get out, often avoiding  my full stop out of 1 S&P point. I start out with a 1 point stop on all trades, but it almost instantly goes to three ticks when I get one tick of movement in my favor usually when I am in scalp mode.

Often times I am able to catch trades for several points as I did last Friday with a 4 and 5 point gain. It does depend on the price action and what the market gives you. If the markets clamed up and its daily trading range shrunk, many traders would suffer, because they only know how to trend trade. When its choppy, they often stay out, but only after they got burned by non directional non moving market. Being able to Snipe or pick off a few trades makes life a lot easier, providing that you can do it. You end up having the ability to pull a few points a day out of the market, no matter what kind of market you have.

I will make a few comments from where I left off yesterday, about needing all three components to become successful as a trader. It does not matter what you trade, these are things everyone in this business needs.

We all need to know how to trade, by following a methodology or system of some kind. Next you need trading discipline, as it is often talked about.  The last thing is, you need to be aware of the forces that are naturally working against you. What forces are you talking about?  Well, for starters, yourself. When trading, there is something called our human nature. That nature says many things about us and our ability to become profitable. It is to often, the unseen things that holds us back from realizing our dreams.                                                                                                                         ————————————————————————————————————————————————-Let me focus on one point and see how far we go. GREED. That is a human emotion that all of us are faced with. We did not learn it, it comes very natural for most of us. I believe, we need to unlearn it or decide ahead of time, by an active decision to not allow this emotion to take root in us. If we can, it will make so many things better not only for our trading endeavors, but in every other area of our lives, good stuff.

The only way we can ever address it, is if we are first aware of it. After that, what are we going to do, to get a handle on it?  This emotion has been one of the leading causes for traders to blow up there accounts.

We need to be content with modest gains when we have them. The opposite of content is discontent and the twin brother of discontent is greed.

Unless you are content with your piece of the market, you will continue to strive for more. In trying to get more, you will lose what you have. Take control of your trading and your emotions. Trade with a purpose and a goal.

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Two Live Trading Video’s in Todays Post !

Tuesday, January 12th, 2010

Today is Monday January 11th and is a typical day for many traders to return to the market after having taken time off.

The price action seemed a little better than it has been lately, but the volume was really about the same. A busy day in EMINI S&P Futures is between 1.5-2 million contract, with the lower figure being border line active in my opinion.

On Friday I posted my blog a bit early, I had a few things to do and wanted to get it out before the weekend, but I did come back at 11:30 am West Coast time to pick up a nice move. I had a couple of small loses of only 1 S&P point combined, trying to figure out which way the market was going to move. I initially was leaning long and was just a little early. Had I waited, I would have had the real market read that I was looking for. The market did give me a head fake and I bit to the short side. With no follow through and a loss of the momentum, I did not wait to take a full stop. My first thought of a long break out was right and I jumped on it quickly without hesitation. I was down 1 point so far, but did not let that persuade me into taking the position. It was on the high tick, I did not want to miss it because I could see that the move was for real. I left the position open and road it to the top. I exited the first half of the trade at I think +4 1/2 points and second half at +5 points as I can remember. I posted it on U-Tube Friday and will paste it in here today.

That was nice to go into the weekend with a nice gain, but I like the fact that I did not get flustered by the first misdirection. Friday was a brutal day for anyone who traded the middle part of the day, just brutal. That is when you need to wait and back off. No follow through to any trades and no price range movement.

I happened to stop right after I got my first trading goal for the morning on Friday. Had I been trading, I am sure I would have been trying to scalp only those small swing trades for a few ticks, 2,3 or 4. If you tried to get any more that, you would have been stopped out, several times over the course of hours. The market stopped moving Friday, so to speak at about 7:30 and it started up again at 11:30. Those are the times I had said last week or so, were the best times to trade. The first 60 to 90 minutes and 11:30 to 12:45, West Coast time. We will see the volume and the trade range come back pretty soon, but until then, be modest with your trading goals.

There is nothing wrong with- get in, get out, get done. It works for me. It could work for you too, if you know how to operate it. Just like a piece of heavy machinery, you could not expect to get up on one of those Cat Tractors and start pulling and pushing levers. It takes time for someone to show you how to do it. It comes with instruction and you need to practice. In time, you know how it operates and you can maneuver it around.

The same is true for trading the S&P emini futures market. You most likely will need someone who does it, to show you how it is done and explain what you need to look for. We are not born knowing how to trade and it is not natural for someone to pick it up like riding a bike. It is more like driving a tractor, not everyone is able to do it, but for the traders who are determined to succeed and have the patience and trading discipline to go by the manual, and occasionally use a little insight, it can be mastered. This what I teach in my Emini Day Trading Course at Sniper Day Trading.

I mentioned in Fridays post that you need three things for success. Trading Discipline, to not over trade and wait for High Probability Trade Setups, you need to know how to trade, (Sniper Trading method or your own method or system) and you need to be mentally strong to overcome and recognize the mind games that come with Day Trading, especially if you decided to Day Trade for a Living. All three of those are no easy task and is attainable, if you break it down in small bit size pieces. Like any large project or undertaking, you always break the project down to small tasks. When those tasks are addressed and a certain level of success has been had, you can move on to the next. You may work on all three area’s at the same time, but in small attainable goals that will be achieved simultaneously.

Many people just want to get up on that thing and ride it. Side step the needed training, not think about developing personal disciplines to help you not react impulsively and not even be aware of the last  part, influences of negative trading psychology. We often end up being our own worst enemy and I know I said that before once or twice.

Start doing things in your life that you can exercise trading discipline and self-control. If you wait until you are in front of your trading screen, you could be giving good money away, don’t do that. Much more to say and no more room or time. Continued in tomorrows post.

Today, I took four trades, last video,  -1 tick /+4 ticks, +4 ticks / + 2 ticks / +4 ticks , +4 ticks.  I split up a couple of the trades, thinking there was going to be more, but I could see that there wasn’t and rather than give it back on the second half, I elected to take it. To me, 1 S&P point or 4 ticks is fine. Others would say, why bother. To each his own, I guess. I have been only trading very small, there will come a time that I will get back up to a larger contract size, but I am in no hurry right now. I am enjoying building my website and teaching traders to see what I see.

   

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Trading Psychology-Trading Discipline and S&P Emini

Friday, January 8th, 2010

Today is Friday, January 8th with early trading showing weakness.

As I write this early post, 9 a.m West Coast time, we are seeing a counter trend move back up, off of some early weakness. This is how yesterdays market started out and is what we will need to see in today’s market for us to hold on to the current momentum. It will be interesting to see how the market ends the day. Currently it is struggling with over-head resistence coming in at this mornings pre-market highs 1138 – 1139.  At one attempt I did see a large cluster of sell orders positioned at 1137.50 the previous short-term high. From that point, the next three prices had 13,000 contracts to sell. That was some serious volume with the market attempting to attack it and swallow it up, but it was just too much to overcome and fell back. I was able to catch some of that drop as you can see in the second video I posted below.

The day started out good for me and I tried to catch some of the early moves. I knew the unemployment numbers would be something that traders were watching this morning, so I thought to participate. I have a video of my first two trades below, but I don’t think there is any volume to it, I had my wires crossed, in my mic, not my head, thank goodness. The trades we good and took only two ticks of heat after my entry. My method said buy and I did, both times exactly as I should have. I grabbed the high tick as well, I did not want to miss the move, it looked strong.

Both of these entries were at what I call my turning points, like I posted in yesterday’s blog. Then, I did not take any trades, but just pointed out what they were for the day. I thought we would have the volume back today and with all the talk, I thought something big might happen. It actually turned out a lot quieter than I thought, but it was a big enough move for me.

I took a break and came back for a few more trades. I split most of my trades up and they are as follows and are in ticks. +3 +4 +1 /  +5 +10  /  +3 +3  /  -2  / +2 -1  / + 2 +5 /   

I often judge how I did not only by the net ticks, but also by how much draw down I take on the trades. On most of these, it was only a couple of ticks. That is what I strive for. In the loss that I had, I could have made it through that with my standard 4 tick stop and looking back in hindsight, I can see that, but I did not know that with surety then and had to protect myself. After I saw support come in, I did re-enter long at the same price. Losses are a part of trading and you have to accept it without it negatively affecting your next trade. To often, we look to get back into a trade to recover the loss that we just may have taken. That is the wrong reason to enter a trade. One thing should have nothing to do with the other. You need to place your trades based on what ever your trading model says that you should. Trying to make up for losses, is the wrong mindset and will hurt your overall performance.

Take each trade on its own merit, don’t let human nature get the best of you, by following your emotions. One thing that helps me is to know that you have and live by a daily loss limit. In the case that you have a bad day, you must have a cut off point to your trading, that says, I quite for the day. Don’t look at it as a defeat, but in a way, it can still be a mild victory. What I mean by that is, if you exercise the Trading Discipline to stop trading, for what ever reason, (not feeling well, too much on your mind, poor entries or just trading in weak price action environment) you can consider that a victory, because you know you have a cut off point for the day and you stuck to it, no matter what. That is a victory, believe me.

To often traders start out on the wrong foot and get in a hole. What happens after that?  Well, I think we all know, it can go from bad to worst. The worst, is what you are trying avoid, with bad being OK. I have a 4 point daily loss limit. If I go minus 4 S&P points for the day, I stop trading, I have to. If I am having a bad day and it happens to everyone, that is the worst thing that is going to happen to my account. It is a lose that I can live with and one that I can easily come back from the next day.

Let me say one more thing. I have mentioned this before a few months ago, but it bears repeating. When you are in trouble or even when you are not in trouble for that fact, “Trade by Exception”. What I mean is “Trade the easy and obvious”. Both of those are very important. We need to be relaxed when we trade and not tense or stressed. Try and calm yourself down before you begin and get into the right mindset. You can tell yourself, “I will not take any trades today unless they are easy and obvious trades. That will take the pressure off right away and give yourself permission to relax and just wait and watch price action along with what ever else your use to help you decide to take a trade. Price action does rule over all indicators,that does take time to grasp, but learnable.

Trading psychology and trading discipline are key ingredients along with knowing how to trade. You need all three of these vital components to be successful long-term. I will cover more of this in future posts.

So, there are some things for you to consider. It has more to do with how you approach the market, then anything else, but often this is exactly the kind of things that hold traders back from getting to the other side. Good Luck and Good Trading.

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Bullish Sentiment backs off- Room to Rally

Thursday, January 7th, 2010

Today is Thursday, January 7th and all is well on Wall Street.

I don’t look or watch much financial news, but I did see that the unemployment numbers are coming out tomorrow and there was some talk, good-bad-neutral. I did not really hear a consensus, but, based on some other numbers that I was waiting on, I would say that there is a good chance that we may have an upside surprise. I totally welcome it. It seems the sentiment numbers came out on Tuesday and just receiving them today, (2 day delay), says there is likely more room to the upside for the rally.

The numbers went the other way, a bit of a surprise, but just what we needed to keep the rally alive. We dropped down inside the 48 % Bullish figure (55%+ trigger point) and the bearish % came up 1.5% to a paltry 16.9%. The main numbers are the bullish numbers and they have pulled back down. That will give the market room to move up without causing an overly bullish bias. You want to see skepticism in a rising market. That is what really keeps it going. Once everyone feels to strongly one way or another, it’s usually lights out. So to recap, it does look like the rally will continue and the technical picture says the same thing as well.

The monthly, weekly, daily and 120 minute momentum on the S&P 500 cash, are all pointing up now and that should carry us over into tomorrows market.

Yesterday, I did mention that if 1130 on the S&P futures broke we could trade down to the 1120′ish level. It never made it that far and is a good thing. We were in a rising wedge pattern and in a up-trend, when that kind of pattern gets broken, you will usually see some type of selling movement at the break. We did get the selling, as the break happened, but it quickly got shored up. Later on, a test of that low successfully held and we were on our way back up to the highs for the day. That is exactly what you would like to see. The bear’s tried to take it down, but the bulls came in to shore it up and lead an advance to the high of the day. That is a good position, coming into tomorrows session.

I did not do any trading today, but I did post a video of the turning points in my “Scalp Trading” screen and you can see that below. These are short-term trades designed to capture small pieces of profit from the move. When I see a certain trade setup brewing that I like, I can click the screen to a different window set up, to take advantage of this condition, which can capture several points, instead of just a small scalp. Not all of these trades are gains, to be expected and I did not trade any of them today, in addition, you must know how to manage the trade after you put on an entry. All that said, these are still the turning points as the “Sniper Day Trading” method would give them. As of Monday, I will be back in full swing. I may take a few trades in Fridays session, but not sure, we will see.

I feel it is important to learn this type of trading, because you never know what the market will through at you and that would include, very slow, direction-less days with little movement to it. The market should  pick up considerably in volume, daily range and trade setups in tomorrows session and certainly Mondays. This is the time, that the institutional players will be coming back from there extended time off. It happens like this every year and so this is no exception.

That is it for now, a little tired and need some rest, so until tomorrow,

Good Trading !

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Financial Freedom through Electronic Day Trading

Wednesday, January 6th, 2010

Today is Wednesday January 6th and the market ended the day flat.

We are three days into the New Year and we had one good day and two consolidating days. Tomorrow, we will have to get things going. If Thursdays session breaks 1130 on the futures, it is likely we will see 1123 sometime in the session or soon there after. We will have come back half way at that point, from the intra-day low set last week.  If the first, (break 1130), then the second is likely.

Currently, all the moment is up, monthly, weekly, daily, and the 120 minute or 2 hour bar chart in the cash S&P.  There is a little room for the market to retrace, probably down around that 1120′ ish area in the emini futures, but after that, it gets a little sketchy. I will post what the sentiment numbers are in Thursdays blog, to see if we have had any shifts in bullishness, which I have been waiting for.

So, until then we will have to read price action and  take it a day at a time. If we do get a spike in bullishness, I will be in “Stock Market Red Alert” mode. We will then be taking a closer look at price action once that happens and everyone should be ready, for the unexpected, no surprises. Personally, I expect a big selloff, but it is just my opinion. Until then, we are still within the up-trend.

I did take a few trades (4), in the S&P E-Mini, they are as listed. -1 tick/ +5 ticks, +3 ticks / +4 ticks, + 2 ticks/ +2 ticks. The market is still very slow, for this afternoon’s session. I am sure it is going to pick up next week. I have a U-Tube video of todays trades below.

The daily direction does not make any difference, as an emini S&P day trader. I look to Scalp small pieces of the days movement out of the markets current trading range. From there, book the profit and call it a day.

Next weeks movement will be better than this week over-all. I am sure of that. More volume will come back into the market and we will see a lot more opportunities to Snipe or pick off a few points. Get in, Get out, get done. If you can do that, you have no issues, no struggle to come back from a negative equity position. If you take a break and come back for the afternoon session, I recommend you cut your size down. If you are up in the morning and come back in the afternoon and give it back, what have you accomplished. If you have the confidence to take only solid method trades in the afternoon, I would recommend that you cut your size in half at a minimum. If you draw down against your equity, you can still end the day with a gain and that is so very important. I would not recommend that for new traders. You need to get in the habit of staying in control, book your gains for the day and move on.

As day traders , one of the reasons people like this business is that you can make money in a relatively short amount of time from the comfort of your home. So the money is the lure, but it’s really what the money can do for you and that would be an added dimension of freedom, including time freedom. So, if you are able to capture the money rather quickly with a minimal struggle, does it not make sense to then play out the scenario I layed out above. Capturing 2-4 points in an hour or less is what we are talking about. You then have the money, so now its time to go do what the lifestyle promised you. Freedom and time freedom. What will you do with the extra time you have on your hands. It is always a nice idea to parlay that and invest it into other people and relationships. I once heard of two people, one had a lot of money and the other much less. The person who had a lot of rich relationships was really the person who was considered rich. I believe what we do in this life lives on and it is in those things which will last.

So, it is a worthy goal to capture your points for the day and go do something else. What ever you have a passion for, besides trading. To often, we saturate ourselves in the very thing we love, only to mess it up by allowing ourselves to become un-balanced.

When we are learning something new, it is normal and natural to invest your time and energy and lots of it. Nothing in life does come easy, I think we all know that one, but once we have achieved and found our new skill to capture our daily goal, what ever that is for you, I believe, less is more at that point.

I have just heard so many story’s of traders doing well early on and over-stay their welcome, to the point of giving all early gains back to the market. Frustration sets in, and all kinds of weird things can start to happen to even the best of traders if you do not guard yourself. We trade against ourselves just as much as we do against other traders and institutions. Don’t make it harder for yourself than you have to. Book your gains and enjoy life. Then come back tomorrow and do it again. It takes 21 days to form a habit, is what they say, why not form one as nobel as this.

Good trading to all!

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Key Stock Market Turning Points

Wednesday, January 6th, 2010

Today is Tuesday, January 5th and we got just what we needed, a rally.

Yesterday, I did not post an update, but we had a nice rally to start off the year. I did see that the volume was light and that is still to be expected. It is easy to get vacation fever, I had a touch of it myself. The bigger volume will not typically come back until Monday’s session next week. That is what I remember from past years.

The market was sitting on key support. I remember I said, we could not afford to close down 1 S&P point and still maintain the long-term momentum from the March 6th lows. It held and pushed higher. This is shaping up nicely. I am sure if the short-term momentum can continue for a little while, a week or so, it will inevitably turn the ”stock market advisers” bullish, pushing the numbers to the potential trigger point of +55%. Currently it stands around 50%, but these guys are trend followers and I can only imagine they will turn bullish here right at the top. Many of them have already been bullish and good for them, but the ones that have been neutral will soon BIT. Once that happens, you can bet we are going to get a big sell off, mark my words.

We are currently at 9 years highs in the numbers when you combine the two together. That kind of excess will not sustain itself indefinitely. The only thing that will be able to work off the exuberance, is a sell off. Let me remind you, only 15% of professional stock market news letter writers are bearish. That is a small number and the majority will be proven wrong. It always happens this way, I see nothing to say, “it is different this time”. Some how, the market knows and seems to be waiting for the bullishness to catch up as well. Then in my opinion, you will have the makings for the perfect stock market storm. We are not there yet and I am only giving my opinion and not stock market advise here. I will share with you when I think all of this is going to play out. About a month ago, I did get a little excited when I saw the bearish numbers turn up so low, but the bulls were still cooking. I came back down to earth in a day or so realizing that, it was not time. 

Those numbers I am talking about are published on a website called investors intelligence, you can look it up if you want to. I just look at those numbers to get an idea of how much bullish/bearish sentiment there is out there and these numbers have proven to be very accurate in the past at very key stock market turning points.     

In my personal trading, I took one trade yesterday coming off the top. At 10:45 am West Coast, I went short at 1029 on the S&P and covered half at 1027.75 and the other half at 1028. I had unexpected company and did not have time to continue. No trading today, although today had some real nice moves to it. Just taking care of a few loose ends. I plan to get a good schedule for myself starting on Monday, this coming week. The volume will be back, I am sure the moves will be back and I will be back. I will be posting my trades from the first hour of the day at least.

The first 90 minutes of the day are where the best volume is going to come in. After that, from 11:30 to 12:45 I feel are the next best times to trade. As a “Scalp Trader“, I feel I can trade any time and still squeeze out a few points for the session. I have been doing this for some time now, but  to often last year I did not trade the open, but closer to the slower time of day. That just makes it take longer, which is really not my style.

As a “S&P Emini Day Trader“, we should all trade accordingly to our strengths, not our weakness’. If you have the patience to wait long periods of time for the trade to work and be OK with that, swing trading might be your style. If you feed off of the fast pace you may be geared to a shorter term time frame. There is a lot in between and every trader needs to really figure that out. You will not be at your potential if you are not matched up properly with your personality and trading strengths.

If anyone needs or wants helps with this, I am available. This is free advise, I will not ask you for anything, or will not try to sell you anything, but I will try to see where you are at, ask you some questions and help you identify your strengths to make sure you are going in the right direction. I don’t worry about doing this for free, it all works itself out in the long run. But helping people overcome their trading challenges brings me a lot of satisfaction and it helps me more clearly define my own strengths and allows me an avenue to express my experience to those who will listen.

So, don’t be shy and send me an email. You can get contact information at www.sniperdaytrading.com  I use Skype to communicate and my Skpye name is SniperDayTrading.

Good Trading.

http://www.screencast.com/t/ZTFlZjY1   Yesterdays one and only trade

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Emini Trading Course – free consulting offer

Monday, January 4th, 2010

It is Sunday evening January 3rd and the market opens in just a few hours after a long holiday break.

The trading day is going to be one to watch. We are currently directly on long-term support going back to the March 6th lows in all the index’s. We can not close even 1 S&P point lower from here without breaking this very key support. Doing so in my estimation will bring more selling.

The current momentum in the 120 (2 hour) minute chart is clearly down. The daily has not as of yet turned down, but a lower close on Monday will signal a shift in momentum for that time frame. Both the weekly and monthly are clearly still up. If we are going to go lower from here, it is going to start in the lower time frames first and then shift to the longer time frames as things move along.

One thing to bear in mind, the sentiment numbers did come out on Thursday and the bearish camp became even smaller by -1.1% to a record low of 15.6 % of professional stock market newsletter writers being bearish. That is such a low figure. I believe it goes back well over 5 years and may go back to early 2000 highs set back then. We all know what happened then.

Something, sometime is going to bring this number up, that is for sure. We just do not know exactly when. A large crack in the market will get these writers to slowly turn bearish again. It happens all the time, these people are trend followers. The interesting thing is, we are trending up lately and it is no wonder that more and more are less bearish.

The other side of the coin is, we still have room to move up in the readings for bullishness. Still only at 51.1 % we dropped by over 1% from the 52 area. What will get this number to jump up. I believe a rally is the only thing. But do we have any bullets left in the gun before we fail. That is the $64,000 dollar question as it has been said. Tomorrow will at least tell us a clue as to which way the day ends up.

The first 5 days of January is said to give the trading community a barometer for the rest of January and then for the rest of the year. I have seen this work out and have seen it be a flop. There may be a statistical edge but it is not anything we all should be hanging our future earnings on for the year.

Study price action and you won’t have to worry about this sort of thing. There are some statistical advantages but traders trade in the now, not the future. So the only decisions you can make are based on what is happening at this moment with the “Daily Price Action” and place yourself in front of the move.

Trade like a “Sniper” and pick your spots. Enter the market with precision, keep your risk low by trading counter intuitively, be a Sniper Trader. You need to stay one step ahead of the market and be positioned at key “Turning Points“. Don’t follow the herd, but use them to your advantage at these key “Trading Turning Points” and you will hit your trading goals.

I know, so many may be saying easier said then done and I can understand that. If you need structure, a trading mentor and trading support, I have my EMINI  Trading Course available to help provide what you may not have at this time. No one was born knowing how to trade. It actually goes against basic human nature and this is a skill that needs to be learned. My Day Trading Method is not hard to grasp, but it is powerful. Once the volatility comes back into the market you will likely wish you were prepared to take advantage of the powerful moves that can very often show up.

If the volatility does not show up, you will have the knowledge in “Scalp Trading” your way to your daily trading goals. Either way, having a set plan to follow is surely better than no plan. My style of trading can be adjusted to accomodate virtually any time frame because it is “Fractal” in nature. The same structure regardless of the time frame. This is a great topic to talk more about and I will try to remember it to expand on the subject in future posts.

If you have a trading method already that you trade and just want some idea’s on how you can improve it or would like to ask a few questions about anything trading related, drop me a line through Skype. My Skype name is “Sniper Day Trading”.  I will never pressure anybody to buy my Emini Trading Course, or even bring up the subject unless you want to talk about it, but I will try to be as helpful as I can in regards to your trading questions.

It is not easy to find people who want to help without trying to get something back for it and it is not easy to find people who are easy to work with and available, all at the same time. I am not perfect, but my heart is in the right place. I like to teach people how to trade profitably. Now is the time for change. Start today !

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Scalp Trading techniques

Sunday, January 3rd, 2010

Yesterdays post brought up some of the benefits of Scalp Trading, but today we will focus on techniques.

There are many ways to day trade, that is for sure and Scalp Trading, I feel ranks pretty high. This has been said to be one of the more difficult methods to master, but the rewards are great. Those who can excel in this type of trading can virtually write their own ticket.

Scalp Trading, will force you to learn so much more, so much faster than other forms of trading.  ”Price Action” is so much faster because of the smaller time charts that are often used. You will see pattern setups that are very difficult to see on minute charts.

When placing your orders to go long or short, you can not afford to have large draw downs. In fact, just a few ticks against you should be your maximum. But how do you do that? Well, there are tools you can use to help you see what is present in the “Price Action“, but it should be price that ultimately determines your entries. The tools can help, depending what you use and how consistent it is. Most tools for this kind of trading are not very good for most people, because they don’t know how to use them and don’t filter out the false signals that invariably turn up with generic indicators.

One of the key things to try to get a handle on is, why prices move in the first place? I believe I touched on this in an earlier post some time ago, but that is the question? The market has a “Natural Trading Rhythm” to it and we need to not only see it, but feel it. Getting in tune with this trading rhythm or trading vibration is key.

Scalp Trading can mean different things for different people and there are ways to minimize your risk and still maximizing returns. One such way is to scale out of the trade on certain setups. Every trade setup is slightly different and some produce bigger returns then others. Over time you will come to learn which one’s are better and on those trades, you can leave a portion of your trade open.

Taking half of your trade off, when you get to a break even situation is a great way to minimize your risks and still capture higher point returns on those special setups.

For me, I often take half of my trade off at 3 or 4 ticks and leave the other half run, when it is appropriate to do so. With this type of trading, I feel you have to trade with the momentum only. You can whether small pull backs of a few ticks once you have the room to do so, but you should not lose the over-all momentum of the move.

Placing the order where you are going to get a sudden burst of movement is all about understanding price action. A trader places his order to go long, at that point his stop is set under his entry somewhere. Other traders are going to place there stop order in the exact same place and so. You want to try to find out why and where those spots are. If you do, then you will be able to take advantage of that burst of energy that has built up and which give you the power behind the move, but, all to your benefit.

A lot of traders know where these spots are but are not conscious of it. Ask yourself, if I was in this trade here, where would I place my stop-loss order, long or short.? When you come up with the answer to that, often times that is where you will want to take the opposite side of the trade. It is a little strange to think that way, but that is exactly how you need to think in order to start understanding daily price action.

That is why I have come up with my website name. Trading like a “Sniper” is what it is all about. You can not afford to miss the mark and have a wide range for error. “Sniper Trading”, zooms into that small window, whether I am using my “Scalp Trading” screen or my “T-2″ setup screen. Both models narrow the entry down to that small window where the energy is built up, ready to explode.

Trading with this kind of focus can protect your trading capital by only allowing yourself to take small losses. Others may be taking 2-4 point stops on there trades, when trading the S&P 500 futures, but I think that is way to much. It is very hard to come back inside the session to recover losses like that, especially if the “Daily Price Range”, is narrow.

Setups like these also take a long time, where to often you run out of time in the trading session to ever recover.

To Recap:  Look at tick data, not minutes, look to place orders where other traders are placing their stops and consider splitting up your exits to reduce risk.

All of the above information is broken down and explained in my “Emini Trading Course“. If you have questions, I will be happy to answer them for you. Even if you just need some information about trading more profitably with your current approach. I am willing to help, it is not all about the money. I do enjoy helping traders. Visit my website and drop me a line  www.SniperDayTrading.com , the New Year is just ahead, start off on the right foot, take action.

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