Today is Monday March 1st and the market rallied on cue.
We did see the rally on Wall Street that I was mentioning, but it did not have all the bells and whistles that I was looking for, like increased volume and conviction behind it. It still counts and maybe its a warm up for tomorrow? All the index’s closed at the high of the day with the S&P +11 points about 1 %. The Nasdaq was the big mover at + 1.5% on the index.
If you look at a chart of the S&P 500, the Dow Jones Industrial and the NASDAQ, you will see that the NASDAQ is in the lead right now. With one more day like today, it will be right at its old highs. I did see this previous outperforming as a sign of internal strength, giving me one clue to a market rally. The other was the low sentiment numbers, which are coming off quickly, but still a bullish scenario and lastly price action itself. The position of the bars themselves, tells a lot if you know how to read it. For many, it may just look like lines on a chart, swinging up and down, seemingly without order, but that is not the case.
I don’t want to build up any false confidence in the current price patterns. Every trader needs to be careful at all times and expect the unexpected. Let me point out a surprise scenario as the market is not out of the woods yet. I have seen many times patterns in the daily charts that look just like the one we have now, that draw the unsuspecting in, only to quickly pull the plug and take it down hard. There could be bad news looming and that could be a catalyst for just a scenario. The idea of being a day trader is as the word describes, we follow the action of the day. I know there may be position traders that out there that will hold several days and they may find many of my past market calls helpful to see the possibilities, but as day traders, we look inside each day and should attempt to read the price action charts to determine if we are in an uptrend or downtrend. Then, you will be well served to find a low risk entry in the direction of the dominant trend for the time frame you are in to capture a piece of the move.
It is best not to try and pick tops and bottoms. It really might feel good to do that when you can, but this really only feeds our ego’s and does not bring us closer to becoming professionals but more like amateurs, so try and not do that. If the market is not trending up or down, but range bound, you will have to find your way to catch a piece of those moves and take what the market gives you. You can’t take what the market does not offer, so, keep your expectation in line with the current price action. That is important and it should be remembered to keep yourself from getting frustrated and controlling the greed factor. If those two emotions come out of the bag, you could be toast for the session. So, keep a lid on it and one way to do that is keep your trading expectation in line.
Once you get good at catching 2-4 points and it could just be 2+, that is often enough on average to do very well. To average that, it is best to catch a bit more now and then, to cover any future loosing days you might have. The key is, having in mind the ability to capture two small points for the session. If you have in your mind that you are going to crush it today, with high expectations, often that will work against you. Stay calm, be realistic and quietly take what the market gives you and move on.
Long term readers of my blog know that I have a 4 S&P point stop for the day (Dow=40 points) That is when you have to throw in the towel. If you don’t have a point where you stop for the day, you only open yourself up for a possible whip out day, which you cannot allow under any circumstance. Controlling your loses is mandatory, it is not an option. Success will depend on it. Even if it means having a losing day, that can be a victory, because you stood your ground and stopped trading when you were supposed to. It is only one day and you can make it up down the line, just put it past you and keep your focus on trading properly.
Don’t trade against the market in the acceleration phase, (while the market is driving forward ). You will see a shift in power or a transfer in momentum as the market rolls over. At that point, you need to use your entry skills to get in and risk little. My Emini Trading Method, will teach those traders who need structure and a method to follow, that is clear with rules to identify which direction you should be trading and how to enter and risk no more than one S&P Emini point while doing so.
If you have your own trading method that shows promise, you may want to consider adopting some of the idea’s above, it could increase your bottom line.
In today’s trading a few trades only. I could only take what the market gave me, and it wasn’t a lot, but enough.
I wish all my readers the best,
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