Archive for the ‘Price Action’ Category

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Reading Price Action in Any Time Frame

Monday, August 2nd, 2010

Today is Monday August 2nd and what a nice day in a perfect world as the Dow, S&P and Nasdaq markets put in solid gains across the board, with +208 on the Dow, +23 points on the S&P and +40 points on the Nasdaq.

If one went only by the news, everyone should be short as things don’t look or sound good on Wall Street. If you uncover the numbers, they are not that inviting, but we don’t trade numbers, or reports, we trade stocks and index futures.

I have been calling for a significant rise in the market for some time now and have been saying that the surprise will be coming from the upside. That is unfolding very nicely. I am sure there are bears, now running for cover. Those are the smart ones, cut your losses early. The ones who just know that this market has to go down, will be the ones who really feel the pain. It could be financial ruin for many as they hold on and on, just waiting for this market to turn, with hope slipping through there fingers each day. Pride, has often been the financial ruin for many traders and investors. When you enter a trade, you have to know exactly how much pain you can accept before you enter and never move your stop to a worst position. Justification, will soon be the thing that starts to kick in, as traders and investors will not throw in the towel, admitting they were wrong.

In addition to calling the larger overall moves by the market, I said in yesterdays blog posting that we would see 1115 on the S&P Emini futures in the early morning session. It could come in the night trading but a move to that area was very likely in the morning session. Well, that again, is exactly what happened. The market pushed up to 1115.50 and backed off that exact number by 5.25 points. The next part was for the market to continue higher from there through out the session and that is just what we saw.

In today’s trading it went good, as I picked up some nice gains from the sessions. Nothing earth shattering, but good enough. Just traded small, as I am marking time for better opportunities in the coming week. I am sure I will find at least one mega day this week. That is a day with 2 to 3 times or more a typical average daily gain. Having 3-4 of those type of days per month, can make up for a multitude of trading sins. A screen shot below of my trades today.

Being able to read price action is the key to successful day trading and or any kind of trading. I have said that many times before and is a valid point to be reminded. I like trading with trading indicators, but I don’t always lean on there every signal. I always balance my approach to what I know about support and resistance, as well as many other unknown trading techniques that I cannot discuss. I show these trading techniques in my video updates that I send to my students many times each week. It is so nice to see that so many of my students are understanding the trading concepts that I teach apart from any trading indicators at all and are able to apply them to the markets to get what they came for.

Recently, I have been expanding my trading concepts to include the ability to project where prices will likely go based off of many factors. One of those factors being the amount of stored energy in the trading instrument. That energy get reflected back onto the market in the expression of a long or short move, depending on the directional release of the energy. Many times you will see the market pull to the opposite end of the trading spectrum as that release gets played out. That is where and when you want to be able to position yourself in-front of that move. You then possess the trading advantage.

Depending on your trading time frame, a trader can do very well to hold onto large direction shifts in this energy. I am able to see these shifts in energy by understanding the price action trading that takes place on the trading screen. There is a reason why prices move as they do, it is not just random as some would say.

The recent expansion of this concept is what is giving me the ability to project future price action, with precision. I don’t always have to be right, but right enough to make it right. With good money management and having the ability to enter an S&P trade and risk no more than 4 or 5 ticks or a stock equity trade risking no more than .10 cents, gives you certain advantages over other traders.

Currently, my focus is still on short term trades, 1-3 points for many, with the occasional 5-10 point trade. Becoming a good day trader takes time and discipline and a good proven trading method. You need all of those, to make a living at this. If you are lacking the trading method and the discipline, I think I can help. The time, you will have to put in. Nothing worth while ever comes easy, but the rewards are outstanding.

Good Trading, Vince

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Price Action Trading – Key to Long Term Success

Friday, June 18th, 2010

Today is Friday June 18th and the markets were up only slightly, calling it flat.

Another basically flat day across the board. The Dow did move up a bit more than the other index’s and basically touched a similar area and or number that would correspond to the S&P number I was watching 1122, which has not yet been hit.

I know a lot of people are calling for this market to drop and the level of bearishness has increased over the last 7 weeks from only 18% to currently 32% now. This is the largest bearish reading we have had in 15 months. If a minority position develops in the bullish camp to 35% or under over the coming weeks, I can not help but see a rally coming behind that. I might not be seeing something in the individual Dow Charts as of yet and will be taking a closer look to try and gain some insight, but for now we will just have to wait.

Either way the market moves, as short term traders and day traders, we only need to listen to what it is saying. It has a message for traders each day and tells you when to go long or short, but do you know how to here its voice? Many traders do, but most do not. Trading is about timing and trade and money management. If you have it, you push forward, if you don’t, you look, search, read, ponder, guess, analyze in the hopes of trying to figure out the formula of success.

The bottom line, people are not born with understanding how to do this. Logic and reason are not a large help, so being intelligent will not always help you. Understanding how the rhythm of the market moves is a learned trait and would take literally many years to just get a basic understanding of its nuances on your own.  Most traders will have there account equity drained long before they get to the point of understanding. Which brings me to a very noticeable observation. To many traders are relying on call rooms to give them the answers that they need to know and find out for themselves.

Call rooms or trading rooms that give out market calls most often do not explain why a trade is a buy or sell, but make the call for those to follow. Traders end up placing trades without the understanding of why. They do not have an understanding of “Support and Resistance” and how that applies to there positions. Support and Resistance, is just one aspect of trading that goes overlooked. You are not going to learn most often how to trade in a trading room, unless the moderator is clearly showing why, where and when the price will break away from an area and give the reasons.

At that point, it could be a benefit, if you are involved in the process. If the trades are called out, Long at 1105.50 and you follow it, what have you gained. You are dependent on someone else to give you your “daily bread”, not a good idea. Even if it works out, which most do not, you are actually hurting yourself from gaining and achieving your long term trading goals as your mind is not focused on learning how to trade and understanding the probable path of price.

Good traders know how to interpret the “Price Action” of any trading instrument. You will not be dependent on trading indicators, on trading rooms, or anything else but yourself, because you have learned the secret language the market gives off each day.   Sniper Day Trading teaches that language and also mentors you through the process of understanding that trading language.

I know traders are enamored with trading indicators, but they are only a reflection of the price. When you understand how to read the price action of the price bars themselves, you will be moving in the right direction. That is what I mean when I talk about understanding this trading language. The market will tell you what to do, as the evidence mounts overwhelmingly to one side of the equation.

I have talked about this recently, but I only repeat myself to be sure everyone is listening. Trading indicators can be a big plus for many and I do use them. I often trade without them as well, to make sure I am not building up a crutch on anything outside of reading the price action itself.

Recently I have been putting up only a couple of my indicators to show that if you follow them, you will be able to make money consistently. You will not have to trade all day long, as you will probably make mistakes, I know I do at times when I trade all day. The point is, taking a couple of hours or less, depending on your goals, you could make money consistently by just following the custom indicators and setup I offer. That is really not the ultimate goal although it may be for some. Learning why the indicators are saying buy or sell is what you should be after. Then you will have the confidence and conviction to place your orders and expect the market to move in your favor.

If you want to reach your trading goals, you have to do something different than what you are doing now. If you expect different results and do the same as you have before, you cannot reasonably expect different results. The law of  “action reaction” would apply here as it does in the stock market.

I am here to help. It is not all about the money, money can be made quickly in any given trading session. Giving back to those who want to improve there trading and realize there goals brings a lot of satisfaction to me. I have also seen my personal trading improve as I teach my trading method.

I will leave you this. I spoke to one of my students this week and I was so happy for him to see his trading results improve. He was a struggling trader who reached out for help. He told me, he has not had a loosing day in the last three weeks. He trades only one contract and does trade a few different markets, but is making $350 to $700 dollars a day     ( trades one market at a time -S&P, Gold, Oil, Russell) . He understands the language and is able to read it clearly. He see’s price structure the way it should be approached and again, I am so happy for him, you can not believe it. He is too, by the way. He knows that he will be able to make his living from trading and is just beginning to live his dreams.                                                                     ” HOW ABOUT YOU”   Good Trading to all, Vince.


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Price Action Trading & Trading Indicators

Sunday, May 30th, 2010

Today is Sunday, May 30th and I missed a couple of posts last week, but I am back.

In my last post on Wednesday, I said that the market was ready to push much higher as the market closed around 1056. The target area I called for was 1110 on the S&P and it was likely to take a couple of days. Well, on the second day, we came up to 1106.75, call it 1107 and within 3 points of the target area before it started to back off. On Fridays session after hitting the high mentioned, the market sold off towards the low of the day around 1087. Currently the S&P futures are up about 3 point at 1091 but it is very possible we will see lower numbers before we attempt to go higher, but not by much and for very long. I am looking at 1075 to 1080 as a possible turning point area. We will likely see some buying come in around those numbers. How the market reacts will be important as it trades into those area’s. I could see a good rally coming off of that area if hit and it is possible it could take us up to S&P 1130 this time over a short time span, about 2 days. That is where we will see stiff resistance, from there?  This is just what I see as a possible market move and it would be within the realm of a natural rhythmic market.

The sentiment numbers were out on Thursday evening for me, but released on Wednesday morning and they were lower yet again, a good sign for the bulls as it gets now within striking distance of yet again another sentiment reversal. The bullish sentiment of stock market newsletter writers for the past four weeks starts out at a bullish extreme figure of 56%, followed by the massive sell-off we had right on cue. A figure of 55% or greater is usually a strong tipping point. The next three weeks we had all lower figures of 47%, 43.8% and last weeks 39.3%.

This latest figure is now very interesting as the market sentiment extreme is now closer again to a bullish tipping point of 35%. The way the market reacts on Monday and Tuesday will set the tone for the new weekly numbers that are released on Wednesday morning and if we rally big, that could send the sentiment back to neutral, 45%. Professional market newsletter writers are really no different or better at picking the markets major turning points than the public. They are all trend followers and always have been. The thing is, when the market makes its intentions obvious to the public, it is about to turn and go in the opposite direction. A simple and yet effective tool for trading against the public. All of this is not so critical as short term day traders, but its a good exercise for all followers of the market to look at weekly, daily and hourly charts to see and gain insight into where the markets next large moves will come from.

Below is a video I posted last week on U-Tube and am posting it here. I have been showing one of the timing tools I have available at Sniper Day Trading. I do not say what it is, but want to post this video, to show traders that it is possible to time the market and be successful at it, using the right tools. I have a few other things up on my personal screen, not shown here, which makes for a complete view of how I can handle the market. This is in my Trending T-2 model and works well, when the market is moving. When we are range bound and the moves are small, I just trade out of a different screen with a different set of objectives and goals. If the market is likely to make a move and reverse, it is best to take a all in and all out approach. If the market is trending I often times like to scale out of the trade and average the position out. The market always gets to decide. Either way, hitting a daily goal of 2-4 points per day is not that hard and can usually come rather quickly.

Trading is knowing when you go long and when not too. When to go short and when not to. As I have mentioned before, knowing when not to trade is just as important as knowing when too. If your timing is off, you loose. If your timing is good, “Bingo”, you got it. So, being able to say no to a trade that you may want to enter if vital to your success. Do you have a map or guild to tell you with some degree of consistency that you are making the right decision or are you going by just a gut feel. The later, will play games and tricks on your decision and you will often question yourself if you don’t have clear rules for entry.

With all that said about trading indicators, I feel, every trader should learn to read the price as it moves, thus the term “Price Action Trading”. If you know how to read the price of anything, you will more closely know why you entering long or short. Learning to read the price takes time, and often traders are not willing to put the time in to educated and expose themselves to all the different reads, tricks, fake outs and natural rhythmic moves the market can throw at them and that is where trading indicators can help, initially. As time goes by you will get the exposure you need to be well grounded and thus a profitable consistent trader.

The video’s are only to show you what is possible. You only need one or two of these trades per day to make very good money, not thirty. So, again, many systems or trading methods don’t show you how or even a part of how this can work for them. I am glad that I am able to show you something to help you better see, again, just what is possible.

Above,  is another video of a stock and I cover three days of typical movement here. I basically mark up the screen of every trade signal through out the three days and again shows you what is possible. This is in my T-1 Trade screen and is geared more for short term swings with an occasional runner. You only need two or three of these trades a day to make a good living not all the ones as shown.

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Having Strong Directional Market Bias can hurt you

Thursday, April 15th, 2010

Today is Thursday, April 15th and the market has shown to be pretty resilient as it closed up another few points on the S&P and other index’s.

The Dow was up 21 points and the NASDAQ up about 11, putting back to back gainers together. As I had mentioned in Mondays post I believe, we needed to stay above some key spots on the charts and I clearly marked them. That was the maximum amount of room the market could move inside and still have the longer term momentum in tact. It bounced off some key support and has not yet stopped.

I did see a slight bearish pattern present late in the day today. That setup lead me to some pretty nice gains and reached my daily goal with ease and room to spare. I did not trade or post yesterday but am far ahead for the week so far with only Friday to go.

I have an equity chart of my results below. I took nine trades in total ( a few exits were scaled out) , a little more than I usually do, but that was fine, I took a few good breaks in between and traded about 90 minutes. I cut my trades off at very slight losses, -.25 and -.50 point, nothing big.

My method is very strict in order position placement. If you are placing your orders in the right place, you should get some movement right away, that movement is basically free cushion or extra room to help you insulate yourself. I very often will see one or two ticks movement right away which gives me an advantage. I take that movement and it helps insulate my position so that I don’t need to have a 6 tick stop. If I don’t get the results I am looking for and loose the edge, I don’t worry about getting out. I can always get back in, but I am only taking a one tick loss or maybe two. It is a whole lot better than my full stop of 4 ticks, which is still very small for most traders.

If a trader is taking a 6 tick stop, you have to make up a lot of ground just to break even, let alone then make a profit. If you take two of those, you are bleeding.  Trying to hard to come back from that will again only hurt you further. You need to let the trade come to you and it should be, feel and seem effortless.

So, the key is, don’t take large stops. Some will say, easier said than done and that may be true for them, but for those who know how to position the entry to get good movement right off the bat, it is not that hard. This is one of the keys to trading price action, order placement. I have talked about this before, but it bears repeating, since that is part of the topic. Order placement is grounded in understanding good price action structure as well as support and resistance.

I don’t often talk much about these things because this is all part of my trading method and course, with everything else. What I do talk about is everything else. All the other parts of trading are really just as important as knowing when to get in and out. There is a lot of good trading advise and know how buried in all the posts I have written, so, feel free to dig in a little to past posts, I believe it could help.

That is what I try to do each day, help.  If a topic or subject comes to me as I start writing, I throw it out there. In fact, before I run out of room, I have something else in mind that may help my readers.

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Traders, are faced with decisions all day, what to trade, when to trade, which direction to trade, etc. I have settled to trading the S&P emini’s so I don’t need to be concerned with what to trade. There is plenty of leverage and money to be made. When to trade is another subject, trading the early morning or late afternoon is usually best, first and last 90 minutes of the day usually provides plenty of opportunities. The direction to trade should be up to the markets to decide and not us, but that’s my opinion.

The last few days, I am sure there were many traders who just had in there mind that this market was going to go down. They have predetermined in there mind a directional market bias, that can really hurt them.

As the market makes an advance as it would have before in previous sessions, where a pull back is in order, the trader is going to look for shorting opportunities. If he does not see one clearly, he will start to make one up that matches his directional market bias. An order is placed short because that is the only trade that meets his disposition. As a bullish continuation pattern develops, he is blind to its setup and only see short opportunities. The market breaks out against him and he is in shock and he may get stopped out. With his market bias still in tact, he waits a few minutes and again does the same thing and gets stopped out again as the market is clearly in an uptrend. This leads to frustration and the next trade, he lets go by as it was good for a small gain short. This reinforces his short bias and after consolidating, he takes another short trade, only to see the market take off against him again in the direction of the dominant trend, up.  He feels now that the market is out to get him and his confidence is shot.

I know that scenario happens all the time, which is one of reasons for the rally, skepticism and doubt. That is fuel for the bull rally. When the doubters start to believe, it is time to sell.

The point to the story is, keep an open mind and read the price movements and try to keep directional opinions to a minimum. This will allow you to see both sides of the market and only then you will know what direction to trade.

I hope this helps my readers.

Good trading.

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Reading Price Action gives you the edge

Tuesday, March 23rd, 2010

Today is Tuesday, March 23rd and the market is still running strong +8 points on the S&P, +102 on the Dow and +22 on the NASDAQ.

Another nice showing for those on the long side of the market. Today the market did something that it does about once per month. I call it “Search and Destroy”. That is, the market makes a slightly new high, followed by a slightly new low, then a slightly higher high, followed by a slightly lower low and yet again the same. The price is taking out players just above new highs, hitting there stops and at the same time making those who play breakouts go long and taking  them down. Both players long and shorts are getting killed when this happens, thus the term “Search & Destroy”. It is searching for stops and causing breakouts players to go long only to make them both loose. This is pretty brutal if you don’t know how to handle yourself. This was just a quick easy observation.

The market in general is designed to keep you guessing or it seems like that for most players, but there is a consistent element that runs through each day and those traders who know what to look for can take advantage of this.

By getting comfortable with this new language that I was talking about yesterday, traders will know when to enter long and or short with a high degree of accuracy. Trading for one to one (1 to 1) ratio is alright as long as you are right more often than not. In addition, when you have 2 or 3 to 1 returns, it makes it nice and keeps things simple. But two or three trades for 3-4 ticks each is “A OK” in my book, always has been and always will be. I only run a 4 tick stop on 95% of my trades and my average stop out is really only about 2 or 3 ticks. This is not an accident and can be learned.

There were a lot of nice easy trades today that could have been taken by those who know where to place there buy orders and where and when to get out. It all happens at the pressure points, like an acupuncturist at work.  They find the points on you body that will release the built up pressure on the nerves and muscles. As they apply pressure to a very small defined area, the toxic build up is released and body feels better by the release of energy in that area. This is exactly how to read the price action as it relates to day trading. This is best I can do without going into it further, but the most important thing I have said about this topic since I started a couple of days ago.

In today’s trading, I only put on a couple of trades and was in the market for only a few minutes. In fact, I came onto the screen, looked at few things for a minute, went to my my scalp screen and waited for just a few moments, took a trade long for a nice quick gain and walked away. I was coming up into the New York lunch time, so I just left and said that I would return for a trade in the afternoon session. I did just that, looked at my screen for just a moment to see where we were at and place a trade short for another easy trade. I had in my mind that was enough, no struggle, just a quick small scalp trade and done for the day. I definitely could have taken several more trades and could have picked up 3-5 points more at least for the session if I continued to trade the afternoon.  But what I had was enough for today. If I start early and traded the morning and afternoon session, I feel I could have picked up 6-10 points net almost any day. As I said yesterday, it is not about being over confident or cocky, but knowing how to read that trading language that could do it. I definitely need to respect the markets, for sure. The day I don’t is the day I will see a stop out day for myself of -4 S&P points if I take it that far.

Trading for most people is very difficult, but it does not have to be that way. Traders need to trade the easy and obvious. If it is not easy and obvious, then you should wait until you see a trade that fits that description. Don’t underestimate that last statement. That could be the second most important thing I have said the last three days, certainly in this post anyway. To often, traders want to live up to the scenario  that I laid out above and it can hurt them. I can see the charts and read the language very well, and you can do it too, but it will take you some time to learn it. If you spend your time only following indicators, then you will miss out on valuable life changing skills, where money and earning a living are not as important because you have enough from the trading markets. That is only going to come when you understand the trading language and can read the daily price action with confidence.

If anyone is interested into learning this trading language and posses within them the ability to trade any market with confidence, then I would say, send me an email and we can talk about it. I have the time to pour my knowledge into those who are willing to learn. If this is something you are interested in, this is a good place to do it. You only go around this life once, fulfill your dreams, you will be glad you did.

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Price Action Trading Defined

Monday, March 22nd, 2010

Today is Monday February 22nd and the markets pulled out another day of gains.

We saw a  6 point advance on the S&P, 44 points on the Dow and 22 points on the NASDAQ, pretty good. Overall the last four trading days have been contained and we have a consolidating market at this point. A period of rest is normal and expected after the previous advance of the last few weeks. There is room for the market to pull back inside of today’s low and Fridays high.  A breakout from Fridays highs of 1165 could send us higher yet again while at the same time we could easily trade inside of today range and possibly retest it? This part is unsure, but those are the major points of interest for long and short.

Traders will have opportunities which ever way the market moves, but we will have to read it. Just like reading the newspaper or even reading this blog. You were not born knowing how to read, but with practice and persistence you were able to do better and better and with time you could quickly pick up any piece of literature and just read it, to then see what it is saying. From that information, you are able to take action on your understanding of what you just read. That understanding can lead you to many rewards in the your field of interest.

The same is true with the trading markets, we need to be able to look at a chart and just read it as in the above example. By doing so, you are not dependent on indicators or any other outside influence. The markets have a rhythm to themselves and it is best to try and pick up on that trading rhythm and get in sync with it. Trade with the path of least of resistance and you will maximize your returns.

The trading markets advance and then they rest, advance and rest. This cycle is repeated over and over and is the basis for us to read the market. All of this is called “Reading the Price Action”. That is what I call it anyway. Other traders may call it something else, I don’t know, but this is how I see it and trade it. Let me give it to one more time, what exactly is price action.

“Price action day trading happens every day the markets are open. This is the study of price movement or price bars in any time frame and that alone, no indicators or anything else. Most traders use indicators to help them see what the charts are saying, but a pure play is in reading the chart alone in this manner.” That is my definition.

I believe traders are best served to learn how to read the market in this manner. I know I have said this before, but trading indicators only reflect what the price is saying. That is really important to understand and should be the basis for us to learn to trade in this way.

I can go pretty deep in this area and break down all of the points that make up the process in learning how to read the market this way, but that is reserved for my trading subscribers. I don’t often talk a lot about how I do what I do, but try and show what I can here and there for traders to see and understand that trading for a living can be mastered.

I talk a lot about trading psychology because that is an area that gets overlooked by many traders and many times is the determining factor for them becoming profitable.

Learning how to read a price chart and trade off of it successfully with nothing else on it, with a very low risk per trade is something that is not going to be picked up overnight. You will not read about it in books and you rarely see it used and talked about. It is the same if you tried to pick up a foreign language and master it in a couple of months. You may learn some of the words and phrases and get some of its structure down but it is going to take time. Are you willing to stay the course and learn this language? It takes focused energy and commitment, but you need to keep your life balanced at the same time.

The traders that want to achieve this skill are the ones you will not give up. The key is, do not put the things that are important to you at risk while pursuing your goals. We always need to maintain control when we are pursuing any dream. If not, the cost can become excessive and all we hope to achieve has gone in the wrong direction. Don’t let your passions blind you from maintaining balance and patience in your life. Again, if not, you only push off that dream farther into the distance.

Getting back on point, reading the market is where traders need to go. Price action is the study of price and its movement. Become an expert in this study of price movement and the emotions that are tied to it by the majority of those who trade it and you will always be moving in the right direction of your goals and dreams, because with that knowledge you can position yourself to take what you want from the markets almost at will. That is not meant to seem like a cocky statement but one of confidence and expectancy, all the while staying humble and balance.

Today’s trading I started later than I am used to, but picked up the low side of my daily goal on a little smaller size. The smaller size is because I started late. I will often do that if I trade late in the day because I do not have time left to come back if I have draw downs. My results below.

Trade On, and be safe !

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Price Action Day Trading

Friday, March 19th, 2010

Today is March 19th and the markets saw some nice price action from the start of the session.

That is where it began today, with a slight rise just after the open. It was like someone pulled the plug and down she went. The market was just in a continuation off the lows of yesterday where it put in a bottom and worked its way up to a double top formation just after the open. Sellers were there in force and the market dropped 15 S&P points top to bottom, 1165 to 1150 where it pulled up at the close to end the session 1156.

The market will be working against this selling pressure on Monday morning with a few more S&P points left to the upside before initial resistance comes in. So, we shall see. As day traders we need to read the market and interpret what we see. But trading is a little like chess, in that you always want to look out ahead and anticipate what your opponent will do next. That is fine, but just don’t be to convinced about every move. If something different happens than you projected, it can be very difficult to trade against an anchored believe, so hold your opinions loosely and interpret what you see as it unfolds.

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Traders, investors, institutions, move to position themselves in the stock market every day so that they are able to take advantage of price appreciation. Basically they want to make money for themselves and there clients, a worthy goal. Every investor or trader can not make money so there have to be people that come up short. How do we consistently become the ones that come out on top and  pull this off ?

Study the price patterns and behavior of other traders. Since most traders and investors loose money, we don’t want to do what most of them are doing, that is clear. So how do we ultimately know when to buy and sell ?

The answers to those questions as stated is in studying the price. Price action is, first “price” and “action”, or price movement. Successful traders need to focus on price movement and that seems obvious to most, but this is not what often times happen. Trading indicators often take center stage, but it should be the other way around. Indicators are good, but not at the expense of studying the price patterns and behavior of the underlying issue.

It boils down to when to buy and when to sell, another obvious conclusion. The question is how much risk can you take to see your desired outcome? Traders to often take on more risk than they can absorb as there entries are far to lose. You need precision entries that are virtually spot on. Some may say, that is not possible and I beg to differ. There is always a small window of tolerance on any trade, but it should be kept down to a minimum if you expect to keep your loses under control.

For me, while I day trade the price action on the S&P 500 emini’s I rarely ever risk more than 1 S&P point. There is 4 ticks to a point each broken up into $12.50 incriments per contract. A trader needs only to find a few points per day to make a  nice living, but you need to be able to really read the price movement, formations and tendencies all while keeping your stops to a minimum.

Being successful is also about knowing how to manage the trade after your order is filled. In a choppy market, you can not let the market move in your favor by several points and because you want more, hold out, only to see all of the gains that you had, suddenly evaporated and then some. A trader who expects to either supplement his income or make a living from day trading can not let something like that happen.

Today’s trading was a good example. I put on four trades towards the end of the day and the last one was at 12:30 pm West Coast. The market dropped off a ledge it was holding onto for several hours. It looked like a possible rally was at hand but things changed and down she went very quickly. I did go short at exactly the spot I wanted and scaled out at +2 ticks, +6 ticks and +12 ticks at the very bottom. I was in scalp mode and prepared to ride the momentum on that trade down. I was buying into weakness (to cover my short position at a profit) and held out until there was no more left in the move.

The point is, I am sure there were traders who did not cover and watched in just a few moments the move completely reverse, forcing them to cover at a lose. If you are day trading the price action you will not let that happen to you. I feel if you have good gains in any trade, there is no way you can let that trade turn into a lose. If you struggle to take your stops, you have other issues at hand which can be discussed in another post.

Price Action Day Trading happens every day the markets are open. This is the study of price movement or price bars in any time frame and that alone, no indicators or anything else. Most traders use indicators to help them see what the charts are saying, but a pure play is in reading the chart alone in this manner.

To day trade successfully you need to understand the key components of support and resistance, price action is apart of that at its core, learn this and you will be moving forward.

If traders have questions about this topic or any other trading topic, feel free to email me. I will be glad to answer your trading questions. Until next time, trade on and be safe

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Price Action Day Trading

Wednesday, December 30th, 2009

Today is Tuesday, December 29th and today we saw a mild pull back in the Index’s.

As day traders, one important question always comes up, which indicators are the best and which time frame should I use. Let me address the first one here today in this post.

Price Action Day Trading is going to be your best indicator. The reason why, is price always proceeds first and is in my estimation the best indicator to use. Support and Resistance goes along with price and is used to establish boundaries for price. Once those trading boundaries have been broken, market participants will look to establish new boundaries of support and resistance. Area’s of struggle are established and become our road markers in establishing new direction.

All a trader needs to do is learn how to read the signs, but most often we rely on indicators that interpret the price action for us. It is similar to reading cliff notes from a book as opposed to reading the book itself. You will only get a portion of the benefit when you read a summary as opposed to the real thing. The same is true when glossing over the actual price movements of what it is we trade. For me, it is the S&P 500 emini futures.

Learning how the price action is taken up, only to later to be taken down, is something we all need to get familiar with. “Price Is King” when it comes to getting your points and daily goal for the day.

When traders rely on indicators only, it sends them a message that there is a short cut to the end result, that will bypass the work that is needed to understand how price action comes into play, while day trading. The truth is, there is no easy way out.

To become excellent in our field, we need to draw near to those things that we fear. For some it is the fear of more work and involvement. That is the wrong attitude and will eventually catch up to you. As I commented, embrace that which you currently don’t understand and in time, it will become your friend, not something to shy away from.

Try and ask yourself as you look at your indicators, why is this indicator giving me a signal at this time?   What just happened within the price action to make it give a signal long or short?  Look at it again and again. Keep asking yourself the question why.  What is going on at this level of support or resistance that produced a move up or gave you that price rejection?

If you do that, I believe you will be learning far more than you ever would by just following indicators. Don’t get me wrong, I use them myself in my own trading every day, but I understand why and how they work. I understand the reasoning and outcome of the corresponding signals and they are all based on the price first.

They can be a guide for many, but I warn those who solely look and follow indicators as their personal road map. More on this and other topic’s as I am inspired to write over the next few days. For your review, I have the turns posted in a couple of screens. My scalp screen and a higher time frame chart that I use to give me my T-2 turning point signals. You can use this video as your guide and future ones to help you do this exercise.

In the charts I have everything stripped off and only show the basic bar chart. I don’t often show how, what or why my method works so consistently because that is reserved for partners. You can still learn a lot here through my posts and by addressing common real life trading struggles that most traders go through, so stay tuned and good trading.

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December Santa Clause Rally, Boom or Bust

Tuesday, December 22nd, 2009

This post is for Mondays session, December 21st, posting a little late.

Mondays trading turned out to be a mover, to the upside. The market has pushed itself back up to the top of its range and in fact hit that all elusive number I had called for so many months ago, 1120. Mondays we hit 1120.25 on the cash market S&P a full 50% fibonaci retracement of the full trading move over the past two years.

 The momentum did turn rather quickly with the size of the move and currently is up on the 120 minute chart. As I write this post it is currently Tuesday a.m. and today happens to be the day that the new investors sentiment numbers come out. I will not see them until Thursday, but the price action that takes place today is reflective of those numbers. So today’s close on Tuesday, is going to be very important.

I am anticipating the numbers to turn more positive which in-fact will be more negative in reality, but we will have to see how it turns out, first with todays close and then with the numbers themselves.

The month of December has traditionally been a positive one and some have even called it “The Santa Clause rally”.  In the last 20 years, Decembers trading has shown a gain 16 out of the last 20 years. At this level, it would be 17, but we are not finished yet. It is noteworthy and that is why I point it out.

Below, I have posted the trades I took for Monday. I have not traded for several days, but thought I would squeeze a little in. The market was just coming off a big rally up and then I come in. Well, I knew better, to try to play the trend, because we were coming into overhead resistance and coming off a large move up already, which started in the pre-market. That is why I have a different model to trade out of, based on price action conditions. It is not rocket science for me to switch to “Scalp Mode” and pick up a few trades and points in both directions. All I do is follow my “Turning Points” as I have shown you before. In-fact I mentioned it in my last post. The thing to do is just follow it. If you do, the trades work out, if you don’t, they don’t, pretty simple. I did an OK job in following my signals, I could have done better. You can see where I came in and compare that to the signal turns in the link below.

If I was trading earlier, I am sure I would have had those break outs to the upside. Starting January, I will definitely be trading the open and getting my points for the day will be easier and quicker for me. The pace is faster and I like it. Trading after the market has slowed, is not what I prefer, but as I have said before, I have to take what the market gives at the time I decide to trade. A trader can not impose there will on the markets, so you learn to take what it offers at that time.

I absolutely love the way I approach the market. I could always stay in “Scalp Mode” if I want to, but I would at times miss out when the market shows signs of life and has legs. I have my other screen set up to accomodate this type of run away condition and can easily take advantage of it, if it presents itself. It is not really hard to switch into this screen, one click of the mouse at the bottom of my Trade Station Platform and I am there. A screen set up to accomodate large moves that are very clearly defined that only require you to follow it. It always boils down to that, can you follow signs to get to your destination, they are clearly marked.

In my blog, I often talk about things that hold traders back from following their signals. If you can get a handle on the trading discipline that is required to execute, you will make it. You first need the method or plan and some may call it system, but what ever it is you follow, it needs to be clearly defined and show consistency. Then you need to exercise your mind and build your character to follow through with it. If you don’t have the first one, the second one will not help you and if you have the first one without the second, you will still be in trouble, the two go hand in hand.

Start the rebuilding process now, start exercising your mind, write out your plans on paper in your trading journal, hopefully you have one. Start exercising your body as well, this will get your endorphins kicking in and give you some blood flow and hopefully motivation, be consistent. Get going now, see the picture in your mind of how it all comes together, but it takes action. It is not going to happen only by thinking about it. Once you see the big picture, break it down into small bit size pieces. What is it going to take to get step one finished or started, then on to step two. Break each one of the steps down as well, if it requires more work. If you write it out and take this approach, you will be moving forward towards your goal and dreams. This takes you out of the dream state and puts you in the driver seat. Do you know where you are going? When will you get there? What will it be like when you arrive? Taking charge of your life is up to you and all it really requires is one small word “DECIDE”. Have you?

http://www.screencast.com/t/YTRiM2U3Y

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Today was clearly the day, short term direction now down.

Friday, November 20th, 2009

Today is Thursday November 18th and we finally got a clue of what is going on.

Today was the day, that decided the short-term direction. It came in the night trading and did not look back. I can say, that after the night trading had pulled the market down, the open was a sure thing to come off of its high and the first move after the open decided what the direction would be.

Just a few minutes after the open, the market started to form a very nice triangle formation with the tops coming down and the bottoms holding for the moment. After the apparent break short the move was established and the only trade an open minded trader could take was short.

That move was good for about a good 10  points. I am going by memory and I know I am close, but it sure was a clear signal down. If you look at a daily chart, you can see a clear point of resistance and I knew we were up against it, but I just wanted to stay open to the possibility that we could get a ”Blow off Top”. That is a fast hard spike to the upside which usually takes out all the stops, holds for a spell, then drops like a rock.

I did not want to be taken by surprise and did not want you to be either. I have one of the video’s below, showing a 120 minute chart of the Dow and you can see we were right up against resistance at yesterdays close.

Today was the day, that decided for us, which way the short-term direction was going to take us. Currently the trend is down. There is a good chance the S&P will bounce off the low established from last week around 1082 or so. If it breaks like I said yesterday, it will clearly establish the direction as down and lower prices are likely. 

If we do come down to that neckline, it will look more like an early Head and Shoulders formation. The likely next move after that, is a bounce up about half way and then a failure below the establish pivot point.

Trading is about observing conditions. If this, then that. I have said this several times and it will consistently play itself out in the daily price action on a regular basis.

There are those who try and predict moves and I do it on occasion. It is really best to keep opinions close to the vest and then trade-off of what is happening. I get my best results when doing this.

Sometimes I like to be a hero and go against the grain, like yesterday, just a little. I knew it was not probable but I thought, I should leave the possibilities open. 

With the open, breaking support, and a consolidation taking place at lower levels, it does not take a genius to see that we are consolidating for lower prices. Some I am sure will not be able to see it, for all the reasons I mentioned yesterday.

Keep your mind open and read the current  price action. After todays open, it was saying lower, can you see it. Get in a practice of looking at different time frames.  Try and learn to think on your own by learning how to read price movement.

I will and can tell you right here and now, that “PIVOT POINTS”  are the key to help you determine the direction of future prices. I don’t often say much about how exactly to read price action, but if you are reading this and if I was you, I would commit that first line in this paragraph to memory and investigate further.

If prices move higher, it is obvious that they have to push ahead of previous highs. What do you think is happening when that happens. Small resistance points are getting over-run and new highs are being discovered. The same is true for the downside.

There is a formation that happens on rare occasion and it is called “search and destroy” or at least that is what I call it. It pushes higher to take out a high and it immediately goes down to take out the pivot low. After that, it pushed straight up to take out the pivot high again. Each break over the highs and lows are causing the stops to be hit and additional movement in that direction.

This formation is rare and it does not happen very often. That being said, the norm is, pivot highs being taken out followed by further increases in price. The same is true on the down side. Pivot lows being taken out, followed by further downside price action.

That is the very basic form of how prices move higher and lower. You would think more people would try and understand this and how to use it to their advantage while day trading, or any other kind of trading as far as that goes.

OK, that is it for now, I may continue with this tomorrow, we will see. I never know what I am going to say each day, it just comes out. Well, this was a really important point for those who are astute in understanding what I am saying.

This is the hidden gem, in understanding price action. Very basic, but no one is born knowing this and even thinking about it. If I were to show you, which I won’t right now, the lights would go on. They would be lit up like a Christmas Tree. That was my response when I understood it, many years ago.

Below, I have a couple of video’s from today, one of them I think the second one, has a current view of the daily Dow and showing where we were and where we are likely to go.

 

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