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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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Price Action Rules When Trading the Markets

Friday, November 13th, 2009

Hello, Vince here from Sniper-Day-Trading and today is Thursday November 12th and we got a little pull back today in the markets.

To be expected, we were right up against resistance and a pull back is quite normal. Next week we will see a lot of economic news coming out. If there are any surprises, it could exacerbate the moves in the index’s one way or another.

Let me help you keep your eyes open to both sides of this market. I don’t have television (by choice) and I don’t watch CNBC, but I could only imagine what the street is saying about this run up. Sell- Sell-Short- Short. They may be right.

Seven months ago, I had said that the natural move of this market should take us to Dow 10,300, again, that was 7 months ago. I had been saying that off and on all along the way. During that time I was actually pretty bearish after that objective would have been reached and commented on it good and plenty. Well, we reached the objective and I have to remain open-minded and not have my mind made up about where we go from here.

That is what a lot of traders do in short-term situations. They make a decision as to where prices are going to go, but do so with a sort of conviction that damages their ability to stay open-minded to the current price action. If you do that, let me tell you exactly what is going to happen, without a doubt. You will become blind. You may still see with your eyes, but you will not allow yourself to see the changing price action as it takes place right before you.

You may think I am exaggerating to the idea that you will become blind, but I am not kidding. If you tell yourself, “This Market is Going Down”, and for a brief moment is does. All of the sudden, things start to change and buyers come in for what ever reason and pull prices up. You rationalize with yourself saying, “It is only a temporary spike” it will come back down. Seeing that you have already gotten stopped out, you are only looking for a place to get back in short, so you enter. The move shoots up against you and again, Stopped Out.  You are still so sure that this was only temporary and you try and short again at what you think is a safe spot, it looks like it is going to go and suddenly, turns quickly and Stopped Out, again.

Is this scenario familiar to you, well, it has happen to all of us one time or another, so don’t feel to bad, but, you need to understand why that happened to you and how are you not going to let it happen again, or at least not as easily.

Understanding price action is the first key. I won’t go into it all here, but I will tell you that the current price at any given moment reflects everything that is happening within a company when compared to earnings, revenue, etc. It is constantly being adjusted to reflect the value at that specific moment. It is all built in. So what come first, the cart or the horse, the chicken or the egg.

Some may disagree, and that is ok. This is America, but everyone’s decisions are based on hundreds of variables and there is no way for anyone person to know what all of those are. So it makes more sence to look at everyone’s decisions collectively and draw your own conclusions to future direction. That is the way I see it and it works for me.

Buying and selling are based on emotions. How you feel about all of those variables, which cause you to draw a certain perspective and outlook on future direction. You may be wrong, but at the time you do not think you are. It compels you to make a buying decision and away you go. Other traders and investor are drawing different conclusions on the same subject matter and now you have a conflict.

The struggle begins, like a tug of war. Prices move higher as the optimistic view wins out for that moment, then met with selling as the current price no longer represents value. All along the way highs and lows are established, creating support and resistance. We see it everyday the markets are open. A trader NEEDS TO KNOW HOW TO READ SUPPORT AND RESISTANCE LEVELS while he is trying to pull points out of the market. If you only rely on indicators you will always be at a disadvantage to those traders who do know. That is the first and most important things to know and remember if you are going to be consistently successful at a trading career.

I will continue with the subject in the coming days as I become inspired to share.

Before I run out of time and room, I did want to mention that Bullish Sentiment has decreased by another 4% this week, incredible and bearish sentiment went up about the same %.

More traders and investors become increasingly bullish at the top of a market. That is not what I am seeing right now. It is currently under the middle range of the extreme. That tells me, there is FUEL left in the engine to push this market higher. Like I said yesterday, if in fact that happens it would take everyone by surprise. We may see a little more pull back to get the short sellers to commit, but I do say, keep your eyes open, it could come real fast and big to the upside. Next week could tell us all we need to know.

That is how markets work, dont be convinced about anything, learn to read price action and don’t depend on others. It takes time, but the sooner you start, the better off you will become.

I have a video of todays turning points with no explanation, why or how, but I have the screen marked. Later in the video, I have my live trades I took posted.

Good Trading

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Market Rhythm, can you feel it !

Friday, October 23rd, 2009

Hello, this is Vince from Sniper Day Trading and this is Friday, October 23rd.

The market had a down day today and started off just the way I said it probably would in yesterdays blog. I will post the quote as I wrote it from yesterdays blog to make it easier to  see here.

From yesterdays blog:

I will say the next move for tomorrows open to me looks like it will start off to the downside. The S&P support should     come in at 1084 or 85 and the Dow around 10,000. “If” we get a pull back to the middle of the todays range then we will then again have a couple of key turning points established for the next move, which ever way it comes. A break of todays low and or todays high, will see big moves in the directions of the break. We may consolidate inside this range for a day or two which will only add to the built up pressure that will form. Strong positions will be established on both sides. Now all we have to do is wait.

We started off to the down side and initial support did come in at around 1084 on the S&P cash, a 9 point drop within the first 90 minutes of trading. The sell off had a little bit more in it and edged ower, but stabilized over the next 2 hours before it dropped one more time. It came close to yesterdays low, about 2 S&P points, but did not go lower. That area was key support and the Index held its ground and pushed up better than 4 point off that low.  

It looks like the down-trend has been broken but we really still need to get over the last minor pivot high at 1080.50 . Once that is taken out we will have a good chance to get back up to 1086 + in quick fashion. As I mentioned yesterday, it looked like the market was going to stay inside the two outside ranges that it established in Thursdays market, for one or two days. Well, we had the first day and we will have to see if this market is for real and holds above the critical point I mentioned above. That would be the second day, if it can maintain itself inside that range, I think it can, but I will not be bound to that, because as a day-trader, I react to the price action as it develops. I only point out what I see as basic market rhythm, the market can always do what ever it wants at any time it wants to do it. Then I get to ride it like a -BUCKING BRONCO - until it throws me off, I always aim for a soft landing, why not.  

Below is a soft landing from a trade I took at the end of todays session, have a great weekend !

Vince

http://www.screencast.com/t/BBU9NHapJ

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Day Traders, read the current price action !

Thursday, September 17th, 2009

Today is Wednesday September 16th and the markets are still bringing it in.

I was wrong on a closing basis in regards to the pullback. We did get one and it was pretty significant, but not near what I thought we would get. Monday’s pullback was about 12 S&P points but  most of it came in the night session, before the market opened. From there it pulled back up nicely and then some.

The markets are strong right now and that is what I have been saying since the March 6th bottom. We have had a few pullback along the way and I did see and call most of those. Last week I did say that I saw the upside around 1100 on the S&P ultimately, but we shall see. That is more closely the middle of the entire range from 1550, the high, to 666, the low and back to the middle around 1100, give or take a few. The market likes round numbers and given the strength and with the Dow being close to 10,000 it appears it wants to trade up to that number or close to it. In the S&P as mentioned, 1100 would match pretty close to a 10,000 Dow.  It is a psychological numbers for sure and will be interesting to see how the markets handle it. You will probably get some fan fare on CNBC or Time Magazine or News Week. That is usually not a good sign if it happens. Lets just hope it keeps going somewhat unnoticed. I imagine that would be best for those with paper losses in there 401K’s. I would love to be wrong about the big picture. I hope it goes right on back to the top of the market at 1550 plus. We can all hope, but I think that is what it would be, hope.

The best way to handle it is, take it a day at a time. Seriously, the daily trend is up, the weekly trend is up, but the monthly is still actually down.

All we are doing, as far as I can see, in regards to the monthly, is coming back up to test the middle of the range. Until we find the middle and this market runs out of gas, we will have to see the daily action to get a better read on what will come next. It is all conditional, if this, then that. The this, is still working on it, so let us not be anxious and just read the swings inside the daily and go from there.

I and we, need to hold our opinions loosely. If we get to strong of a bias, we will not be able to take the trades as they come to us. It is almost impossible to trade against a strongly held belief that you may hold. So the moral of the story and I am speaking to myself, hold your opinions about overall market direction loosely. That way as the set ups develope, you will be able to trade in what ever direction the price action is telling you to without strong bias’.

I like to forecast the daily’s because it is something to write about and I know a lot of people follow it. As far as day trading is concerned, it usually is not something I use as a timing tool. I look at much smaller time frames and let the market tell me where to go from there. This time, I will admit that I did have a bit of a bias short and it did affect my decision making a little, but not a lot. Once I see strength, I try not to fight it. Ok enough on that.

I have a short 5 minute screen shot of the some directional turning points on a 233 tick chart below. I show on a clean chart only, no indicators or anything else, where my method would give the buy and sell points for the session. There is not as many trades as there would be on the 100 tick chart but still plenty to make 2 to 4 points for the session. One or two trades would do, rather quickly.

 http://www.screencast.com/t/Z4PSvSrr77k                          Turning points on 233 tick chart for 9-16-09

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