Today’s market we saw a sell off that was due to come back from resent sessions. I did see the down day coming in the daily charts and see one more behind this one tomorrow. Support should come in at 12,500 on the Dow Jones and 1323 or so on S&P emini futures. From where we left off today, that would be 130 points more for the Dow and about 15 points more for the S&P.
After that, I would expect a pretty good bounce back up off of those levels and then we will see what happens from there. The support zones I mentioned above are pretty much a line in the sand. I expect a bounce up off those levels, but if for some reason, it just cuts right through it and closes that way, I see a sizable sell off from that point. So 12,500 on the Dow is key and 1323 area for the S&P futures, on closing basis needs to hold or else. It is one of those look out below scenario’s that might be building and caution needs to be in order.
In either case, scalp trading the market long or short will always be available. The trading volume and amount of opportunities has been limited by a slow market. We did see good volume and trade movement on Thursday and Friday of last week, but things started to quiet down again after that.
If we get a break in the market, trading interest will increase and with it, trading opportunity. As we come into the Summer months things tend to slow down. If they are going to slow down from where we are now, already slow, it will get slower.
With that said, if we don’t see a pickup in market volitility soon, we could expect the trading range to stay narrow and in turn limit trading opportunities. Being able to take a few ticks out of the market here and there is a great skill to have all while entering your trades with low risk entries.
If you can keep your trading risk levels low, this is one important key to becoming successful. For some, this is the hardest thing to do. Most traders that day trade, enter the S&P with a 2.50 point stop. To me, I could never risk that much on a regular basis. I may have done it here or there, but that is one trade out of 200 and it may be because the payout was a high risk to reward ratio worthy of the extra risk. To do that on a regular basis would be a killer.
There are many days, that we don’t see large trading ranges and with limited trading opportunities, you won’t have enough time in the day to come back if you hit a couple of losing trades. You may be lucky to break even as you now have to net 5 S&P points plus commission costs to break even. That is where a lot of damage is done. Trying to come back with a big trade when one does not exist. You can not conjure it up, or wish to be, but you can only trade what is given to you, nothing more.
When we try and get back that which we lost, human emotions kick into high gear. That is when we need to remain level headed and relax. Don’t go hunting, as you are likely to miss your target under the extra pressure you are putting yourself under.
Traders need to remember that trading should not be a big struggle, whether you are up or down. It is a lot easier to trade when you are up, but that too can have its own set of issues. Just because you are up for the day does not mean you have the liberty to take less than desirable trades, because you want more and you want it now. It does work that way and if you allow that extra emotion to kick in while up on the day or down, you can quickly see it work against you.
It is a good trading exercise to talk out what you see as you trade. Talk it out as you if you were telling someone about what you see happening. You may even want to record it so you now have an audience, “of one”. That is really OK, because you actually can hear yourself as though you were a third person. You have a better chance to catch yourself if you hear yourself reaching for a trade. Are all the components of a good method entry present? Do you see this or that, as you speak it out loud?
This is just a good habit to get into. You can call it “Traders Self Talk” and now you have a name for it, so no one will think you are crazy talking to yourself, lol. Seriously, if you do this, you can hear the quality of your market analysis and see if you are misleading yourself based on what you want or if it is just good market analysis.
It all starts with a written trading plan and or trading method that you are following. If you just do what you think might happen, you are sure to have troubles. You cannot do that and expect to be around the trading world. A important key is being able to do similar things again and again. By doing that, you can bring some level of trading consistency to the table.
That brings us full circle, day trading low risk entries to hit your daily goal, if you have one that is. If you hope to trade for living, you need to think about it like you are trading for your paycheck. Once you have it, take it and go to the bank, so to speak. If you try and break the bank, all you will most often do is break your account and lose the opportunity to get paid. Good Trading to all. My trades from today below.
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