(This post is from Friday June 27, 2014)
After many delays and distractions I think everything is setup properly to begin trading.
Let me start by giving an introduction to my methods.
My technique is to watch the ‘order-flow’ of the instrument I am trading.
Some people call this ‘reading the tape’. The technique requires watching the support and resistance areas on the charts and watching multiple time-frames of the same instrument. The chart below shows an image of my desktop/workspace with all of the charts shown.
On the workspace I trade from the large chart that covers most of the image.
The instrument I am watching is always on this chart.
This chart has the volume shown at the very bottom in red/green columns
On the right side is the custom DOM (depth of market) with volumes traded in numbers for the bid & ask and shown in graphical format. I can go into further detail but it will probably bore you.
Everything on this chart means something and helps me see possible trade opportunities.
To the left of that chart are several smaller charts.
Most of the charts are the same symbol but with different time-frames or chart types.
The two charts on the top left side are usually the other symbols I am watching.
These two charts are for reference only so I can see if they are setting up for a possible trade.
If I see something interesting I can open that workspace and examine it closely.
The primary symbols I trade in the futures market are:
- US Treasury Bonds/Notes ZB & ZN 7:20 a.m.
- WTI Crude Oil Futures CL 8:00 a.m.
- S&P E-Mini Futures ES 8:30 a.m.
I may at times trade others but these are the ones I trade most often.
The regular session of the market on these symbols opens at the times listed to the left of each in the central timezone.
My normal routine is to get up early and check the market. (Usually about 4 a.m.)
I watch the charts of the market while I am showering and dressing to depart for my trading desk.
I have found that trying to trade from home presents too many distractions so I have a quite place at my office where I can setup and watch the market in the early morning hours. I normally arrive at my trading desk between 6:30 and 7:00.
After I get things setup and have been able to do my preliminary checking of the charts, I am ready to take any trade that occurs. This means that many times I will be taking trades prior to the regular opening of the market. I have found that this allows for less volatility but still is able to take advantage of increasing trade volume just prior to the open.
Today, I arrived at the trading desk a little early (about 6 a.m.). It usually takes me a few minutes to review charts and setups before taking any trades. Today an entry was showing on the charts as I opened them. Without proper review of the charts before taking a trade the result can be unsatisfactory so I did not take this trade.
I have posted the chart of the trade opportunity below.
The candle at 6:08 was the ideal entry for this trade.
The volume candle on that time at the bottom of the page and the previous support shown on the supporting charts was the cue to enter. The magenta arrows on the candle show an increase in volume to the downside without a break of the low. This also shows a possible support area.
The candles that follow confirm the trade. I have to admit that had this trade been taken it would have only resulted in a $35 to $50 profit because I would have taken an exit when the candle at 6:44 was being created. I know in hindsight that the trade would have continued higher but during the trade it would not have been as evident and an exit would have been taken.
In the second chart you can see the results after the next resistance area was reached.
The buyers lost control at 1945.75 when the sellers regained the edge.
The result was a pull back to the previous support area.
There was no real signal to take a trade here. The market was very sluggish and no momentum was present.
After this time, the market went flat (about 8:00) so I decided to add this entry to the blog and wait to see how things developed.