February 1, 2011
- in Uncategorized by schooloftrade
How to Predict Price Reversals
– Predicting Price Reversals
o When the market goes in one direction, bounces off support or resistance and goes in the opposite direction.
o Price reversals can occur at any level of S/R, but the best levels are always going to be:
§ HOD/LOD
§ Trend Lines
§ Double-tops/bottoms
o We know where to look for the price reversals, but what specifically do we look for around those important levels?
§ Speed: the pace of tape indicator measures my speed. If I see dropping speed I know things are looking to reverse.
§ Momentum / MACD: if the momentum indicator or MACD shifts against your position we need to look for a reversal.
· Long: avoid MACD below zero line, and visa versa
§ Big Money: big buyers/sellers against my position.
o How do we use this new information?
§ Getting into trades: look ahead of time into the HOD/LOD to see if speed slows down, momentum is overbought/oversold, and we have the big money getting ready to come to the table.
§ I will look for the price reversal and sell the highs and buy the lows of any trading range.
§ Getting out of trades / taking profit: when im managing my FINAL target (runner) im looking for clues from the market that the price action is going to reverse and stop me out.
§ I want to anticipate this price reversal and look to take my profit when I see the signs coming.
– 1029am Crude Oil 2step short was selling the highs below the PLOD and using the trend line as protection against rising prices.
– Exit strategies, how do we know when to exit a trade early?
o Use your trade management chart and watch for the 3 signs of a price reversal
o Log into your advanced course and watch the ‘exit strategies’ video
– Day trading the FDAX
o Its one of my favorite markets because of the volatility and the patterns that it gives us.
o If you trade with USD and you trade the FDAX it is settled in EURO, which means your broker will send you USD after it converts from EURO
o We make a little more money every time the euro is converted into the USD.
o Cost of trading the DAX is a lot less than the eminis, gold or crude oil.
o Fully-electronic exchange = no pit =no overhead = lower costs for the traders.
o The downside:
o Volatility is HIGH and so are margins ($2500usd day trading margins)
o Very illiquid, which means new traders need to be careful.
o 25 EURO per point, and ticks in ½ point increments
o This is an expensive contract to trade.
o 12.5euro per tick
o $17.50usd / tick (more than the ES, CL)
o What’s the end results?
o This is a great market for experienced traders, but new traders may find it too expensive, not enough consistency with its lack of volume, and the cost per tick is enough to scare almost any trader.
– The new momentum indicator is posted: training on Wednesday,
– Auto Levels indicator
– Make sure you have that .CSV software (excel, open office, lots of free spreadsheet software out there)
– Best pattern to start with
o The pattern you understand the most
o Breaker pattern is always the simplest b/c it has the least moving parts
o I think the 2-step reversal is somewhat easier to see the TRIGGER and get in properly because you can see the signs of the price reversal
o The easiest to make profit will be the wave b/c it gets you in at the best spot, it gives you plenty of support and resistance to protect the trade, and a clear sign to the final target.
– What does the OPEN of the day tell me?
– Nothing is happening
o We tried to push the highs, nothing there, we come back down
o We tried to push the lows, nothing there, come up
o We sit quietly at the OPEN of the day because there is not enough buy or sell pressure to move this market around.
– Learning how to use the DOM and your Charts
o Please attend a live webinar from NT on their charts, DOM, indicators, strategies.
– Instrument manager, keeping your contracts organized
– Best way to use these charts for YOUR MONITOR
– Pace of tape indicator:
– Auto Trader: testing on the new 1.4 auto trader
– 1.3 version was requested for anyone looking to go back to the previous version.
– Training on Wednesday on the auto trader also.
– New Momentum Indicator:
– How to avoid getting bounced out of your trade at entry? Use the proper stop strategy
– On Wednesday this week we’ll take time to review all the specifics.
– How much do you need to get started?
– ZERO
– We have accounts you can qualify to manage, all you need to do is show me demo consistency.
– 1 contract would be the best place to start ($500usd)
– I would recommend at least $1000/contract you wish to trade.
– If you trade the emini’s its on $500/contract
– If you trade gold and crude oil is $1000/contract
– Safer to have $1500/contract you wish to trade fro GC and CL
