September 9, 2011
- in Uncategorized by schooloftrade
Catch a falling market with this simple day trading strategy on Crude Oil, Gold, Russell and Euro
Mini Russell has rolled forward to the 12-11 contract.
The Euro has not rolled forward yet, the volume is still higher on the 09-11.
830am est
Markets are sloppy on this Friday morning, and we are staying patient, waiting for the personality to give us opportunities.
Crude Oil futures are giving us three distinct price structures today.
Outside day (above PHOD) tells us that the opinion of value from one day’s trading range to the next has changed for some reason. As day traders we usually do not know why this has happened, all we know is the REACTION to this change is that buyers and sellers see value either higher (above PHOD) or lower (below the PLOD) and therefore price breaks the previous day’s trading range higher or lower.
Outside day tells me to look for breakouts. The personality of the market has been searching for new highs or new lows, so let’s trade along with the personality.
Looking to buy pullbacks with new higher highs, and sell retracements with new lower lows. We don’t buy the highs, or sell the lows, and we wait for momentum to confirm along with our other entry rules, but outside days tell us to expect the breakouts.
When an Inside Day turns Outside, or an outside day FAILS and then turns back inside…this a VERY big clue for the future direction of price.
If we see price above the PHOD that means the buyers are in control. If those buyers lose control and the sellers can bring it back below the PHOD (turning it inside day) then we know the sellers are now in charge and price will fall quickly below the PHOD.
If we see price below the PLOD that means the sellers are in charge, and then if the buyers can pull price back above the PLOD (making it inside day) then the buyers are in control and price should rise above the PLOD quickly.
I am always watching closely as price moves from Inside Day to Outside
Price Channels are very easy to trade using the directional bias of the channel.
Bull channel has higher highs and higher lows and you will buy pullbacks with new highs. Buy at support when price falls.
Remember, trying to buy the highs of a bull channel will always be difficult, especially if the market is slower, or low volume.
Bear Channel has lower highs and lower lows, and we want to sell retracements with new lowers, and sell at resistance when price rises.
Remember, trying to sell the lows of a bear channel will always be difficult, especially if the market is slower, or low volume.
The key to trading breakouts on a channel is to wait for the support below or the resistance overhead to be broken, and then look to buy a pullback with new higher highs and/or sell a retracements with new lower lows.
I use the ‘Trend Channel Drawing Tool for NinjaTrader 7’ to perform this task easily, and I provide all of this to members.
Price Wedge tells us a very specific market personality.
Lower highs and higher lows is called ‘consolidation’ and that occurs when the market participants are searching for clues for future direction.
In other words, a wedge pattern tells us the traders don’t see value higher or lower, so they are waiting for news, something to spark the next move.
We trade a wedge the same way we trade an inside day or a sideways range, sell the highs, buy the lows, and avoid the middle.
At some point there will be a potential breakout of the wedge.
We expect fake-out breakouts at the highs and the lows of the wedge, until we break above resistance overhead or support below the wedge.
Im buying pullbacks when we break through overhead resistance and selling retracements when we break support below.
Our plan of attack for crude oil:
Outside day (below the PLOD) tells me to sell retracements with new lower lows and look for those runners to extend your trades. Expect breakouts on an outside day.
Price Wedge tells me to sell the highs of the wedge, buy the lows of the wedge, and avoid the middle.
The middle of this wedge is 86.50 so use that as a final target for your short trades, however, be very careful entering trades around that area.
Bear channel goes right along with the outside day below the PLOD. We want to sell retracements with new lower lows, and sell at resistance when price rises up.
As we keep making new lows im selling retracements, keeping an eye on the middle of the range around 86.50
Im also looking for price to rise and short positions at levels of resistance, however, if we rise up above the PLOD 88.36 then the BUYERS are back in charge and we begin looking to buy.
We aren’t THAT far outside of the range from Thursday, so if we fail at new lows and go back above the PLOD this is a very bullish sign and we will trade long up to the PHOD 90.23
930am est
We made some good money on crude buying at support as price tumbled.
We missed the big drop in price, but we bought the major support and made some great profit.
Gold Futures gives us three price structures today:
Inside day tells me to buy the lows and sell the highs. Sell the PHOD as resistance. Buy the PLOD as support.
Price Wedge tells me the exact same thing.
Sideways range gives me resistance overhead to sell, and support below to buy as price tries to move higher or lower.
As price rises im looking to sell first, and then with strong buying i can buy pullbacks with new higher highs above 1856.0
The OPEN at 1894.9 is a great final target for buying opportunities. Beware trading again around the OPEN.
Also keep an eye on the highs of the wedge just below the OPEN as your final target, then look to sell the highs of the wedge, but beware trading around the open.
1030am est
We’ve had a great day so far, lets wrap up our plan for the rest of the morning, staying focused on being disciplined to follow the plan.
Russell is in the middle of a price wedge, with the BMT and the PLOD above us as price magnets.
We want to buy the lows, sell the highs, and avoid trading in the middle, and around the BMT’s
Buying 676.0 area down to 673.0 area the lows of the wedge.
I’m selling the 689.0 area up to 691.7 area
