Applying the 3-2-1 Approach to the ES

[bthomas]

More Exhaustion Bar Examples

The Exhaustion Bar trade is one of our three basic trades taught in the room. The Exhaustion Bar trades come at the end of the move when the last buyer or seller capitulates and are fade trades by definition.

1. The setup is a bar with much more volume than the preceding bars and sometimes extended range too. When the directional move fails to extend and hold the previous bar’s high, the market is set to reverse.

2. The next bar tried to trade higher, but failed to hold those gains. The market reversed and began to trade lower.

3. The net cumulative buying decreased in the bar immediately after the exhaustion bar which confirmed the sale.

4. The recommended entry is to stop into the market when the low of the subsequent bar is taken out. The short entry was 79500/50. The market traded to 974 before the selling was over. This would have yielded up to 20 points of profit.

 

[bthomas]

Retest Failure Trades

One of the mainstay trades of the 3-2-1 Methodology is the Retest Failure trade. The software is designed to alert you to the fact that the market is in a retest through the green dot, if to the tick and when the buying or selling has decreased enough to take the prescribed trade. Entry is on the close of the signal bar or with a stop when the signal bar’s high or low is taken out.

1. The first trade came off a retest of 716.75. the retest was signaled by the green dot which captured the retest of 716.75 to the tick. Two bars later the blue square showed the selling had decreased enough to buy. The entry was at 718.75. The Market rallied to 723.50. the potential profit was up to 4.5 points.

2. The second trade was a retest of the high at 723.50. The market stopped at 723.25. The red diamond (most severe form of deceleration) signaled that the buying was over. The market reversed and hit 713.25 before the buying reentered the market. The entry was at 720.75 (the low of the preceding bar was 721.00). The potential profit was up to 7 points.

 

[bthomas]

Retest - Failure Trades on 3/18

The attached chart shows three retest - failure trades from Wednesday 3/18.

I think the ES is a very difficult market to trade due to the volatility. But if you're patient, these retest failure trades occur daily.

The first trade, on this 3 minute chart, retests the 10:06 and the 11:03 bars. Their highs are 769.50 and 770.00 respectively. Within 2 ticks is ok for an RTF. The entry is on the close of the 11:06 bar, which is 1 tick off it's low. With patience, this trade worked for a tradeable 3 handles before there was a significant retracement.

The second RTF involves the 11:24 and 11:35 bars, the low of which was 765.25 and 765.00 respectively. There should be a minimum of 3 bars between retests with "white space." Entry is at the close of the 11:39 bar, which is only 1 tick off it's high. Again, with patience, this trade had the potential of 8.25 tradeable handles.

The third RTF uses the 12:18 and 12:57 bars, the highs of which were 774.00 and 774.50 respectively - 2 ticks apart. Entry is at the close of the 13:00 bar, which is exactly on the low. This one is only good for 2 tradeable points, but between these trades you should have been able to make your daily business plan.

Things got wild after the FOMC announcement, but you should have been able to sit back comfortably, having made your money for the day.

 

[bthomas]

Retest Failure Trades on 3/20

Here are more retest failure trades, from Friday, 3/20. The same trade guidelines apply:

1. At least 3 bars in between retests.

2. White space must be apparent.

3. Enter when, in your judgement, the retest has failed. I like to see a bar close on it's extreme opposite the retest.

The magenta arrow denotes the retest. In a challenging market to trade, this set-up offers a good, high percentage opportunity.

 

[ammo]

bt,thnx for posting es

 

[bthomas]

More Retest Failure Trades

My constant reference to RTF's (retest failure trades) in the ES may seem a bit repetitive, but this is an extremely powerful trade that is suitable for both trending and responsive markets.

The attached chart identifies four RTF trade opportunities form Monday, 3/23.

 

[bthomas]

RTF's on Monday 3/30

The three trades indicated by the red arrows on the attached chart worked for a scratch, 4 points and 2 points respectively. I continue to post charts with RTF's because they are the most consistent, recurring trades I see in the ES.

 

[bthomas]

More Boring Profitable Retest Failure Trades from 3/31

The trade parameters are the same:

1. A double top/bottom is set with a 2 tick tolerance

2. White space between the base bar and the retest bar

3. At least three bars between retests

4. Entry bar must close within 2 ticks of the extreme away from the retest

5. Risk 2 points to make 2 points. Move stop to break even after 1 point trades.

I'm surprised some outfit hasn't taken this strategy, packaged it, and tried to sell it. It works.

 

[bthomas]

Overnight Opportunities in the ES

The attached chart depicts four trade opportunities from Friday that occurred before the open. The trade is, of course, a retest failure trade, but you knew that. Each trade offered at least two potential points of profit with the entry I described in earlier posts.

I have previously read on Dr. Brett Steenbarger's web blog that 80% of the moves in the ES happen in the overnight session. Whether this holds true in today's market, I can't say. But I can say that the volume and range is usually sufficient to support a trade.

 

[bthomas]

Getting Ready For Trading on 4/14

Comments by Charles Cochran

(06:51)_Most markets motored sideways OVN w/players back from vacation hesitant to take a position. May take a bit to sort things out this morning. OVN volumes are a bit below norms, especially in the Note. A break out play might garner the most interest this morning. The Bond really didn’t retest the unanswered buying from yesterday’s y-A period.

The ES was sideways w/a D profile leaning P. Will look to engage at the edges and plan on a breakout trade too on the RT of the OVN highs/lows. Holidays sometimes take an hour or two to see which side the paper is favoring.

ES
R1-3: 855/57, 860/62; 869/70.
S1-3:845/47, 840/42,833/35.