Approach to trading the ES contract

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I think its important to look carefully at the premarket. In this instance what I am looking for, are "tests" of a "landmark" (in this case the 200 period ema). When I see that price respects that landmark in the premarket, it suggests to me that price may again respect that line in future. Actually I know this to be true because I have put in the screen time. So what I am more interested in, is how price acts around the 200.

Today, price opened "in value", meaning somewhere in between the previous day's value area high at 911.50 and value are low at 904. When price "tested" 904 soon after the open, a long entry at 904 would have resulted in a nice profitable trade (refer to the attached chart).

If you follow the early move off the open, you can see that price drove up from 904, through the previous day's value area high at 911 and up to a "local high" of 916.25 about a half hour later.

price then retraced back to the 200 period ema (and the previous day's value area high at 911). As I have mentioned in previous posts, when I see that kind of confluence, and my filters ($VOLD, $ADD, etc) give confirmation, THATS A BET I AM WILLING TO TAKE.

So actually we have two possible scenarios.

1. A trader could have entered long at 904, scaled out to 10 pts and kept a couple of contracts in case the trade continued to run in his/her favor, or

2. The trader could have cashed out at 12 pts and then waited for another shot. Seeing the test (and confluence at 911) a new trade could be put on at that point. If a trader entered long at 911, they would have taken only 1 tick heat. That entry would have resulted in another 5 or 6 points depending on the exit.

As can be seen, there were multiple tests and retests that an aggressive trader could have made good use of.
 

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Here is the same chart with the Weekly Pivots in place

As you can see the pivots reinforce the confluence concept and make it easier (my point of view) to take the trade(s).
 

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and the same chart once more with both the daily and monthly pivots in place

Once you see this it should become obvious how important it is to place the right context around price action. Simply put it is easier to lean on a couple of landmarks when putting on a trade than it is to simply trade price (the current fad).

Best of luck in the markets tomorrow.

Stevesbg
 

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I wish there was a way to save threads like these as favorites on this site, and be able to reference them fast.

Great thread Steve!
 
steve,

do you always have a 200ma on your chart as a strong reference point to add confluence? i missed both of those trades yesterday but the setups were there at both spots but i wasnt quick enough. i caught the short of the IB EOD on the 1min retest. Just curious as to why 16 was a logical high? the reason i was looking to short it was because it has a 2week value extreme at 915 and it looked like a 5min probe to me over that level.

To the above guy looking to add this to your favorites, click the subscribe button on the bottom.
 
leapup,

in the bottom you can subscribe to a thread and you can always go to your accout and view them, also you can email every time someone posts on a thread you subscribed to.

hope you're enjoying Generals thread. I am and its is interesting.

hope it helps.

JT
 
Got a moment here before things heat up

The open was a grind, with retail covering shorts and options players moving inventory.

As can be seen in the attached chart. Price hit my S/R lines and retested a couple times. The rest is up to the individual player

$Vold and $ADD kept me out of the early chop and confirmed both retests down.

For those who watch other indexes, the $SOX (Semiconductors) also gave a nice signal.

Close to another 10 pointer
 

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Here's a simple chart showing price bouncing off the 200 just now

Unfortunately there is a single above near the IB low (917.50), and THAT combination (confluence) usually signals resistance.

If that single fills in, I should get a nice ride back up to the highs

I would say the odds are against me, so my position size is small and for those who would ask why take the trade? I already have a payday, so I get to take this one knowing I can scratch the trade if I need to.

Edit

and as it worked out I got two points best scale out on the front end, and scratched the balance as it retraced to my entry
 

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Quote from stevesbg:

Got a moment here before things heat up

The open was a grind, with retail covering shorts and options players moving inventory.

As can be seen in the attached chart. Price hit my S/R lines and retested a couple times. The rest is up to the individual player

$Vold and $ADD kept me out of the early chop and confirmed both retests down.

For those who watch other indexes, the $SOX (Semiconductors) also gave a nice signal.

Close to another 10 pointer
More...
Great thread stevesbg, and you're giving out some really quality information here.

I've used the $ADD (Advancers-Decliners) and the $SOX (Philadelphia Semiconductors) in the past as well, and I find that many good traders use them also. I have also used the TRANS (Dow Transports) as a pretty good secondary tool for trading the ES.

But for simplicity I have found that keeping my eye on the DOW (Dow 30) - which you've mentioned in the past - is the simplest and best tool for me to use. It gives very good idication of when the market is breaking out to the upside or downside (+/- 40 pts on the Dow vs its Open) and signals reversals in the ES very quickly, unlike any of the aforementioned tools ($ADD, $SOX or TRANS).

Good trading
 
Quote from babykuttan:

leapup,

in the bottom you can subscribe to a thread and you can always go to your accout and view them, also you can email every time someone posts on a thread you subscribed to.

hope you're enjoying Generals thread. I am and its is interesting.

hope it helps.

JT
More...

I don't do this often.:D But, I owe you one! Thanks!:) My computer skills...:eek:
 
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