Ideas for struggling traders

The envelope is setup around a single moving average. The concept is simple. Right click on an advanced chart (anywhere on the chart) and you get a pull down menu. Then go to "Basic Studies". To one side of that menu, another menu will appear. Scroll up to "Envelope". Again a menu will appear for the creation of the envelope. Under "settings" you choose the parameter for the moving average. I suggest 80 period, so use the scroll wheel to get to that figure. Then all the way over to the right you will see a box with the word "percent" written above it. There is where you get to make another choice (size of the envelope). To create this example chart I chose 2.75%. Be advised that this is where "research" is necessary to find the optimal figure....I chose this based on my experience and my estimation of current volatility. You see what I am getting at? Volatility changes through time and so you will need to learn how to estimate it so that you can "tune" your chart periodically to the market.

I am afraid this is about as far as I can go on the subject.

I hope it points you in a profitable direction.

Steve
 
At this point I think we are getting the limit of what a struggling trader can make use of....I will however post this chart to show what one can do with a longer time frame and different orientation to the market.

Notice how the use of an envelope helps to determine where a possible change in momentum could happen. Actually there is a lot to see on a chart like this. One of the things that is interesting is the impact of world events on the market. You can see some of that in the way that the market oscillates from close of RTH to the next open...

As can be seen on this chart a swing trader getting long from the 16th would have taken nearly 90 ES points exiting today on a touch of the upper envelope. I use options for this kind of trade and for me, it seems to work pretty well.

I am on going on vacation, so I will be stopping here.

I hope this helps..

Take care

Steve
 

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Thanks Steve for the detailed charts of Friday's action. It seems I was overtrading and taking every signal which you did not. I will have to ponder over this for a while. Meanwhile have a great vacation and hopefully I'll have many more practical questions for you later.

thanks again
 
Quote from steve46:

Well these are ideas for "struggling" traders.

I would guess that a significant percentage of those struggling traders probably have other jobs, and are trading part time.

I am hoping that traders will take the basic concepts offered in this thread, and try to modify them to fit either full or part time schedules.

Good luck to you

Steve
More...

Thanks Steve, Good luck to you too! :)
 
Your welcome Derrick

I am home from vacation and thought it might be interesting to see an example of how a skilled trader might use available data to orient and plan the most important trade of the day. The open

First, in order to plan a opening trade, one has to know the status of the world markets. I look at the Nikkei, Singapore and HongKong, then review the DAX and Stoxx. These markets react to what happened in the US, and to their own financial and political events. The Asian Markets open (Nikkei first) at 1700 hours EST. At 0300 hours EST the DAX opens in Germany.

I look at how these markets acted (the night before), and orient my opening trade "plan" to that movement using the concept of "value" from Market Profile.

To aid in preparation, a trader can simply get the exchange data, or look at the effect of the world markets as reflected in the Globex or overnight markets (the ES contract that trades overnight).

The attached chart uses a 2401 constant volume chart to show how the Globex market moved in response to Asia, then Europe.

I'll add more comments (later) to show how a trader might use this information to plan the opening trade.
 

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Okay then, installment 2 "how to plan an opening trade"

First, understand that the earlier a trader can establish favorable trade position, the longer he/she can ride that trade, and the more money he/she can make.....understanding this one can see that it is of great importance to learn how to make use of whatever data is available to anticipate how the market might move on the open and to plan where to enter, and how to accurately and effectively estimate and manage the risk associated with that entry.

As we get closer to the open of the US market, it is important to have an idea of where the market might go. I use Market profile for this...

In the previous chart, we saw how the ES contract was affected by the Asian (Nikkei) open and then the European (DAX) open.

In this chart, as we get closer to the open, we can see how the market re-tests previous both the previous value area low and the daily pivot..both in the same area. Each time, price fails to take out that area and never makes it back

Also note how the market opens....In Market Profile terms this market opens and "drives" up toward "value"(and the daily pivot)
and "fails"..

When this happens, we look for a place to get short

Takes us to the next chart
 

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We have established that on the open, the market "drove" up and ran out of gas so to speak.....Market Profile defines this as a "failure" and as the market "fails" it heads downward

If you re-visit the previous chart you can see the first obvious short entry as price takes out the 200 period EMA (white line) at 9:32:35 EST. This entry is at 1268.75 and requires a stoploss of
2 points. As I have pointed out previously, there are usually several good entries using this system.

Now lets look at another chart.

This one shows a little more data. The principle I like to stress is waiting patiently for the "retest"....Seems to me that price likes to retest areas, and when it does, it will either "take out" that price point or "fail"....THAT is where you want to make you entry because at that point you have the best risk/reward ratio and you can use the tightest stop

Check out the attached chart

Notice price takes out the 200 period EMA (White line) and then swings back up to retest. While it is true that I like to see price retest the 200 period EMA, what I also see quite often is price retesting a PREVIOUS HIGH. In the attached chart look to the left and follow my blue line. On this retest, price stops right at 1268.50. Short entry on the open of the next candle at 1268.25 offers favorable trade position and a tight stoploss (close above 1269.25).
 

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Here's how that trade played out

As you may know from reading my previous posts, I suggest that traders look for 10 pt moves, scaling out at 2, 3, 5, 7 and finally 10.

Also I suggest that traders try to leave at least one unit on in case the trade runs in their favor. This is important for your long term profitability.

Here's the chart.
 

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Finally the importance of keeping at least one unit on in case the trade runs in your favor.

As you can see, this trade continued to move favorably and leaving one unit offered the trader the possibility of catching additional points down to 1253, a total of 15+ points.
 

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The rest of the day, price moved laterally between the Weekly and Monthly pivots. This is not unusual.

If a trader had done his/her homework and planned their initial trade well, they now had a choice to make;

either

A.) Try to trade the channel or

B.) Call it a day with at least 10 ES points and go play golf or whatever else you want to do...

If the trader chose to trade, I suggest (as I have in the past) switching to a different chart. Here is what that channel would look like on a chart with 10,000V candles.

Now I realize that for "struggling" traders this is a lot to take in...and it is unrealistic to think that one can in a short time, learn to plan....and then execute trades like this....it is much easier in hindsight.....but it can be done.

It requires setting aside your preconceived ideas and limitations. It requires discipline and perseverance
It requires committment, a lot of study and practice.

If one of us can do this (I can assure you that many good traders do this on a daily basis) then many of you can if you set your goal and go for it....

Good luck

Steve
 

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