Market Context for PA setups

Market Context and technical analysis is affected by new information or reports that come out. However, once the trend is established, you can base your trades on that trend till it changes. This does not mean you blindly go long or short. You still need to use your setups.

For example, I wanted to go long ES, but had not good setup and my signals were for a short, so I decided not to trade ES today. I then looked at CL, and had good setup for a long trade so went for it. Trade went my way immediately so I brought up my stop a little bit, but still left room for trade to breath.

My goal with this thread is to provide market context information for afternoon and night into the next trading day. Note market context can last for several days when no new information that comes out changes it.

Yes, one can use a PA signal to do a counter trend trade against the context.

However, a good way to trade is to use multiple confirmations:

1) Market context.

2) Without any indicators, do you have a PA setup forming on your chart during the time you are looking to trade. If not, do something else for awhile and look back at the charts or even don't trade if you don't see a setup rather than randomly going long or short when the market is going sideways.

3) For those that use indicators and understand what the indicator is telling you, does it also confirm the PA setup.

4) For those that use stops and targets, can both give you a reasonable means of managing the trade without taking a big risk.

If some of you find market context informative, I will continue to post messages here.



Quote from oraclewizard77:

Market context is bullish today for commodities and the overall market.

http://www.marketwatch.com/story/gold-prices-higher-after-monthly-rout-2013-06-03?siteid=YAHOOB

My scalp was successful today on a long trade.
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a lot of small stocks are moving up at double their daily ranges\betas without any news at all. from my observations-bullish for at least next few days.
 
my view = gold tricked everyone, now going up. so, agree with your view. also first time NCM large AU miner had a serous positive feedback on gold moving up. So far NCM price movement mediocre vs gold.
 
Good spike up on US treasuries on the bad ISM contraction number. No signal yet but seems
down channel and new up channel on hourly chart are overlapping. Fed certainly changed context at FOMC and bad data like ISM contraction very good for trend continuation.
NFP Friday.

You know what burns my naive ass Is the interest rate sensitive ( inflation crushing)
High yielding REITS and Utilities in the sp500 getting crushed prior to fed meeting.
Someone knows, but not me.
 
It is possible to use a breakout strategy for news events, but it does not always work. You would need to have orders in place before the news.

I think you are right, and some traders are using inside information while the HFT are front running the news.

As some of you know the HFT computers are programmed to read news alerts and place rapid buy and sell orders faster than a human can read the news.

On Sunday before the news came out I was able to make money a short scalp on CL, but I wish I kept the trade live since I should have made double the profit.

After market close today, I saw that my scalping profit was the best I could have made on my long. If my win% improves, I think trading more contracts with different targets may be a viable strategy.

Quote from eurusdzn:

Good spike up on US treasuries on the bad ISM contraction number. No signal yet but seems
down channel and new up channel on hourly chart are overlapping. Fed certainly changed context at FOMC and bad data like ISM contraction very good for trend continuation.
NFP Friday.

You know what burns my naive ass Is the interest rate sensitive ( inflation crushing)
High yielding REITS and Utilities in the sp500 getting crushed prior to fed meeting.
Someone knows, but not me.
More...
 
When looked at a bullish market context today ES was down 2 points, I see that it closed up 9 points. So as we can see the trend can last a very long time. As noted I did not have bullish PA setup for ES, but assuming I did not have to leave early today, I could have waited for a bullish signal to make another trade. However, once I make a positive trade in CL, its hard to make another trade, since I don't want to give my profits back to the market. I think its easy to make another trade after a losing trade, since you want to make your loss back, but this is sometimes bad trading when the market is not conductive to your reading of the charts.

Some days are pretty random, I would have to say today TA and PA setups worked fine. My thinking is that it may be better to trade more on days when signals are working and less or not at all when they don't.
 
http://www.marketwatch.com/story/energy-stocks-are-worst-sp-500-performers-2013-06-04?siteid=YAHOOB

We went back down as market context changed to negative with investors worrying about the Fed.

However, this could be just a very large range as bulls fight the bears. I normally don't like to do break trades especially in CL, but could not help myself and took one. After getting into the trade my internet went down, but when I got it back up, the target and stop worked and price hit my target before the stop got hit. Price off course kept falling, and I should have been aware that if the break worked, price would keep moving and I could have made more profit than a normal scalping trade. I may be able to add more funds to my account soon, which may allow me more confidence to set longer targets or do more than 2 contract trades. I only took 3 ticks of heat on the trade and with a smaller stop, one could either go for longer targets or more contracts.
 
No, market context is a lagging trend determination. What's good about it is that trend can continue for a long time on a higher time frame chart, and can set the tone for the day.

When I use my own indicator (not market context), it tells me on a lower time chart if price is going to continue in its current direction, or stop and reverse. Then while I don't look at channels, I will use that word since I think you are able to grasp that concept for your price drivers since you wrote about how you get a signal from price drivers and then check channels for entry unless you no longer do this.

So by using the lines I do have on my chart (they are not channels), I am able to take a trade with a very small stop and either a scalping target or a longer term target. So for example, if I was stopped out today, my loss would have been a little lower than my target, but it was not 2 to 1 since this was a scalp.

The guess is how far price will travel once I am in a trade. I know it will probably travel at least a scalping distance, but it could go further. I would not trade against price until my indicator tells me that we have reached a possible bottom for example on a short and price action confirms it. Obviously, I could just stay in the trade until the indicator says to get out, but I don't like to watch the charts once I am in a trade and rather let my stop or target work.

Also, guessing implies that I will take a loss. Since Sunday, I have not had any losing trades. As one improves on the skill of trading, one can increase his or her win% and therefore increase confidence when trading with real money like I do. However, TA is not the holy grail, I will eventually take a losing trade, but if I am able to control how much of a loss I take with a stop, I can then trade better in the future, rather than letting one trade blow out my account.

Quote from marketsurfer:

Sounds about as accurate as guessing.

surf
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