S/R Emini Journal

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JJ and Romik,

If you really look at the long time best (not perfect) methods for trading. What you will find it to be S/R and divergence (in no particular order). These two methods have proven over time to work and they continue to work. Both have their strengths and their weaknesses as pointed out but their weaknesses can be overcome by good money management, discipline, and knowledge of the other system.

When I started trading (1992) every Joe Blow didn't have access to real time charts so this is how I started do trading S/R. I bought Investors Business Daily and paid the delivery guy to bring mine before 5 AM. I studied my charts and wrote down my S/R numbers. Then I had to drive up to the Charles Schwab office and watch the ticker to do my trading. I did learn how to draw a crude P&F chart while trading so that I had something to look at. But that is how I started using S/R for my set ups and never looked back.

I always used to bash the use of indicators and it has been Romik and B1S1 that got me to start looking at them. I have been spotting the divergences here lately but since I am not as familiar I don't use this as my entry but I could use it as a quick exit and minimize my losses. As everybody has seen my method isn't 100% but over the long term it is successful and with the added use of divergences my money management has improved as well. So I believe that I am still getting to be a better trader.

Gary
 
Quote from hardyards:

For what it is worth, I think that in order for ES to reverse it needs a minimum of 2 independent signals before looking for a good entry point.
I take divergence seriously particularly at the end of a run, but it is in fact no more than a double top/bottom, sometimes equal and sometimes failing. If it happens around s&r then this adds weight to it and if the first pop had high vol and the 2nd had low volume that is your key. I imagine that it means the big boys unloaded on the first pop into the face of retail and then cleaned out the cupboard on the 2nd pop into the face of those traders waiting for a 123 hook or thought that were being left behind.

Here is a thought for some weekend homework.

I trade the RTH open almost every day using momentum.... I hardly ever miss banking points and it sets me up mentally for my session.
My reasoning is simple ...the open introduces so much volume that it overwhelms anything happening on the overnight session and emas or any long tailed indicators such as bbands need to be viewed in a different manner since their tail can be trailing in a pool of low volume.
It is a sorting out period for the price as it begins to establish it`s initial balance (IB) for the day

Take a close look on a 1M chart at the open from say 9.25 est going back over 20 sessions and see if you can see exactly what is happening.
I image that it is a mix of big boys and "market on open" orders, but to be honest I dont really care, I only look at price and volume sales.
I am 90% accurate in 20 trades ie 2 stop outs at 3 points each per contract.
On average I walked off with 8 pts per and so I was 5 mins into the day and 2 handles up per.
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Hardyards,
I have a friend that is trying to figure out a system very much like the one you describe. Using a EMA to help him. He says that my system takes too much descretion and he doesn't have the skill yet to use it. I have always that my system was as basic as you can get. But to each his own I guess. I believe with time and experience he find a successful method that fits his personality. I think it is important to find your own niche. I hope he can discover and make it work as you seem to.

Gary
 
Quote from 4re:

Hardyards,
I have a friend that is trying to figure out a system very much like the one you describe. Using a EMA to help him. He says that my system takes too much descretion and he doesn't have the skill yet to use it. I have always that my system was as basic as you can get. But to each his own I guess. I believe with time and experience he find a successful method that fits his personality. I think it is important to find your own niche. I hope he can discover and make it work as you seem to.

Gary
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I am of the opinion that unless you use discretion, the size of your drawnloads will prevent you from really moving forwards.
The problem is, the market has many moods and unless your system can cater for this event it will brutalize its way through the day,,,, by brutalize I mean that it will assume that all events have equal weight much in the way an sma flattens out price action.
The opening of ES is a case in point in that it needs to be treated as an individual event until the IB takes over and sr and other systems can kick in.
I imagine that no one group really knows the full extent of the MOO (market on open) orders but it is interesting to watch. Mention to your amigo to watch the price and vol action just before the open. These must be traders placing orders since the MOO doesn't kick in until after the bell ... well that is my home grown logic anyway.

In the end, the whole game is about managing risk.
Do you want to enter on breakout and cover the range with your risk or do you want to fade the entry with a 3 pt risk.... needs more experience.
Same apply on exit. Trailing stop, gives away pts but allows continuation of a good run. Exit upon exhaustion maximizes short range pts but means that the longer trend will require a fresh entry.
As we have agreed before " there are many ways to skin the cat"

That is why sr is so important because it is a consideration area in an otherwise totally fluid game.
 
I have found divergence setups to work very nicely on an hourly time frame as well as daily - the signals seem to be pretty valid and consistently generate good reversals (worth more than 2 pts, that's for sure).

Just remember, the smaller the time frame, the more prone the signals are to being just noise.

Later,

Jimmy
 

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JJ, I would add Histogram to MACD and track divergences of the histogram curves, rather than actual MACD lines. Also I did not understand the 3rd chart, what does MACD tell you at the time of price going up? Adding a 2nd indicator like RSI would add to the strength of the signal and CCI would point to O/B & O/S areas above +200 and below -200, as you pointed out works more accurately on longer TFs. Profit targets are based on multi exits, but the main 1st target is set @ the average price at the time of divergence starting to form. That's basically how the cookie crumbles over at my hacienda.

Thanks
 
Quote from JimmyJam:

Jeez, and we think we have it tough ... got this from another thread here at ET, and couldn't resist posting it.

http://www.slate.com/id/2144866

How do you like that money management :eek: !
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That sounds like my family while I was in the military. The only way we made it was by my wife working and me trading options. The trades made our vacation money to come home for 2 weeks a year.
 
Hey Guys,

Here are my numbers for tomorrow:

Long 1281-1284

Short 1270.50-1263

I have a couple of patients early in the morning tomorrow. I am going to try to be back home before the market opens. I don't know if I'll make it but I should be back before soon after. I hope everyone has a good trading day tomorrow.

Gary
 

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