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The 3-2-1 Approach: A Simplified Method for Trading Any Market
- Thread starter bthomas
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One Way To Trade Levels
One way to trade support/resistance levels is the pullback method. In the TIE Trading Room, Charles Cochran sets the support and resistance levels using the market generated data from the Market Profile chart, in combination with volume analysis.
At the start of Tuesday 6/24, the idea with which we started the day was to buy Bonds. The R1 was 113.16/20. When there is a range, I just put a horizontal line in the middle of the range. In this case, at 113.18.
As soon as one bar closes above 113.18, I begin to look for a retracement back to within a tick of that level. On the attached chart, you'll see that the market traded up to 113.22, and one 5 minute bar closed entirely above the line at 8:25. The 8:30 bar's low was 113.17. The trade was to buy at 113.18/19. Lending support to the buy was increased volume at the ask on the histogram below the chart.
The market then traded to 113.255 (7 1/2 32nds) before retracing back to 113.19. At 31.25 a 32nd, taking 4 ticks out of the market would have been worth $125 per 1 lot traded. Our recommended business plan is to trade size for small gains, so a 5 lot would have been worth $625.
One way to trade support/resistance levels is the pullback method. In the TIE Trading Room, Charles Cochran sets the support and resistance levels using the market generated data from the Market Profile chart, in combination with volume analysis.
At the start of Tuesday 6/24, the idea with which we started the day was to buy Bonds. The R1 was 113.16/20. When there is a range, I just put a horizontal line in the middle of the range. In this case, at 113.18.
As soon as one bar closes above 113.18, I begin to look for a retracement back to within a tick of that level. On the attached chart, you'll see that the market traded up to 113.22, and one 5 minute bar closed entirely above the line at 8:25. The 8:30 bar's low was 113.17. The trade was to buy at 113.18/19. Lending support to the buy was increased volume at the ask on the histogram below the chart.
The market then traded to 113.255 (7 1/2 32nds) before retracing back to 113.19. At 31.25 a 32nd, taking 4 ticks out of the market would have been worth $125 per 1 lot traded. Our recommended business plan is to trade size for small gains, so a 5 lot would have been worth $625.
Two Ways To Take The Same Trade
The Volume Exhaustion trade is one of the basic staples in the TIE methodology. You can see, on the attached 5 minute chart from Wednesday 6/25 (Fed day), that the 12:35 bar is far wider than any of the surrounding bars. The width of the bar is determined by the volume traded on that bar.
You can also see, in the volume histogram below the chart, that even though price was making a new daily low, shorts were covering. This exhaustion bar also happens to occur at the S3 level, determined by Charles Cochran through interpretation of the Market Profile and volume analysis before the market opened.
This trade can be played multiple ways. Fading the S3 is very valid, as S3 is a "drop dead" level. far away from the open. To do this, you would place a buy limit at the S3 level.
A second way to play this set-up would be to wait until the bar following the potential exhaustion bar closes, to guarantee that there is no selling interest remaining. You would then buy stop into the trade 1 tick above the follow-up bar.
Either trade would give you the potential of at least 15/32nds, or $468.75 per 1 lot traded. If your business plan was to take 4/32nds daily out of the market, this was easily available to you.
The Volume Exhaustion trade is one of the basic staples in the TIE methodology. You can see, on the attached 5 minute chart from Wednesday 6/25 (Fed day), that the 12:35 bar is far wider than any of the surrounding bars. The width of the bar is determined by the volume traded on that bar.
You can also see, in the volume histogram below the chart, that even though price was making a new daily low, shorts were covering. This exhaustion bar also happens to occur at the S3 level, determined by Charles Cochran through interpretation of the Market Profile and volume analysis before the market opened.
This trade can be played multiple ways. Fading the S3 is very valid, as S3 is a "drop dead" level. far away from the open. To do this, you would place a buy limit at the S3 level.
A second way to play this set-up would be to wait until the bar following the potential exhaustion bar closes, to guarantee that there is no selling interest remaining. You would then buy stop into the trade 1 tick above the follow-up bar.
Either trade would give you the potential of at least 15/32nds, or $468.75 per 1 lot traded. If your business plan was to take 4/32nds daily out of the market, this was easily available to you.
Two Ways To Take The Same Trade - 2500v
Here is the same trade, only shown on a 2500volume chart, rather than a 5 minute chart. Adding even more information to what was already seen on the 5 minute chart is now selling deceleration (the blue square below the 12:35 bar), and the bar close at the absolute top of the bar. The close at the top of the bar also denotes rejection of the price low.
Two charts with similar information, but a slightly different look. The signals on one chart confirms the other, giving you more confidence to take the trade.
Here is the same trade, only shown on a 2500volume chart, rather than a 5 minute chart. Adding even more information to what was already seen on the 5 minute chart is now selling deceleration (the blue square below the 12:35 bar), and the bar close at the absolute top of the bar. The close at the top of the bar also denotes rejection of the price low.
Two charts with similar information, but a slightly different look. The signals on one chart confirms the other, giving you more confidence to take the trade.
The Big Question
After reviewing the beautiful trade set-up shown in the last two posts, the question you have to ask yourself is "do I have the patience to wait for the right set-up before putting my money on the line?" The trade in the last two posts occurred at 10:35 EST.
Overtrading is one of the key reasons many traders fail. Another huge reason is thinking you have an edge on the market when none exists. If you can't statistically prove your edge, you don't have one. Both are fatal to your account.
You can succeed in this business if you treat it as a business - wait for an opportune set-up and absolutely "know" what an opportune set-up is (bad grammar but the right message).
Good set-ups, like the ones shown, can fail as well, but you don't have to win 100% to make a nice living. Two out of three can get the job done
After reviewing the beautiful trade set-up shown in the last two posts, the question you have to ask yourself is "do I have the patience to wait for the right set-up before putting my money on the line?" The trade in the last two posts occurred at 10:35 EST.
Overtrading is one of the key reasons many traders fail. Another huge reason is thinking you have an edge on the market when none exists. If you can't statistically prove your edge, you don't have one. Both are fatal to your account.
You can succeed in this business if you treat it as a business - wait for an opportune set-up and absolutely "know" what an opportune set-up is (bad grammar but the right message).
Good set-ups, like the ones shown, can fail as well, but you don't have to win 100% to make a nice living. Two out of three can get the job done
6/25 Fed Day Recap and Market Profile Analysis for 6/26
Here are Charles Cochran's comments from Fed Day and his analysis for the overnight session and early trading on 6/26. Levels can and will be reset based on the overnight action.
F2 Comments: It was a day that was contained by volume nodes at 114-02 and 113-08. The ES whipped the Bond around during the day. And when the ES failed to hold its gains after the FOMC announcement, the Bond rallied to close strong. If the ES continues to sell tomorrow, I think the Bond is poised to test resistance at 114-20/115-00. If the ES rallies back, the Bond should find sellers. Tomorrowâs GDP news is old news and shouldnât impact the trading. The Existing Homes Sales number and Jobless Claims could. IF ES is lower, want to buy the Bond. See two buy zones113-29 OB or 113-20 OB. IF ES sells in OVN session, may take 114-01âs to get into the Bond from the long side. IF ES is higher, would like to sell the 113-31-114-03 area w/a cover, if 113-20 then holds.
Here are Charles Cochran's comments from Fed Day and his analysis for the overnight session and early trading on 6/26. Levels can and will be reset based on the overnight action.
F2 Comments: It was a day that was contained by volume nodes at 114-02 and 113-08. The ES whipped the Bond around during the day. And when the ES failed to hold its gains after the FOMC announcement, the Bond rallied to close strong. If the ES continues to sell tomorrow, I think the Bond is poised to test resistance at 114-20/115-00. If the ES rallies back, the Bond should find sellers. Tomorrowâs GDP news is old news and shouldnât impact the trading. The Existing Homes Sales number and Jobless Claims could. IF ES is lower, want to buy the Bond. See two buy zones113-29 OB or 113-20 OB. IF ES sells in OVN session, may take 114-01âs to get into the Bond from the long side. IF ES is higher, would like to sell the 113-31-114-03 area w/a cover, if 113-20 then holds.