The 3-2-1 Approach: A Simplified Method for Trading Any Market
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Trading The News
You could make a decent living just trading news events, so why do so many traders avoid news trades like the plague. It's the uncertainty and risk involved.
Here are three ways you can trade the news, listed from most agressive to least agressive:
1. Place a buy stop just above the market and a sell stop just below the market a minute or so before the release. Make sure they are placed on an OCO basis (one cancels the other). Your software must place the profit target and stop loss as soon as the order is filled.
The benefit is that you're sure to get filled. The risk, and it's a big risk, is that the market moves a few ticks in your direction and immediately reverses stopping you out.
2. Place a sell limit well above the market and a buy limit well below the market. In the ZB, this would be 20 to 30/32nds off the market. Once again, this must be done on an OCO basis. What you want is the market to make a big initial move, hit your limit, and then retrace, giving you a profit before the market returns to it's initial direction.
You may not be filled, but if you are, the market should be running out of steam a bit after the initial thrust. Most markets move, retrace, and then move again. Of course, if you are filled and the market doesn't retrace quickly, you'll be stopped out.
3. The TIE method for trading the news is the most conservative of the three. Charles Cochran suggests waiting until the initial market thrust has been completed and a pullback has ensued. The TIE software gives you strong signals when the pullback has likely been completed. You would then enter in the direction of the initial thrust.
The attached 2500v ZB chart is from Thursday, 6/12. You can clearly see the down move and the expected retracement, but how do you judge when the retracement has been completed.
Well the small red box above the 8:36 EST bar denotes buying deceleration, but the bar closes on it's high. The 8:38 bar has an S above it and a pointer that indicates a possible swing high, but equally as important the mode (magenta line where the highest volume was traded) is below the middle of the bar and the bar closes on it's dead lows.
The trade is to go short out the bottom of the 8:38 bar. In this case, the trade works for 7 32nds before a second reversal occurs. The second reversal works for 4 32nds before the market goes into consolidation. 7 32nds in the ZB is $218.75 for every lot traded. 4 32nds is $125 for every lot traded.
We recommend a business plan of 4 to 6 ticks a day, but trade multiple lots. This is the business plan of the "local", trading smaller moves with size. 4 32nds @ $31.25 = $125 X 5 lot = $625. There are 240 trading days in a year. If you were able to meet this plan (4 32nds with a 5 lot) you would have earned $125,000 if you traded only 200 of the 240 trading days.
You could make a decent living just trading news events, so why do so many traders avoid news trades like the plague. It's the uncertainty and risk involved.
Here are three ways you can trade the news, listed from most agressive to least agressive:
1. Place a buy stop just above the market and a sell stop just below the market a minute or so before the release. Make sure they are placed on an OCO basis (one cancels the other). Your software must place the profit target and stop loss as soon as the order is filled.
The benefit is that you're sure to get filled. The risk, and it's a big risk, is that the market moves a few ticks in your direction and immediately reverses stopping you out.
2. Place a sell limit well above the market and a buy limit well below the market. In the ZB, this would be 20 to 30/32nds off the market. Once again, this must be done on an OCO basis. What you want is the market to make a big initial move, hit your limit, and then retrace, giving you a profit before the market returns to it's initial direction.
You may not be filled, but if you are, the market should be running out of steam a bit after the initial thrust. Most markets move, retrace, and then move again. Of course, if you are filled and the market doesn't retrace quickly, you'll be stopped out.
3. The TIE method for trading the news is the most conservative of the three. Charles Cochran suggests waiting until the initial market thrust has been completed and a pullback has ensued. The TIE software gives you strong signals when the pullback has likely been completed. You would then enter in the direction of the initial thrust.
The attached 2500v ZB chart is from Thursday, 6/12. You can clearly see the down move and the expected retracement, but how do you judge when the retracement has been completed.
Well the small red box above the 8:36 EST bar denotes buying deceleration, but the bar closes on it's high. The 8:38 bar has an S above it and a pointer that indicates a possible swing high, but equally as important the mode (magenta line where the highest volume was traded) is below the middle of the bar and the bar closes on it's dead lows.
The trade is to go short out the bottom of the 8:38 bar. In this case, the trade works for 7 32nds before a second reversal occurs. The second reversal works for 4 32nds before the market goes into consolidation. 7 32nds in the ZB is $218.75 for every lot traded. 4 32nds is $125 for every lot traded.
We recommend a business plan of 4 to 6 ticks a day, but trade multiple lots. This is the business plan of the "local", trading smaller moves with size. 4 32nds @ $31.25 = $125 X 5 lot = $625. There are 240 trading days in a year. If you were able to meet this plan (4 32nds with a 5 lot) you would have earned $125,000 if you traded only 200 of the 240 trading days.
awesome chart,
not to disparage, but most technical analytics look good after the fact, what the challenge continues to be, both live trading and longer term trading is / are,
how do those indications show up during real time?, and / or do they change as the day progresses and the software goes back two bars or so and change the signal that was triggered to something more current?
that's really called force fitting, back in grade school its called grading on a curve (relative to the other students in the class)
another question is:
do you make realtime calls in the trading room for traders there to decide whether to take?
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heard good things about this software package from some traders and others, and would appreciate some sincere answers
not to disparage, but most technical analytics look good after the fact, what the challenge continues to be, both live trading and longer term trading is / are,
how do those indications show up during real time?, and / or do they change as the day progresses and the software goes back two bars or so and change the signal that was triggered to something more current?
that's really called force fitting, back in grade school its called grading on a curve (relative to the other students in the class)
another question is:
do you make realtime calls in the trading room for traders there to decide whether to take?
-------
heard good things about this software package from some traders and others, and would appreciate some sincere answers
Moving Indicators
All the Trademaven indicators are real time and, as such, can come and go as a bar is being formed.. The S or B can move from bar to bar, as can the triangle, as the next bar is being formed. The most important indicator, though, is the deceleration square.
The decel square can come and go as a bar is being formed, but once the bar is closed, the square is fixed. And of course, the mode and the closing price are fixed at the close of the bar as well.
Charles Cochran's commentary usually takes place at the top of the hour and lasts from 10 to 30 minutes. The potential for developing trades is discussed at that time.
The only real way to answer your questions is for you to see for yourself. Just click on the free trial button on the TradeMaven banner ad and you'll get 10 days in the Trading Room.
All the Trademaven indicators are real time and, as such, can come and go as a bar is being formed.. The S or B can move from bar to bar, as can the triangle, as the next bar is being formed. The most important indicator, though, is the deceleration square.
The decel square can come and go as a bar is being formed, but once the bar is closed, the square is fixed. And of course, the mode and the closing price are fixed at the close of the bar as well.
Charles Cochran's commentary usually takes place at the top of the hour and lasts from 10 to 30 minutes. The potential for developing trades is discussed at that time.
The only real way to answer your questions is for you to see for yourself. Just click on the free trial button on the TradeMaven banner ad and you'll get 10 days in the Trading Room.
Friday 6/13 Comments and Early Set-Up for Monday, 6/16
F2 Comments: A lot of bad news was built into Bond prices as the market awaited the release of the CPI figures. The numbers were close enough that the Bond rallied off of the release. This EOW buying and day trade longs took the market to 112-21 before the sellers had their way. The selling was present into the close, which was weak. The market is pointed lower and we continue to want sell into strength to see if the current low can be broken. Little in the way of news Monday to impact the trading. Tuesdayâs PPI news is another matter. The aggressive sell zone is 112-07/11. Back up sell is 112-29/23. If the selling doesnât get going quickly Monday morning, OK to trade from the long side of the market. Key should be which side of 112-08 the market builds volume.
F2 Comments: A lot of bad news was built into Bond prices as the market awaited the release of the CPI figures. The numbers were close enough that the Bond rallied off of the release. This EOW buying and day trade longs took the market to 112-21 before the sellers had their way. The selling was present into the close, which was weak. The market is pointed lower and we continue to want sell into strength to see if the current low can be broken. Little in the way of news Monday to impact the trading. Tuesdayâs PPI news is another matter. The aggressive sell zone is 112-07/11. Back up sell is 112-29/23. If the selling doesnât get going quickly Monday morning, OK to trade from the long side of the market. Key should be which side of 112-08 the market builds volume.
First Morning Trade 6/16
Here is a quick follow-up to the trade recommendation Charles Cochran posted on Friday after the market close.
The recommended sell zone was 112.07/11. The area marked on the attached chart has a high of 112.115 and a low of 112.04. The 112.04 was hit just before the release of the Empire State Mfg. number at 8:30EST.
If your business plan is 4 to 6 ticks, you've either achieved it or are well on your way this Monday morning.
Here is a quick follow-up to the trade recommendation Charles Cochran posted on Friday after the market close.
The recommended sell zone was 112.07/11. The area marked on the attached chart has a high of 112.115 and a low of 112.04. The 112.04 was hit just before the release of the Empire State Mfg. number at 8:30EST.
If your business plan is 4 to 6 ticks, you've either achieved it or are well on your way this Monday morning.
6/16/08 Second Morning Trade
After the release of the Empire State Mfg. number volume spiked up at 9:05EST to 112.17. This was 2/32nds shy of our second sell level, but look at the bar where the spike occurred. The close was 1 tick off the low. And look at the volume histogram under the chart. You can see that traders have already started to pull their longs.
Shorting out the low of that bar puts you in at 112.12. The market hit a low of 112.035. Now you've made your business plan for the day, assuming you plan was somewhere from 4 to 10/32nds.
This is probably as close as I can get to reporting trades in real time.
After the release of the Empire State Mfg. number volume spiked up at 9:05EST to 112.17. This was 2/32nds shy of our second sell level, but look at the bar where the spike occurred. The close was 1 tick off the low. And look at the volume histogram under the chart. You can see that traders have already started to pull their longs.
Shorting out the low of that bar puts you in at 112.12. The market hit a low of 112.035. Now you've made your business plan for the day, assuming you plan was somewhere from 4 to 10/32nds.
This is probably as close as I can get to reporting trades in real time.
6/17 News Day Trade
Here is another example of a news day trade. The market rallied after the PPI release this morning and pulled back 11/32nds. Remember, we like to see a 8 to 12/32nd pullback, but you can only count on 6/32nds.
You can see in the histogram that the shorts are beginning to cover and the 2500v bars themselves are getting short and squatty. When the 9:06 bar closes 1 tick off the high, it's time to go long. What you now want to see is the high taken out.
The high is not taken out, we get a deceleration square (which means that buying is drying up), an S sell indicator, and a rotational arrow, it's time to go short. You can see how the pullbacks worked all the way down.
I achieved my business plan before 9:30EST today.
Here is another example of a news day trade. The market rallied after the PPI release this morning and pulled back 11/32nds. Remember, we like to see a 8 to 12/32nd pullback, but you can only count on 6/32nds.
You can see in the histogram that the shorts are beginning to cover and the 2500v bars themselves are getting short and squatty. When the 9:06 bar closes 1 tick off the high, it's time to go long. What you now want to see is the high taken out.
The high is not taken out, we get a deceleration square (which means that buying is drying up), an S sell indicator, and a rotational arrow, it's time to go short. You can see how the pullbacks worked all the way down.
I achieved my business plan before 9:30EST today.