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The 3-2-1 Approach: A Simplified Method for Trading Any Market
- Thread starter bthomas
- Start date
Quote from forestfire:
"want to buy the ZB and see if 116-04/12 can be taken out"
Get a bigger resistance area -why don't you call it 116-04/117-12 just to make sure that you are right?
8 full tics in the 30 Year Bond Futures market equates to 2 Basis Pts. in the cash market. Theses ranges are considered reasonable "areas of interest"
Thanks,
July 1 Early Morning Call
Here is Charles cochran's early morning call for trading on 7/1/08.
[6:43] Charles Cochran: The ES is getting slammed OVN by the usual culprits- crude oil, bank woes, economic slowdown in the UK, manufacturing slowing. The recession articles are taking front row again this morning. The Fedâs argument that economic slowdown will dampen inflation lives for another day. With the selling in the ES the ZB has recovered hitting 116-075 in the OVN session. The market must continue to rally to hold the longs in their positions. Our aggressive buy zone was doable OVN. Best support this morning should be 115-24/28. The buy zone has moved up to 115-25/29. Perhaps some light short covering in the ES will take the ZB a bit lower. Failure to take out 116-08 will send us to the side lines. IF retested the 2nd time and holds, we will look to the short side of the market.
[6:42] Charles Cochran: ZB R1-3: 116-08/12, 116-20 and 116-28. S1-3: 116-00, 115-24/28 and 115-16/20.
[6:41] Charles Cochran: ES R1-3: 1270, 1276/78 and 1280/81. S1-3: 1265/66, 1260 and 1250/55.
Here is Charles cochran's early morning call for trading on 7/1/08.
[6:43] Charles Cochran: The ES is getting slammed OVN by the usual culprits- crude oil, bank woes, economic slowdown in the UK, manufacturing slowing. The recession articles are taking front row again this morning. The Fedâs argument that economic slowdown will dampen inflation lives for another day. With the selling in the ES the ZB has recovered hitting 116-075 in the OVN session. The market must continue to rally to hold the longs in their positions. Our aggressive buy zone was doable OVN. Best support this morning should be 115-24/28. The buy zone has moved up to 115-25/29. Perhaps some light short covering in the ES will take the ZB a bit lower. Failure to take out 116-08 will send us to the side lines. IF retested the 2nd time and holds, we will look to the short side of the market.
[6:42] Charles Cochran: ZB R1-3: 116-08/12, 116-20 and 116-28. S1-3: 116-00, 115-24/28 and 115-16/20.
[6:41] Charles Cochran: ES R1-3: 1270, 1276/78 and 1280/81. S1-3: 1265/66, 1260 and 1250/55.
Trading The News Revisited
As I have previously pointed out writing for this thread, one could make a reasonable living just trading single headline news events. Attached is the ZB chart showing the market's reaction to today's CPI news.
The 3 trades noted would have allowed you to achieve your daily business plan, and then some.
As I have previously pointed out writing for this thread, one could make a reasonable living just trading single headline news events. Attached is the ZB chart showing the market's reaction to today's CPI news.
The 3 trades noted would have allowed you to achieve your daily business plan, and then some.
Attachments
Another News Day Trade
Get used to it. I'll be posting these with regularity. Why? Because it's a consistent way to make your business plan.
After the ADP Employment Report was released at 8:15 the Bond market moved up on a job loss number of -79,000. Remember, our ideal retracement is 8 to 12 32nds. We then look for a continuation of the newly established trend.
The market then traded up 10/32nds to 116.03. If your business plan was 4 to 6 ticks trading multiple lots, it was easily achieved and you were done for the day by 10:30 EST.
There will be another big news trade on Thursday with the release of the Non-Farm Payroll report.
Get used to it. I'll be posting these with regularity. Why? Because it's a consistent way to make your business plan.
After the ADP Employment Report was released at 8:15 the Bond market moved up on a job loss number of -79,000. Remember, our ideal retracement is 8 to 12 32nds. We then look for a continuation of the newly established trend.
The market then traded up 10/32nds to 116.03. If your business plan was 4 to 6 ticks trading multiple lots, it was easily achieved and you were done for the day by 10:30 EST.
There will be another big news trade on Thursday with the release of the Non-Farm Payroll report.
Attachments
Trading the NFP News
The Non-Farm Payroll number is always big news for the Bond.
On 7/3, the market moves down after the release of the number and pulls back at 8:37EST. This is a 2500v chart.
We would like to see 8 to 12 ticks on the retracement. Here we get 7 1/2 32nds. The deceleration square, our 1 indicator in the 3-2-1 strategy, appears and the next bar sports a rotational triangle and an S (denoting a lower high).
Taking the trade out the bottom of that bar gives you at least 15/32nds for you to take 4 to 6 32nds and make your business plan. Have a great July 4th.
The Non-Farm Payroll number is always big news for the Bond.
On 7/3, the market moves down after the release of the number and pulls back at 8:37EST. This is a 2500v chart.
We would like to see 8 to 12 ticks on the retracement. Here we get 7 1/2 32nds. The deceleration square, our 1 indicator in the 3-2-1 strategy, appears and the next bar sports a rotational triangle and an S (denoting a lower high).
Taking the trade out the bottom of that bar gives you at least 15/32nds for you to take 4 to 6 32nds and make your business plan. Have a great July 4th.
Attachments
Volume - Price Divergence
Monday, July 7th, looked to be a slow day. No news announcements were planned. It's the summer. France is on vacation.
Your best trading will always be early in a situation like this. Anyone who needs or wants to trade will be present at the open, but not necessarily much longer. So look for your opportunities early.
On the attached chart, you will see two excellent set-ups involving a test of the high and a test of the low, both on high volume. On the F3 chart, the width of the bar is reflective of the total volume traded on that bar.
The test of the high happened at 9:05 EST. Note in the histogram under the chart that selling was increasing while the high was being tested. A deceleration square was present, as was a rotational arrow.
The bar that occurred immediately after the test of the high is a "balance bar." A balance bar has the mode (the price where the most volume was traded) exactly in the middle of the bar. Usually, the direction price trades in the preceeding bar will be the short term direction of the market. Notice also that all the action is happening at the R1 level.
There were 13 1/2 32nds available to you. More than enough to make your 4 tick a day business plan.
At the test of the low, volume is actually decreasing. The balance bar occurs two bars later. All the action is happening at the S1 level this time. 5/32nds could have been had.
Set-ups like this occur on almost a daily basis, and are very clear on the F3 chart.
Monday, July 7th, looked to be a slow day. No news announcements were planned. It's the summer. France is on vacation.
Your best trading will always be early in a situation like this. Anyone who needs or wants to trade will be present at the open, but not necessarily much longer. So look for your opportunities early.
On the attached chart, you will see two excellent set-ups involving a test of the high and a test of the low, both on high volume. On the F3 chart, the width of the bar is reflective of the total volume traded on that bar.
The test of the high happened at 9:05 EST. Note in the histogram under the chart that selling was increasing while the high was being tested. A deceleration square was present, as was a rotational arrow.
The bar that occurred immediately after the test of the high is a "balance bar." A balance bar has the mode (the price where the most volume was traded) exactly in the middle of the bar. Usually, the direction price trades in the preceeding bar will be the short term direction of the market. Notice also that all the action is happening at the R1 level.
There were 13 1/2 32nds available to you. More than enough to make your 4 tick a day business plan.
At the test of the low, volume is actually decreasing. The balance bar occurs two bars later. All the action is happening at the S1 level this time. 5/32nds could have been had.
Set-ups like this occur on almost a daily basis, and are very clear on the F3 chart.
Attachments
Guidelines For Trading Volume Exhaustion
When a volume spike occurs, should you fade it or take a "go with" trade. Your first clue will be the bar immediately following the volume spike bar. You can recognize the spike bar by it's width - it is much wider than the bars that surround it.
The 8:20 EST bar in the attached chart shows a spike at the open. The next bar traded slightly lower. This indicates, but does not guarantee, that there will be continuation lower.
The next spike occurs at 8:40 EST. In this case, the next 6 bars (30 minutes) traded within the range of the 8:40 spike bar. This activity indicates, but does not guarantee, consolidation or an eventual retracement.
The 9:30 EST bar is similar in nature to the 8:40 bar, only in this instance there is eventual continuation.
So how do you know which way to take the trade. The general guideline is to take the trade in the direction price trades out of the box. I've drawn the boxes on the attached chart.
As you might suspect, the first trade of the day worked for 6 ticks allowing you to make your 4 to 6 tick business plan. As a general rule, trading early in the day during the summer months will give you the best opportunity to make your plan.
When a volume spike occurs, should you fade it or take a "go with" trade. Your first clue will be the bar immediately following the volume spike bar. You can recognize the spike bar by it's width - it is much wider than the bars that surround it.
The 8:20 EST bar in the attached chart shows a spike at the open. The next bar traded slightly lower. This indicates, but does not guarantee, that there will be continuation lower.
The next spike occurs at 8:40 EST. In this case, the next 6 bars (30 minutes) traded within the range of the 8:40 spike bar. This activity indicates, but does not guarantee, consolidation or an eventual retracement.
The 9:30 EST bar is similar in nature to the 8:40 bar, only in this instance there is eventual continuation.
So how do you know which way to take the trade. The general guideline is to take the trade in the direction price trades out of the box. I've drawn the boxes on the attached chart.
As you might suspect, the first trade of the day worked for 6 ticks allowing you to make your 4 to 6 tick business plan. As a general rule, trading early in the day during the summer months will give you the best opportunity to make your plan.
Attachments
Volume Exhaustion Follow-Up
The arrow on the attached chart denotes a volume exhaustion bar that occurred at 8:20 on Wednesday 7/9. As described in the previous post, price trading higher on the very next bar suggests, but does not guarantee, continuation.
This trade would have retraced 2 1/2 32nds from the 116.20 entry, but allowed you to make your 4 to 6 tick business plan easily.
The arrow on the attached chart denotes a volume exhaustion bar that occurred at 8:20 on Wednesday 7/9. As described in the previous post, price trading higher on the very next bar suggests, but does not guarantee, continuation.
This trade would have retraced 2 1/2 32nds from the 116.20 entry, but allowed you to make your 4 to 6 tick business plan easily.