Quote from alpha_monkey:
There were incredible opportunities to make money in the stock indices today, particularly after the US opened up. Here's a bit of my thinking (albeit not necessarily the sharpest today.)
The recent tech-led rally seen in the cash points me towards picking the NASDAQ as a currently favoured Stateside indicator. Indifferent tech stock results out after the US market close yesterday (notably Intel) combined with the tiring technical picture led me to believe the States would sell off early on as investors factored the news in.
Sure enough it came off, not for long, perhaps on account of the data, & JP Morgan Banc One story. However, the opening price action that translated across to the European indices was golden. Perfect wee flags, AND at the end of the sell-off, one of my favourites, a double bottom reversal pattern after over extended price action. Useful, although perhaps in this case it wasn't 100% textbook in formation. For reference, on the DAX I'm taking the area around 4066 at 4.30pm as the line of resistance.
I even managed to trade my nemesis the FTSE reasonably well today! Result.
So, my thoughts and a rough translation into perceiving trading opportunity. I'm still curious to read about other people's approaches. Do you use one pattern exclusively, or a combination, is it all gut feel, how do you set targets, where do you see opportunity, what parameters do you use? There's certainly more than one way to skin a cat.
Hey alpha_monkey,
In a way you could say my style is "intuitive", but it isn't really. It's more like "intuitive fine-tuning after statistical verification based on arduous hand-testing on charts, numbercrunching in spreadsheets and realtime simulation & verification"...
So while I do actually have some quite refined systems and parameters (such as bar ranges, H/L rules, tick excursions etc), I do further fine-tune this with "intuition". Well, I actually don't believe in intuition, so let's just say "experience in interpreting the tape and correlating market action as a means of extensively improving mechanical approaches"... Are you still with me?
OK, here's what I look at (I only trade DAX):
EU Open:
- Charts: DAX 1, 5, 15m, ESTX50 5m, Line chart Overlay of DAX/$DAXI (to see future/cash spread)
- Market depth ladders of: DAX, ESTX50, GBL(BUND), CAC40
- Tapes of DAX, ESTX50, GBL
US Open:
- Charts: DAX 1,5, 15m, ESTX50 5m, Line chart overlay of ES/NQ/YM, ES 5m, NQ 5m, ES 15m, NQ 15m.
- Market depth ladders of: DAX, GBL, ES, NQ
- Tapes of DAX, GBL, ESTX50, ES, NQ
What do I look at when trading? Mainly 5-min bar ranges, I look at the average true ranges of bars and if their highs & lows are lower or higher than the previous bars'. If so, I will stay in that trend, and at the same time try to sell the top of each 5m range and buy the bottom of the same, basically taking the "noise" that makes the 5m trading range. I also look at the 60T chart and the 1m chart a lot, for finetuning the entries. So, clearly I do use a lot of limit orders, and am not exactly too hot for "lighning fast executions". I like to have my orders in place before price gets there, and I like price to come to me. I rarely chase the market. I also like to play range breakouts, and surprise "breaks", and quite a few different things. I try to deal in one way or another with whatever the market throws at me. I think the most important is to know the difference between range and trend, and identify it immediately. If you're playing ranges once the DAX is ranging - you can make huge points! DAX often has 5-10pt ranges, where it will just whizz up & down between highs and lows, this alone once a day or twice is enough to make a decent living.
I try to get at least 20-30% of the daily range and made a much higher percentage of daily range today. It was the best trading day I ever had in fact, in both net point and net $ terms... Very very decent!
I wish every day was like today. It sure was a gift to any trader!
How about yourself? How do you trade?
Cheers!
