The Daily Market Forecast... your trading plan is alive

Friday’s Blog Results: The suggested long entry never triggered. The short did fill but too late to enter minutes before the close. Team Members had a tough day with Volume Profile but made most it back with Volatility Reversal. Diversification of trading strategies helps.

Today’s Trading Tip: Your trade plan is alive.  

In your trading plan you’ve established a set of rules that when followed, show a positive outcome. You have edge.

Most trade plans start simple. When to enter and exit. Which asset to trade. Which tools to use. How much to risk.

That’s a good start but the real meaty rules come from live trading experience. We can’t possibly consider all outcomes and influences in the beginning. We need to trade live, observe, document, and mine the data for new rules to improve. This means your trading plan is a living document. It should evolve.

Add to all that the fact that markets change character. This means you will eventually...

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The Daily Market Forecast... know the weather report

Thursday’s Blog Results: Price chopped sideways between volume levels with no trades triggering.

Today’s Trading Tip: Know the weather report.

The “weather” in this case is the condition of the market you’re trading.

Yesterday was slow for the S&P using Volume Profile. Other days there can be a dozen or more triggers. We can’t always predict the future, but we can frequently come close. Knowing whether the day will likely be wide or narrow range is very useful.

Here’s why: If you’re looking for a big move and the “forecast” is for a narrow day you’d be better off taking quicker profits. Conversely, if you’re in a trade that has room to run and the “forecast” is for a wide day you’ll have the confidence to let it run.

Here's two tools that will help you forecast the “weather:”

  1. Daily Average True Range (ATR) with a default lookback of 14 days. This is a simple measure of recent...
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The Daily Market Forecast... importance of balance

Wednesday’s Blog Results: Price chopped sideways in a 30-point range with no respect for the volume levels. Both the long and short suggestions stopped out. The Globex did shine once again for Team Members with a great 20-point short (see chart).

Today’s Trading Tip: Team trader or lone wolf?

Which is better? This is one of those worthless debates. Both have their advantages and disadvantages. It boils down to your decision on which has advantages that outweigh disadvantages.

Wall Street may disagree, but I would say do both. Put some balance in your trading life. Devote an hour or two a day to collaborating and trading live with smart and successful traders. It will enhance your knowledge, skills, and ultimate performance.

Here’s just one real world example: Several months ago, a member of our team suggested a trading strategy ruleset he recently learned. The logic sounded fine. We coded the rules and through a combination of back and forward testing found it had...

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The Daily Market Forecast... sleep trading

Tuesday’s Blog Results: A strong gap up had all the money earned during the Globex session (see chart). Price continued higher but the volume levels were congested. The Suggested short was only good for a 5-point scalp.  

Today’s Trading Tip: Sleep trading?  

One of the many great features in the Futures market is the Globex session. Most popular Futures contracts start trading at 6:00 PM ET. That’s 15.5 hours before the opening bell the next day.

The participants and trading are different than the day session. During the day the big volume traders are way more active causing price to jerk around more.

Here are some interesting Globex statistics based on profitability and gleaned from our database of nearly 10,000 trades using Volume Profile:

  1. The best times of day are all in the Globex session. 8:00 to 9:30 AM ET is best, 6:00 to 9:00 PM ET is a close second. Even day workers can day-trade now!
  2. During the first 30 minutes of the Globex session Breakout...
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The Daily Market Forecast... a better credit spread

Monday’s Blog Results: Price moved plenty, but the levels were wide apart. No trades were triggered for the Volume Profile. strategy. Team Members took up the slack trading oil, gold & S&P using Volatility Reversal and credit spreads on the SPXW using Volume Profile.

Today’s Trading Tip: Better credit spreads.

Same-day expiration credit spreads are extremely popular trades for income generation. As in all trading there are many ways to find edge.

If you’re not familiar with the trade here’s a brief explanation: You select a price level on the chart that you believe price will NOT touch today. For the Bear Call spread that level would be way above current price. For the Bull Put spread that level would be way below current price.

The trade is entered by selling a call/put for a credit and buying a protective call/put for a debit. You will net the difference. Your maximum risk on the trade is the difference between the strikes less what you were...

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The Daily Market Forecast... your "risk number"

Friday’s Blog Results: You CRUSHED it! While the suggested long level stopped out, the suggested short level ran a WHOPPING 81.75 points to the next level where Team Members could buy the 4494.25 level and catch the bounce of 42 points to the close.

Today’s Trading Tip: The danger of losing too little.

Proper risk management is critical to your success as a trader. There are many aspects to this topic and AFTER you read this blog you should watch a recording of a class I did a while back called 7 Top Risk Management Rules.

This blog is about a new rule I’m adding to the class.

A popular formula for determining your risk on any given trade is the Fixed Percentage rule. You pick a percentage, usually 2% or less, and that is the most you can risk per trade of your trading account. It works great because as you increase your account your risk can larger giving you the opportunity for greater reward. Conversely, if you’re in a drawdown you will be risking less.

In...

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The Daily Market Forecast... ART of exits

Thursday’s Blog Results: The high-volume price levels were far apart and neither were triggered. Team Members saw several opportunities trading our Volatility Reversal strategy which netted a modest winning day.

Today’s Trading Tip: The ART of exits.

The great debate among traders is whether to use “lagging” technical indicators or simply trade real-time price action. This debate is a waste of time. Dozens of different methods of trading can be profitable. If you doubt this statement you need to read any of Jack Schwager’s “Market Wizards” books.

In each book he interviews top traders from around the world. Dozens of them. What you’ll find is that almost every trader has a different take on how to trade. Some use technical indicators successfully. Others focus on algorithms. Still others use fundamentals and macroeconomics. Some are systems traders. Others are discretionary. The list of differences between them is long.

What they ALL...

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The Daily Market Forecast... entry edge.

Wednesday’s Blog Results: You did well! The suggested long level ran 18 points on the first touch and 18.25 on the second (see chart). Team Members saw the breakout afterward that ran for 24.25 points to the next volume level (see chart).

Today’s Trading Tip: Entry “edge.”  

The chart above has a few good trading tips. The strategy followed is called Volume Profile. Signals for entry both long and short, reversal and breakout, come from high volume price levels.

The entry rules are simple (follow on the chart):

  1. Reversal: Always enter at the first or “inside” line of the price level. Price reverses from within 1 point of that entry 31% of the time. If you’re waiting for a late entry to minimize risk you’re missing plenty of winning trades. Either accept the risk or lower your position size.
  2. Reversal: The second touch worked fine. Notice that price went deeper into the level. Second touches are fine but less effective. After a...
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The Daily Market Forecast... real good reversals

Tuesday’s Blog Results: You did well! The suggested long level ran 17.25 points to the next level. Team Members saw the breakdown just prior which also ran for 17.25 points (see chart).

Today’s Trading Tip: Real good reversals.

Yesterday was about finding your style. Trading trends and finding reversals were used as examples.

You might be thinking that trading the trend sounds safer than picking a turning point. Not necessarily. Your initial priority is making sure your rule set has “edge,” meaning over time it’s profitable. After you find that the idea of “safe” becomes irrelevant. Just trade the strategy that appeals to you psychologically.

Finding high quality reversals is easier than you may think. There are many clues on a price chart where the impulse will turn into a correction. Here’s one you should study to get comfortable with trading reversals. After all, confidence in your strategy is paramount and the smart way to get...

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The Daily Market Forecast... trend or reversal?

Monday’s Results: The suggested short level stopped for a loss of 4.75 (per contract). Team members saw a smooth breakout south at the open run for 25+ points (see chart).

Today’s Trading Tip: Find your style.

There are many winning strategies. You need to trade only those that resonate with your personality. Otherwise, your confidence and performance will wane.

Here’s an example comparing two very popular styles of trading. Trend Following versus Reversal Trading. Regardless of the tools/indicators you use to enter and exit your trades…

  1. Trend Following will generally result in many small losing trades and fewer larger winning trades. The net result might look like this: 30% winning trades of $500 and 70% losing trades of $100 = $80 per trade profit.
  2. Reversal Trading will likely result in more winning trades that are somewhat larger than the losing trades. The net result might look like this: 60% winning trades of $200 and 40% losing trades of $100 = $80...
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