The Daily Market Forecast... reversals or breakouts?

Tuesday’s Blog Results: The suggested long entry at 4633.25 ran for 18.75 points. The short never triggered.

Today’s Trading Tip: Reversals or breakouts?       

Both. The high-volume price levels formed by the accumulation and distribution of large positions are simply at “fair value.” Think about it this way: there was a buyer and seller for every contract traded. This means they AGREED the price was fair.

Once price strays OUT of the fair value level it becomes attractive to a trader who is either bullish or bearish. This allows you to trade both reversals and breakouts around the volume levels. Looking at the chart above you’ll see that price went up and through the prior day’s fair value level offering you the opportunity to buy the breakout, as was suggested.

Keep in mind as you follow the performance of the Blog levels every day they are both reversal and breakout setups. If you want to see ALL the levels...

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The Daily Market Forecast... breakeven wins

Monday’s Blog Results: The suggested long entry only bounced for a 3.50-point scalp. The Team saw two more like that, all three trades breaking even.

Today’s Trading Tip: Breakeven is a win.              

Yesterday you read about alternative exit strategies and how in current market conditions our “rapid stop movement” is working best.

It’s a simple risk-averse ruleset designed for day traders only. Enter a minimum of 3 contracts. At profit target 1 move the stop on the remaining contracts to breakeven “for the trade.” This means you’ll be giving back that initial profit. At profit target 2 move the stop to breakeven for the remaining contracts. This means you’ve guaranteed a small winning trade. As the trade runs move the stop to pivots on the chart.

Downside: You’ll miss some big moves in your direction if price is choppy around your entry. You’ll have...

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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.


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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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