It was cool in T's room this morning. Before and at the open she was speculating it would go up, and then she made a really clean trade. I can see these trades now, I mean, I know their rationale as they are happening. So there was a red down bar and you set buy stops on a down bar, and sell stops on an up bar, and there are more rules than that but anyway, so she set a buy stop 1 tick (.25) above the red down bar; the rationale there is if it's going to power up you set your buy stop ABOVE (or in the case of shorting, BELOW) the last bar; and it "powered" up, with enough thrust that she waited the full 2 points before she got out. She usually only takes 2 points and I often see her get out of a trade that isn't powering up even though eventually it goes in her direction, but she has these rules that over the long run earn $, and they are a kind of discipline. So I don't know if she was trading a full hand (10 contracts) or half size, but if it was full size then that was $1,000 in 10 minutes. Time to pack up and go to the beach, except she stays in the room to teach.
There are different rationales in different situations--its based on psychology. F or instance, if you were there in the morning and the previous days high was a possible point of congestion and you wanted to have a safe trade, let's say it had gone down a bit in the first minutes after th eopen, yhou might set a buy stop above yesterday's high. Because if it DOES get above yesterdays high, then it's going to breakout, as everyone will rush in at that point. You'll get carried on the tide and if you get out in 2 bars, that is to protect against being whipsawed.
Well there is lots more to it than that which I am absorbing by osmosis as I watch real time charts. I am nowhere near ready to trade this type of market (futures) but I am getting ready to think about paper trading via the Interactive Broker demo. |
