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Strategies & Market Trends : Systems, Strategies and Resources for Trading Futures -- Ignore unavailable to you. Want to Upgrade?

To: Matthew L. Jones who wrote (39825)	11/3/1999 10:13:00 AM
From: Robert Graham	Respond to of 44573

Whether you trade single or multiple contracts, IMO what is important is being aware of when to make decisions during the execution of a trade. Multiple targets do help provide this framework for this evaluation of a trade in progress. For that matter, I do not see how risk can be managed any other way with the SPOOs if it were not for the flexibility offered in money management by a multiple contract trade. The market changes from day to day, even from the morning session to the afternoon session. Price action can make not possible what I consider a more regular move to the setup's second price objective. The trader needs to be flexible in this changing environment and alter their approach to trading accordingly. This is done be changing how the trade is managed when the market or particular trade ends up providing a different risk profile. I personally am out to make base hits. But multiple contracts allow me to be in there also for the multiple base hit and the infrequent home run. It is these extended moves that make the market very profitable and worthwhile in risking capital. Base hits are there just to pay the bills. Any profit more than this is icing on the cake. Do not let your system deceive you in how orderly profits can be taken from the market. I simply do not see how anyone can have long term success in the markets without emphasis being placed on a flexible money management approach to the markets that needs to be used to manage the changing risk of trades in the market. This is also the reason why a mechanical system simply will not work. And also why the flexibility offered by multiple contracts is not a choice, but a necessity. JMO. Bob Graham

To: Matthew L. Jones who wrote (39825)	11/3/1999 12:22:00 PM
From: Robert Graham	Read Replies (1) \| Respond to of 44573

With regards to a previous post of yours on the types of resistance traders use for stop placement, entry and exit, I have a few thoughts on this topic that I want to share with you. I am still developing my approach to resistance, but my current thinking on this topic has proven to be very useful in my trades. By the way, I am referring to both support and resistance when I say "resistance" because both provide resistance to price movement. Intraday resistance comes basically in two types. One type is temporary and basically only lasts within the current leg of price action. A leg I consider to be made up of minor swing points that move the price in a particular direction which is terminated by more significant major swing points. The other type has more permanence which can last through a good part of the day, and also is stronger. I find some of the strongest resistance offered by swing points, H&Ls, properly formed tops and bottoms, and spikes. Not all swing points are the same. The major swing points are strong along with the minor swing points that have been validated nearby to where the resistance was put in, like in the same leg, prove to be the resistance that is most likely to have some permanence in the intraday time frame. Also key MAs that are operative can function in this way too. In other words, it is important for price trading in congestion to have been responsive to the key MA during that day's trading, and price action has not given the trader no reason to suspect differently on an upcoming test of the MA. I choose resistance that have been recently validated in relation to where I intend to place stops. This means that in the same leg there has been a successful test. Also I may take more temporary resistance put in place in the same leg. But these need to be tested in the form of a test of top (TOT) or test of bottom (TOB), and preferably validated on the same side of current price action. If the temporary resistance coincides with resistance that has been periodically tested in the past on the same chart, this is even better. Tests of resistance can happen in basically two forms. One is a test where price swings to and moves back from the resistance. This is what I call a simple test of resistance (TOR). The more pronounced this is along with a thrusting action following the test, the more valid the test is to me. If this test forms a piercing line (PL), this is better and preferred. Another type of test involves a break of resistance in the form of an elongated bar. But for this test to be worthwhile in being used as a resistance, I look to see if there is a touchback of the resistance before price continues following though from its break in what I call a test of a breakout (TOBr). This type of test can be just as significant as a test of resistance with a piercing line. After the test of resistance, there needs to be at least good directional movement for a reasonable price range for the given market, or more preferably thrusting action . Choosing stop placement for entries needs to be considered separately. Even though it can have much in common with what I have outlined above, there are important differences. There is potential profit considerations where the price target would be too close to the present price action which makes the potential profit to risk profile for the trade not worth taking. Also on some types of congestions that are forming up well-enough, I can follow the price action using some variation of the Dunningnan count method. This is my preferred entry which deals with congestions that will reflect off of resistance. For congestions that involve a play on a breakout, a different approach must be used that gets me into the trade before the actual breakout. This can be tricky and relies much more heavily on waiting for price action to signal not only the position but the time for stop placement. I can say much more, for there are many forms of resistance. For instance, there is resistance put in by gaps, intraday gaps, intraday "perfect" laps, long price bars, three bar resistance, and matching congestions. Fib lines and I suspect even Gann lines can be included here if properly used. Also there are additional considerations which can include the current price action around the resistance, and the type of price action in the current market. This at least gives you some information regarding my analysis of resistance which is really more art than science. I hope this helps. Comments are welcome, as always. Bob Graham