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

To: Robert Graham who wrote (1321)	6/29/1998 11:34:00 PM
From: Robert Graham	Read Replies (4) \| Respond to of 44573

[Text on the Day Trading of Futures] I hope I have not chased everyone away from this thread. ;) If this is inappropriate material for this thread, please let me know. I will continue with another series of excerpts from this book on day trading. The Open (cont) "While the open is normally one of the high-volume points of the day (the close is another significant high-volume area), you want to watch tick volume at this critical time. In particular, you want to watch whether the high volume occurs on rallies or declines. A market that rallies on high volume and pulls back on low volume is signifying a dynamically different trading situation than a market that declines on high-volume and struggles to rally on low volume. The key is the direction of prices on high volume. The rule is, the market wants to go in the direction of the high-volume move. This is double important on the open, because this is the time when the day's first trend is scheduled to appear. Accordingly, look for tick volume to soar when the price moves in one direction or another. That's the path of least resistance. "The other point you will encounter high volume is when reversal occurs. If the market opens, breaks lower, and quickly snaps back up off the bottom, chances are the move will be accompanied by high volume. this is the point where you get a lot of stops, a lot of traders are changing their minds, and a lot of new money is coming into the market, which is accurately reflected by a significant rise in the tick volume." The Morning Trade "Given the timing, chances are this first trade will prove to profitable or unprofitable almost immediately. In short, you will have a decision. As a general rule, the winners will take care of themselves, but the losers will require immediate attention. An immediate winner suggests the trade is correct - even if subsequent price actions eats into your profits. If you get profit taking after an early pop, this can be seen as an opportunity to add to a fundamentally sound position. THe key to success rests with the amount of time that the adversity persists. If the market comes back quickly - say, in 15 to 20 minutes - you probably have a winner. If, on the other hand, the market turns negative on your position - and stays negative - chances are you are on the wrong side. I try to keep myself honest in this situation by carefully monitoring key indicators - futures price, cash price, TICK, volume, Dow, etc. - in specific time intervals and comparing their respective directions. Thus,if I am long and a host of negatives have entered the market, I try to decide if this is a temporary setback on an overall higher day or whether the trend is changing. I want higher readings, designated by an UP, as opposed to a DOWN as a lower reading would suggest. Then I assign a fixed amount of time that I'm willing to wait for an improvement, This might be five or ten minutes or some interval between. But I am rarely willing to wait more than twenty minutes, because this suggests my initial position was way off in terms of timing. Remember, we are talking about shortly after the open here, not the noon time when the market may churn sideways for an hour or more. I want confirmation when I am adding to a position - and I want it soon." Bob Graham

To: Robert Graham who wrote (1321)	6/30/1998 7:52:00 AM
From: Patrick Slevin	Respond to of 44573

That's a lot to comment on. I don't mean the fact that there are several paragraphs just that each point could be expounded on a great deal. I imagine I should have put this on a Word document first so I could double check it for "drifting" too much, but I'm going to give it a shot shooting from the hip anyway. First of all, there are many excellent books on Day Trading; what book(s) work for one won't necessarily work for the next. <The author breaks up the day trade into the morning and afternoon trade.> This is not unusual. Someone who senses s/he has a good handle on the action might enter during the middle brackets but more often than not it's a period of less activity and has the potential to be a bit manipulated it appears. "Brackets" are broken down into 45 minute periods, starting with the first bracket @ 9:30 ET and ending with the ninth @ 3:30. <How you play the open, or at the very least, what conclusions you draw from the initial open activity will determine the success of your trading day. The open is a time of extreme liquidity with an abundance of buyers and sellers all jostling for the competitive edge. It is a time when prices get taken "out of line", offering some of the best trading opportunities of the day. Significantly, it is frequently a time when the high or low is registered.> It's often true that the high/low cuts in the first bracket or the last two. One fast technique is to fade the open in the case of a gap but sometimes it's wise to step aside. I think yesterday was an example of a time to either step aside or buy the gap up. I bought the gap and it re-traced only a point before moving much higher in the early brackets. Making a trade on such an open requires close attention to action with a mental or physical stop pre-determined before entry. Actually, you will be profitable over the long haul if you always have a pre-determined stop loss and stick to it. <you must do your homework in advance if you are going to turn the morning spurt in prices to your advantage.> You should always have a plan and a contingency plan prior to the open. Occasionally experienced day traders can pick up on unexpected action and make profits off it, but the most consistent money comes as the result of a disciplined, well thought out plan pieced together ahead of time. You don't want to be making snap judgments in the middle of battle. A lot of times I get a P-Mail asking how I make decisions on exits so quickly. I don't think I do; I have a routine and I usually stick to it. When I don't follow the routine, it's because I have a backup routine. So in either case if certain things start to happen I exit. The routine I use is predicated on the type of entry trade I made and I know which exit strategy I'm going to use ahead of time. I may make an entry based on momentum and use one exit strategy or I may make a trade based on intraday trend and use another. <They know the interim high and low of the last moved that topped out> Sure. It's easier for the person at home or in the office because it stares at them on a screen. There are those that follow a Larry Williams strategy, for example. I think it goes something like this. "If the market opens below yesterday's low and rises to that low, buy that low", so it behooves you to know those points as action with often happen there. Particularly if the high or the low had a lot of trading near it on the prior day. If it did, breaking that point could see a spike as a result of a lot of covering. <the actual decision-making a virtual afterthought once the opening bell rings> Always desirable. "He who hesitates is lost". <there is times when waiting makes no sense. In markets that exhibit strong trends, buying or selling the open is often the best strategy.> Scary but true. Looking at historical intraday charts will prove that out. However, it does not mean you should do it much. Only if the plan you pieced together ahead of time is being played out. For example, you may decide to buy a gap down open but it gaps up. As the day goes on, it becomes obvious you should have bought the gap up. But that would be out of sync with the plan so....no trade.