A Traders daily plan 13

October 30, 2017

in the last segment of this educational series we spoke of qualifying high probability day conditions in a pre market scan and than started introducing high probability entry points for each of these conditions

1.) Scan: evaluate weekly or daily trend - are we long/sideways/short
2.) Scan: evaluate pre market to determine a high probability of a daily condition:

a.   Trend day (TD)
b.   directional
c.   sideways directional
d.   sideways
e.   sideways counter directional

for condition "c" , which we had in the index markets for a good 4 weeks we identified a simple
 entry pattern which is fading an extreme in the direction of the trend
post "A Traders daily plan 11" gives detailed information about this entry methodology

today we will be talking about another easy to identify and high probability pattern that is a frequent setup for condition"c" day configuration

one quick note prior since I often got asked as to why I am stating (like in the last post) that we need as traders a system all market variants:

the market comes in waves: it trades sideways up,steep up,sideways,down,steep down and sideways again and in addition has other formations as well like smaller and wider rangers,leading and lagging behavior,news and six sigma events,chop,various volume and time distributions throughout the day asf which means it has  an extreme high variability

Now if you are an expert in one or two of these configurations and the market throws at you 3 or 4 months or even longer a cycle where your expertise isn't represented in opportunities your perception changes meaning it will be extremely hard sitting through this length of time with the discipline not executing at all and it is much more likely to get tempted executing sub par setups

with a skill set of a variability of tools to exploit opportunities within the market according to its variability the likelihood of such mistakes is drastically reduced

so it is of advantage to at least have for all the major elem,nts the amrekt represents itself have tools for participation

now some examples for the "V" formation

a "V" is literally a visual V from the alphabet where prices decline at first but the price retracement is between 80 to 100 percent shortly after
markets consensus has sharply changed
while originally there was a strong bearish consensus now just a brief while later the bulls are in control

the msot important rule about a "V" is to never short it
(it feels intuitively that one would want to try a short but simply refrain from doing so)

one way to exploit it as a setup is that most often after a "V" there is a pause which can be extended in time
than a small retracement which timed with other filters is an ideal entry point for a continuation to the long side and a much more low risk entry point than a breakout strategy at new highs

here an example of the S&P500 futures index market
we are selling off at the open and retrace all the way back by 11:50eastern to previous highs of the day
trade sideways for 90 min
followed by a small retracement and the green arrow marks the spot for a low risk entry point for a continuation long entry

(charts courtesy of TradeStation)

 this is the same chart just on a 15 min chart to visualize the "V" even more clearly

another example of the recent market
similar scenario of ES trading lower on the open but prices finding themselves near the highs of the day by 11:00 eastern time
followed by a tight range sideways trading for more than an hour
a small retracement
and the green arrow markets the spot again for a low risk continuation entry to the long side

this again is the same day just represented in a timeframe higher 915 min) to illustrate where the "V" pattern has its name from

same rules count for the "inverse V" when this pattern is being traded from the short side
and again the most important rule about this formation
is to not fade it
(most often it is important in trading to know what "not do do" even more importantly than "what to do")


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