ER2 Trading Strategy Question

[walterw]

Slab : I am also interested on your method... please tell us how it works, looks very nice ¡¡ cheers Walter.

[Soultrader]

	Quote:	walterw
	I like this thread ¡¡ it takes a great topic that I also have in common with Soul, I have a good statistical performance on the morning session... not that good on the afternoon.... Soul : I started doing this on the afternoon: Coil Breaks and believe me they work pretty good... it takes lots of patience... specially when you are used to trade on the morning energetic mood of the market, the tactic I use is taking the continuation of the break and not the break itself, because there are also a lot of false breaks... also I only pay attention to "big and long coils".... I attach concept.... cheers Walter.

Hi Walter,

Thank you for sharing this with us. I have a question. One of the things that I have trouble with is breakout plays during the lunch hours. I have seen way too many false breakouts that I have drifted away from this setup after the morning session. My question is this:

How do you bracket your range? Do you take the morning low and doldrum high as the range? At what time do you decide to take a breakout? In other words when does the doldrum end for you?

Do you always consider a continuation of this breakout as a move for the afternoon session? Thanks.

[Soultrader]

	Quote:	GCB
	James, To me this kind of trade is a chart pattern and price action recognition thing, coupled with the background of the market behavior and internals. Today the market really tried to go down. There were some serious sellers today. But for whatever reason (pc ratio, liquidity) it just didn't go down like it seemed it want to. The ER has been so bouyant lately. It seems to end the day near its highs a lot. Like I said, I should have known and I did. I just missed it. I had a chance to get in. Next time I will. The great thing about these reversals is that you can see them building up, so you have time to enter, and if you're bold and anticipatory you can get into them near the bottom of the preamble range and maybe even get your initial target before the breakout and then ride the breakout itself stress free. Either way, the great thing about them is that you can hit your initial target before you even know it. Reversals are becoming one of my favorite patterns to trade. I don't know how long ER will continue to act this way, but these afternoon run ups are becoming semi-regular events.

Hi GCB,

Thank you for the follow up. By rest of the market are you referring to the other emini futs or major cash indexes? Because the YM did a similar thing..... a fake out move down and then reversal back up.

A very good point indeed about the ER2 closing near its highs lately and the frequent afternoon rallies. This is something I need to keep in mind. Regarding the initial setup, would you bracket the range at the morning low? Where would you bracket the high of the range?

Thanks alot GCB.

[GCB]

	Quote:	Soultrader
	Hi GCB, Thank you for the follow up. By rest of the market are you referring to the other emini futs or major cash indexes? Because the YM did a similar thing..... a fake out move down and then reversal back up. A very good point indeed about the ER2 closing near its highs lately and the frequent afternoon rallies. This is something I need to keep in mind. Regarding the initial setup, would you bracket the range at the morning low? Where would you bracket the high of the range? Thanks alot GCB.

If you look at the charts, NQ, ES and YM broke out of the their lunchtime ranges to the downside, but the ER2 simply went to the bottom of its range. It didn't break lower. That indicated its greater relative strength as compared to the others. So when the others were exposed as fakeouts that was a strong indication that ER2 was NOT going to go down, which meant an upside breakout was likely.

As far as the ER2 range goes, I saw it a about 824.5 or so, but that doesn't mean I would trade a break of that, I would probably need a new low or break of the previous days's lo. As to the high of the range, it was to me about 827.

[walterw]

Soul : I dont use a pre-fixed level to bracket the coil , the coil forms when you have at least two equal highs and two equal lows forming a rectangle... there is no fixed time to consider getting in, when it breaks wich is a very strong event you start considering a posible trade after a pullback that will not re enter the coil.... maybe I can show more examples on a thread I did start on this... (gota trade now) cheers Walter.

[Soultrader]

Thanks walterw. Any chart work that can show the coil would help tremendously.

[walterw]

Soul this is a classsic coil break, they dont happen every day, but when you thought things where so sleepy and boring suddenly BUMM ¡¡ coil break ¡¡ you can notice the multiple retesting of this levels its what makes the bracket... the difference between false breaks and real ones is the velocity of the break... other key is that price once broke, doesnt get back in coil, it may test previous resitance (now support) but not break in again... that makes the pattern very powerfull... cheers Walter.

[Soultrader]

Excellent walter. Thank you for this. Playing the pullback of the breakout seems to be the key here. I learned the hard way today

[walterw]

It sounds like you took the break itself... ? :rolleyes:

[Soultrader]

Yea... I played a breakout on the YM today for the afternoon session which failed miserably. I ended up being the sucker who bought the high.