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Soultrader
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Posts posted by Soultrader
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Alphabetical Order S - Z
Scalp General Floor Term
To trade for small gains. Scalping normally involves establishing and liquidating a position quickly, usually within the same day, hour or even just a few minutes.
Settlement Price General Floor Term
A figure determined by the closing range that is used to calculate gains and losses in futures market accounts. Settlement prices are used to determine gains, losses, margin calls, and invoice prices for deliveries. (see Closing Range)
Sizing Up
When locals check quantity on a paper bid or offer. Example: "XYZ Bank 50 offered at 500, 450 bid paper, locals SIZING UP the bid."
Short General Floor Term
The position of one who has sold a futures contract to establish a market position and who has not yet closed out this position through an offsetting purchase; the opposite of long.
Short Hedge General Floor Term
The sale of a futures contract in anticipation of a later cash market sale. Used to eliminate or lessen the possible decline in value of ownership of an approximately equal amount of the cash financial instrument or physical commodity. (see hedge, long hedge.)
Small
Small contract lot. Not a big order. (Usually less than 9 contracts) but this is relative remember. Usually a term that is heard in a quiet market.
Solly S&P 500 Term
Solomon Brothers. Generally smart money, they used to be the best.
Speculator General Floor Term
One who attempts to anticipate price changes and, through buying and selling futures contracts, aims to make profits; does not use the futures market in connection with the production, processing, marketing or handling of a product. The speculator has no interest in making or taking delivery.
Spot S&P 500 Term
The S&P cash index (commonly SPY or $SPY on most screens).
Spread General Floor Term
The simultaneous purchase and sale of futures contracts for the same commodity or instrument for delivery in different months, or in different but related markets. A spreader is not concerned with the direction in which the market moves, but only with the difference between the prices of each contract.
Spread, The S&P 500 Term
The following contract month minus the front month, E.g. march-dec.
Stop Order (Or Stop) General Floor Term
An order to buy or sell at the market when and if a specified price is reached.
Take S&P 500 Term
Buy, E.g. Locals buy the hundred at 60.
Thin S&P 500 Term
No action, no one really trading or showing any bids or offers. Very little paper.
Tick General Floor Term
Refers to a change in price, either up or down. (see Minimum Price Fluctuation)
Trend General Floor Term
The general direction of the market.
Volume General Floor Term
The number of transactions in a futures or options-on-futures contract made during a specified period of time.
"Watch the [bid/offer, or price]"
Bid or Offer
Our way of telling you that activities on the floor warrant your attention to one side of the market. Example "Watch your bid", the bid may be firming up or breaking down and the market could turn soon. A stock trader would equate this information to his or her Level 2 screen.
Webber S&P 500 Term
Paine Webber. They do a lot of asset allocation business: S&P's; Bonds.
Witter S&P 500 Term
Dean Witter.
Working S&P 500 Term
The Broker is trying to execute an order.
X'd Out ( Or Cancelled Out ) S&P 500 Term
When a trade is whistled no good and is stricken.
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Alphabetical Order O - R
On S&P 500 Term
Same as bid, E.g. 10 on 1: someone wants to pay 10 for 1 S&P.
On the Bid/Offer
XYZ House is ON THE BID"…"ABC Bank joins the bid." They have orders to buy on the Bid - usually limit orders. The inverse is true for the Offer.
Open Interest General Floor Term
Total number of futures or options-on-futures contracts that have not yet been offset or fulfilled by delivery. An indicator of the depth or liquidity of a market (the ability to buy or sell at or near a given price) and of the use of a market for risk- and/or asset-management.
Open Order General Floor Term
An order to a broker that is good until it is canceled or executed.
Opening Price (Or Range) General Floor Term
The range of prices at which the first bids and offers were made or first transactions were completed.
Opening, The General Floor Term
The period at the beginning of the trading session during which all transactions are considered made or first transactions were completed.
Option General Floor Term
A contract giving the holder the right, but not the obligation, hence, "option," to buy (call option) or sell (put option) a futures contract in a given commodity at a specified price at any time between now and the expiration of the option contract.
Out-Trades General Floor Term
A situation that results when there is some confusion or error on a trade. A difference in pricing, with both traders thinking they were buying, for example, is a reason why an out-trade may occur.
Paper S&P 500 Term
Pre-existing written orders held by brokers usually from retails or institutions, not locals.
Performance Bond General Floor Term
(Previously referred to as Margin) Funds that must be deposited as a performance bond by a customer with his or her broker, by a broker with a clearing member, or by a clearing member, with the Clearing House. The performance bond helps to ensure the financial integrity of brokers, clearing members and the Exchange as a whole.
Performance Bond Call General Floor Term
(previously referred to as Margin Call) A demand for additional funds because of adverse price movement.
Position General Floor Term
An interest in the market, either long or short, in the form of open contracts. (see Open Interest)
Premium General Floor Term
1.) The excess of one futures contract price over that of another, or over the cash market price. 2.) The amount agreed upon between the purchaser and seller for the purchase or sale of a futures option -- purchasers pay the premium and sellers (writers) receive the premium.
Premium S&P 500 Term
The futures price above the cash price.
Price Trades
Price trades and is printed.
Print
A price that is actually traded and sent out (printed) to real-time data feeds.
Program Traders S&P 500 Term
(Ranked in order of activity) Morgan Stanley, UBS Warburg, RBC Dominion, CS First Boston, Bear Sterns, Salomon Brothers, Lehman Bros, Merrill Lynch, and Susquehanna.
Pulls or Pulled
When an offer or bid quoted gets cancelled/withdrawn. Example: 20 offered at 500, 450 bid in ten, 500 offer PULLED.
Put General Floor Term
An option to sell a commodity, security, or futures contract at a specified price at any time between now and the expiration of the option contract.
Rally General Floor Term
An upward movement of prices following a decline; the opposite of a reaction.
Range General Floor Term
The high and low prices or high and low bids and offers, recorded during a specified time.
Reaction General Floor Term
A decline in prices following an advance. The opposite of rally.
Registered Representative General Floor Term
A person employed by, and soliciting business for, a commission house or Futures Commission Merchant.
Retail
Retail brokerage business usually from individual traders calling their brokers.
Roll-over S&P 500 Term
As the front month expires and the following month becomes the front month.
Round-Turn General Floor Term
Procedure by which a long or short position is offset by an opposite transaction or by accepting or making delivery of the actual financial instrument or physical commodity.
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Alphabetical Order F - O
Fading or Fades
When a local bid or offer disappears without trading at the price quoted. Example: "Locals 450 bid, XYZ Bank has offered 50 at 500, 450 bid FADES bid best."
Fair Value S&P 500 Term
The theoretical price of the S&P future should trade above the cash index.
Fast Cash S&P 500 Term
A cash index shown above the pit that indicates where the spot is headed.
Fillers S&P 500 Term
Same as Brokers.
Floor Broker General Floor Term
An exchange member who is paid a fee for executing orders for Clearing Members or their customers. A Floor Broker executing orders must be licensed by the CFTC.
Floor Trader General Floor Term
An exchange member who generally trades only for his/her own account or for an account controlled by him/her. Also referred to as a "local."
For S&P 500 Term
Same as bid, E.g. 20 for 20: they want to pay 20 for 20 S&P's.
Futures General Floor Term
A term used to designate all contracts covering the purchase and sale of financial instruments or physical commodities for future delivery on a commodity futures exchange.
Futures Commission Merchant or FCM General Floor Term
A firm or person engaged in soliciting or accepting and handling orders for the purchase or sale of futures contracts, subject to the rules of a futures exchange and, who, in connection with solicitation or acceptance of orders, accepts any money or securities to margin any resulting trades or contracts. The FCM must be licensed by the CFTC.
Half
Price is at the half-dollar level: 975.50 or 1332.50, for example.
Handle General Floor Term
In the S&P 500, a handle is one dollar unit or 100 points. For example, if the market is trading at 988.00 (or "8 even") if the market moves up to the next handle the S&P's would be trading at 989.00 (or "89 even"). With the markets moving so quickly it is important to listen for the "handle" if not in front of a quote screen.
Hedge General Floor Term
The purchase or sale of a futures contract as a temporary substitute for a cash market transaction to be made at a later date. Usually it involves opposite positions in the cash market and futures market at the same time. (see Long Hedge, Short Hedge)
Hit S&P 500 Term
To sell, E.g. Solly sells to the buyer.
Holder General Floor Term
One who purchases an option.
Initial Performance Bond General Floor Term
The funds required when a futures position (or a short options-on-futures position) is opened. (Previously referred to as Initial Margin)
Lift S&P 500 Term
Buy on an uptick so that the offer is now higher than it was before.
Light
Same as "Small"
Limit Order General Floor Term
An order given to a broker by a customer that specifies a price; the order can be executed only if the market reaches or betters that price.
Limit Price General Floor Term
(see Maximum Price Fluctuation)
Liquidation General Floor Term
Any transaction that offsets or closes out a long or short futures position.
Local Only or Local Market S&P 500 Term
There are no brokers working any paper. Locals are on both sides of the market.
Locals S&P 500 Term
Traders trading for their own accounts: similar to market makers (Nasdaq) or Specialists (NYSE/AMEX). (see Floor Trader)
Long General Floor Term
The position of one who has bought a futures or options-on-futures contract to establish a market position through an offsetting sale; the opposite of short.
Long Hedge General Floor Term
The purchase of a futures contract in anticipation of an actual purchase in the cash market. Used by processors or exporters as protection against and advance in the cash price. (see Hedge, Short Hedge)
M.I.T. General Floor Term
Market-If-Touched. A price order that automatically becomes a market order if the price is reached.
Maintenance Performance Bond General Floor Term
(Previously referred to a Maintenance Margin) A sum, usually smaller than--but part of--the initial performance bond, which must be maintained on deposit in the customer's account at all times. If a customer's equity in any futures position drops to, or under, the maintenance performance bond level, a "performance bond call" is issued for the amount of money required to restore the customer's equity in the account to the initial margin level.
Margin General Floor Term
(see Performance Bond)
Market Order General Floor Term
An order for immediate execution given to a broker to buy or sell at the best obtainable price.
Mark-To-Market General Floor Term
The daily adjustment of margin accounts to reflect profits and losses.
Maximum Price Fluctuation General Floor Term
The maximum amount the contract price can change, up or down, during one trading session, as stipulated by Exchange rules.
Minimum Price Fluctuation General Floor Term
Smallest increment of price movement possible in trading a given contract, often referred to as a "tick."
Morgan S&P 500 Term
Morgan Stanley.
Nearby General Floor Term
The nearest active trading month of a futures or options-on-futures contract. Also referred to as "lead month."
Not Held
Means the executing broker(s) have been given an order (generally of size) to execute using their discretion. Filling Brokers have a keen sense of the market, participant relationships, and what the market will bear given the current liquidity which can change at any moment. Therefore, the trader upstairs "hands over the wheel" to allow the Filling Broker to provide his or her added value to the intended transaction.
Offer General Floor Term
Also called "ask." Indicates a willingness to sell a futures contract at a given price. The price they want to sell, E.g. 100 offered at 20: they want to sell 20's. (see Ask) The current price you would pay if you bought at the market.
Offered
This means offered for sale. 100 Offered at 50 means 100 contracts offered for sale at, say 1445.50. If you hear a big offer, this means wants to sell a big number of contracts above the market.
Offset General Floor Term
Selling if one has bought, or buying if one has sold, a futures or options-on-futures contract.
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Many thanks goes out to Christine Grace for providing me with this glossary. Her website can be found here: www.bestrades.net
Terms used in the S&P trading pit. Listed in alphabetical order A - E
##Times
The number of times traders/institutions are bidding or offering. For example, …offered ten TIMES."
"20 up" S&P 500 Term
E.g. There are 20 contracts bid for and 20 contracts offered.
Arbitrage General Floor Term
The simultaneous purchase and sale of identical or equivalent financial instruments or commodity futures in order to benefit from a discrepancy in their price relationship.
Ask General Floor Term
One "asks" a price when he offers a contract for sale. Indicates a willingness to sell a futures contract at a given price.
At S&P 500 Term
Same as offer: e.g. 10 at 20 indicates that someone wants to sell 10 for 20 S&Ps.
Back Months General Floor Term
The months being traded for futures or options-on-futures that are furthest from expiration.
Barney S&P 500 Term
Smith Barney.
Bear General Floor Term
One who believes prices will move lower.
Bear Market General Floor Term
A market in which prices are declining.
Best
Highest Bid or lowest offer at that given time.
Bid General Floor Term
The price that the market participants are willing to pay. The current price you would get if you sold at market. This also means someone wants to buy contracts.
Bid S&P 500 Term
The price a buyer is willing to pay, E.g. 20 bid on a hundred: they want to pay 20.
Brokers S&P 500 Term
Order fillers executing for the public.
Bull General Floor Term
One who expects prices to rise.
Bull Market General Floor Term
A market in which prices are rising.
Buy On Close General Floor Term
To buy at the end of a trading session at a price within the closing range.
Buy On Opening General Floor Term
To buy at the beginning of a trading session at a price within the opening range.
Cabinet Trade (or "Cab") General Floor Term
A trade that allows options traders to liquidate deep out-of-the-money options by trading the option at a price equal to one-half tick.
Call General Floor Term
An option to buy a commodity, security or futures contract at a specified price anytime between now and the expiration date of the option contract.
Car
Carried from long ago, from grains at the CBOT, in which a "Car" was a contract that represented one railroad cargo car -- and still does. We say it instead of a "Contract", as slang, since its one syllable, and as the professionals know, is the preferred terminology on the trading floor. To recap: "XYC Co sells 100 Cars not held" means they just sold 100 Contracts with broker discretion to execute the order at the market.
Cash Commodity General Floor Term
The actual physical commodity as distinguished from a futures commodity.
CFTC General Floor Term
The Commodity Futures Trading Commission as created by the Commodity Futures Trading Commission Act of 1974. This government agency currently regulates the nation's commodity futures industry.
Choppy
No real trend. Market is erratic and usually controlled by locals.
Close The General Floor Term
The period at the end of the trading session. Sometimes used to refer to the closing range. (see Opening, The)
Closing Range (or Range) General Floor Term
The high and low prices, or bids and offers, recorded during the period designated as the official close. (see Settlement Price)
Commission (or Round Turn) General Floor Term
The one-time fee charged by a broker to a customer when a futures or options-on-futures position is liquidated either by offset or delivery.
Contract General Floor Term
Unit of trading for a financial or commodity future. Also, actual bilateral agreement between the parties (buyer and seller) of a futures or options-on-futures transaction as defined by an exchange. The terms of this type of contract include price, month...
Contract Month General Floor Term
The month in which futures contracts may be satisfied by making or accepting delivery. (see Delivery)
Day Order General Floor Term
An order that is placed for execution during only one trading session. If the order cannot be executed that day, it is automatically cancelled.
Day Trading General Floor Term
Refers to establishing and liquidating the same position or positions within one day's trading, thus ending the day with no established position in the market.
Deferred General Floor Term
Another term for "back months."
Delivery General Floor Term
The tender and receipt of an actual commodity or financial instrument, or cash in settlement of a futures contract.
Discount S&P 500 Term
The futures price below the cash price.
Even S&P 500 Term
Price is at an even dollar level: 975.00 or 1,332.00, for example. E.g. 989.00 a.k.a. "the buck".
Even up S&P 500 Term
There are as many contracts bid for as offered.
Exercise or Strike Price General Floor Term
The price at which the holder (buyer) may purchase or sell the underlying futures contract upon the exercise of an option.
Expiration Date General Floor Term
The last day that an option may be exercised into the underlying futures contract. Also, the last day of trading for a futures contract.
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Nooooo.
hehe.. I would have to agree with you Lisa. Trading based on news you see on TV is a bad idea. By the time news gets broadcasted you are two steps behind the professionals. You'll end up chasing the markets. CNBC is good to keep you updated. For trading... not a good idea.
I used to use Breifing.com. Now I trade with the TV off. Here's my little secret. If you plan on day trading use pit noise.
PM me... I'll send you a good link for a pit noise vendor. It might be confusing at first but ever since I started using pit noise I can never trade without it.
Here's a link to a complete list of terms used in the S&P pit.
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Thanks Lisa. I like to emphasis more on classic price patterns. I do recognize candlestick patterns but these patterns are not taught in trading books. They are patterns that I just recogniize from years of trading experience. I do not look for standard price patterns such triangles and flags. Instead I look at the bigger picture. For example, one particular pattern I see over and over again is a low, a higher low, then a 61.8% fib retracement from the swing low to the swing high. To me this pattern represents a low in place and will usually look for a long entry at or near the fib line.Most of my trading methodology involves pivot points and market profile. These are technical tools but different from technical indicators such as Moving Averages, ADX, RSI, MACD, etc... I do not like using lagging indicators. I like to base my trading on price action alone. I hope this clarifies things.
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I have absolutely no experience in the financial markets. I recently read an article from Stocks and Commodities about support and resistance. Can anyone explain to me what these two terms mean? Sorry if this is a newbie question. I would really like some help. Thanks in advance!There are different ways to identify support and resistance levels. Common methods are using moving averages such as the 200MA on a 5 minute chart. Other methods involve fibonacci work. I particulary use market profile, pivot points, and fibs to define my support and resistance levels. Also look for high volume areas. These can act as strong S&R points as well. My advice is to read, read, read. Equip yourself with market knowledge.
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Hello,I ran across this forum and had a chance to read some of the articles and view the trading videos posted here. I have to say they were very helpful. Im still debating if I should learn Forex or stick to the e-mini's.
I am looking for some trading advice that can help me get on the right path. I am currently testing out some indicators with the EMA, ADX, and Stochastics. They seem to work very nicely in hindsight. However, I noticed that J.Lee does not use any indicators. Is it possible to trade without any technical inidicators? If so, how would I look for trade signals?
Thank you,
Creso
Hello, and welcome to Traders Laboratory. Always happy to hear from a new trader seeking for advice. My advice for you right now is to stop whatever it is your studying. Unlearn and learn. If you become too indicator dependant you will never learn how to trade properly. On top of that you will waste time and money. From my personal experience I find indicators useless. Price action is king. Learn to trade price and not the indicator. That being said, I highly recommend you read books on tape reading, pivots, and market profile. I prefer to use methods not vastly used by the trading public. If you need some recommendations, check out the book review forum. I will be updating the forum hopefully on a daily basis.
Good luck on your journey
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Posted a good chart on market profile today. Markets traded within value but value placement is lower than Friday. This could be a warning signal.
Check this thread for charts:
http://www.traderslaboratory.com/forums/chart-laboratory/157-august-21st-2006-market-balance.html
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We had a balanced market the entire trading session. We traded in a rotation from the value high pivot to the value low pivot and back. Anytime the markets open in value, the VAH and VAL act as key resistance and support. Notice the unfilled gap we have left today. That level at 11415 will act as a key resistance for tomorrow.
The markets did rally into the close breaking above the value high pivot. However, I do not place significant importance because this occured in the last few minutes of trade. Although the markets did not break below value and remained balanced, the value area is lower compared to Friday. This can mean two things: either price wants to consolidate in this area or we are seeing a gradual market weakness. Becareful for any longs. We willl need to see Fridays high taken out before any significant rally.
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I was just browsing through some other forums and trading rooms and was quite surpised to see the lack of interest in the dow mini's. I specialize in the dow mini's strictly. And in my opnion they are probably the best place market for a new trader. The spread is $5 compared to $12.50 for the S&P emini's. Also the dow has some nice intraday moves, sometimes as much as 200 points. 200 points is equivalent to $1000 per contract. Of course you will most likely not catch the entire move but the dow mini is less prone to false breakouts compared to the S&P. I can not trade the S&P using a 1 point stop but can trade the dow using a 10 point stop. 1 point on the S&P is approx 10 points on the dow.
From my understanding alot of new traders will start with Forex. Perhaps because it is the most popular market. But one thing I recommend is to forget about the sex appeal of high-tech stocks or volatile Nasdaq stocks. Stick to markets that you are comfortable with. Talking to a bunch of Forex traders today made me feel like I was 90 years old trading the dow.
If you want to start with the dow, I'll be glad to help you out. We need more dow traders!!! -
In this thread I am going to take you through the different development stages of a new trader. Most of this comes from my own experience. Like any other profession, trading takes years of practice to reach the ultimate level. While doctors and lawyers have gone through higher education to obtain their license to practice, traders are required to obtain knowledge on their own. If you are in it for the quick buck, think again. The challenge is tough but the achievements are rewarding.
Stage One: The Clueless Trader
This is the first stage when you enter trading. You may have picked up a book on technical analysis somewhere, heard of a day trader making millions, or got lucky in an earlier stock investment. After all, how hard can it be? The money sounds appealing and the freedom to be independent sounds attractive.
I don't mean to shatter anybody's dream but those who succeed in trading are the minority! Approximately 90-95% traders lose money. This is the cold hard facts. In the first stage, every trader is optimistic. You open a direct access brokerage account and the sound of Level II, ask/bid, and market makers make trading sound like hi-tech video game. In reality you have no clue. You will buy just to see the market reverse and you will short just as the market starts to rally. Most of your trades are done emotionally. You buy just because the markets feel strong without any logical reason. You are in the unconscious incompetence stage. You have no clue how the mechanics and psychology of trading works. What's worse? You are not aware that you don't know. Most traders will blow their entire account at this stage.
Stage Two: The Rookie Trader
In this stage you have lost enough money to realize what you are doing is completely wrong. In other words, you start to realize that you don't know. You will then devour every trading book available. You will study and purchase Technical Analysis of Stock Trends by Edwards and Magee believing price patterns are the Holy Grail. You will memorize every technical pattern known to man. You will read about the ADX, moving averages, Fibonacci lines, pivot points, MACD, Bollinger Bands, channels, etc... You will go through the "help" tab on your data vendor to read about every single technical indicator available. You will plot them on your charts and spend hours looking for an indicator that works. You will be extra confident now because think you have found the magical technical indicator.
Yet, you still continue to lose money everyday. You realize that your indicators are lagging and that every other new trader is probably looking at the same thing. You realize that you are the sucker.
Stage Three: The Developing Trader
You start to realize the amount of work required and the immense learning curve that you must overcome to understand the markets. At this point, traders may find it overwhelming and quit. Stronger minded traders will push their motivation harder to start their second spurt for knowledge. Hunger and passion is needed to clear this stage. You will look for reference online, join mentor programs, chat rooms, and seminars. You realize the necessary elements needed to develop as a trader. You will ask a thousand questions and bug every professional trader you meet. You will read a thousand day trading articles. You will start paper trading, develop strategies and setups, and define risk parameters for every trade. You will go on a hunt for self-understanding to master your psychological game. You will visualize every possibility on a trade before you take it. This is the true learning phase. You are trying hard to develop your edge in trading.
Stage Four: The Determined Trader
This is the stage in which you learn to specialize in certain markets and trading methods. Without realizing it, you have finally found your style of trading after hours of hard work and research. You stick to your method and you improve it. You realize that you need an edge whether its tape reading or being a Fibonacci expert. The important thing is you are slowly transforming yourself into a specialized trader. You test your methods and they seem to work. You gain tremendous market knowledge. You reflect back on yourself and you can't help but laugh at your foolishness. Although you have not made enough money to call yourself successful you are proud of your journey and accomplishments. You realize that the Holy Grail is not about technical indicators or price patterns. You calculate risk before profits and place strict money management on all your trades. You cut losses short and learn to scale out on your winners. You start accept losing as a natural part of the game. You take high probability trades that you have tested and feel confident about your setups because you understand that trading is a game of probabilities. Your psychological makeup has changed from an amateur mindset to a professional one.
Step Five: The Consistent Trader
You rely on your trading method and start taking trades systematically. You try to aim for consistency and are meeting your daily goals often. You have reached the conscious competence stage. You are fully aware of your strengths and weaknesses as a trader. At times you feel euphoric and at times you feel pain. But you are able to understand your own psychological makeup to control your emotional swings. You are now able to trade for a living.
Step Six: The Expert Trader
In this final stage, you completely understand the markets you are trading. Being involved in it everyday you are aware of every key price level. You understand market concept and are able to predict the direction of the markets a fairly good amount of time. You pat yourself on your back and take profits as soon as you feel euphoric. You do this because you understand euphoria is the same as emotional trading. You talk to other traders and realize the development stage they are in. People start asking you for trading advice, you publish a book, and you have a specific trading methodology that represents you!
Taking trades come naturally and you are able to get in and out at the precise price levels based on tape. Instead of having the markets take your stop out, you exit when you know you are wrong. You keep your head high but remain humble on the inside. You have now officially graduated the school of the hard knocks.
Entering the trading profession can be a tough journey for many people. Trading is one of the toughest careers that you can choose. If you enjoy the challenge, you will definitely enjoy the feeling of accomplishment. Trading is 30% mechanical and 170% psychological. 200% is required to become a successful trader. Good luck and best of trading.
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One particular topic I have been thinking about recently is technical analysis. The markets never change because human behavior will never change. Anyone involved in the markets will know that we are not really trading the markets. We are trading other people. Thus human behavior reflects market behavior and we are able to exploit recurring price patterns to profit from. That is the core belief in technical analysis.
However, technical anaylsis and price patterns have mainly been studied and researched for daily charts. In intraday trading, do this patterns still remain valid? Classic price patterns such as the head-n-shoulder and triangles have become widely popular among the trading public. What was once an edge is no longer present. That is why false breakouts, pattern failures have become a popular trading strategy among professionals.
My biggest question is this: do technical analysis work when day trading the futures markets? From my personal experience specializing in the dow mini futures, the answer is no. Let me explain:
Classic head-n-shoulders patterns can stilll be traded successfully with a different set of guidelines. The only reason why they work is simply because price is unable to make a higher high than its previous peak. This indicates weakness and traders will usually short this pattern. Amatuers will usually short the break of the neckline. This is usually too late into the move. I have learned that trading soley on technical patterns is a sure way of losing. Many professionals are fully aware that amateurs love trading price patterns. Therefore, they have made tweaks in the rules and guidelines for trading these patterns. Pattern failure is fairly common in the dow futures.
Another favorite by the trading public is double bottoms and double tops. Amatuers love shorting new lows. In the dow futures market, the markets will usually trade 5-8 points below the previous low just to reverse and rally. The markets need to test new lows and highs to see if there is significant buying or selling pressure in these levels. When professionals realize that the only participants involved are small traders, they will usually reverse it in the oppposite direction.
Regardless of any pattern or technical indicator, price is king. Tape reading and volume analyis are pure information that can help you trade with an edge. In the futures markets, you need to be able to define key support and resistance levels. These are the high probability trade zones. There are different ways in finding these zones using, fibonacci cluster levels, pivot points, moving averages, etc.... You must find something that you feel comfortable trading with. I specialize in using pivot points, pivot point clusters, and market profile. Others prefer moving average cluster zones. I strongly believe trading off these key levels give you a higher probability trade than relying on technical price patterns.
I have had the opportunity to day trade with many professionals . I have yet to meet a trader who relies soley on technical price patterns. Of course we are all aware of the pattern. The only time I will trade a pattern is when it lines up with a key price level in my market analysis.
Do your homework and know your market. Hard work and preseverance is the key to trading success.
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After Mondays session and a clear rejection of price above 11400 (dow futures), my bias has changed from bull to consolidation. We can see a possible rotation back to the 10700 level. This level is key support on the daily charts and the lower extreme of our current range. (Late may - till present range)
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Traders use a variety of ways to control themselves from emtional trading. One simple method would be to take a 3 minute walk after every trade to clear up your mind. Other traders go towards the extreme and will measure their heartbeat to find if they are trading under the influence of adrenaline. If you have a certain method that you apply, please post them here. I am sure this topic will be of general interest.
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Is it common to see TICK's trade above zero during the entire trading session? I have been watching it closely the last few trading days and it seems to be the norm. Also, how do you judge whether the TICK will spend their time above zero or below zero prior to the trading day?Predicting the TICK's prior to the trading would be too magical. In fact, I will pay good money for a TICK forecasting tool.
The majority of the time, the TICK will spend time above and below zero fairly equally. Last week was definitely not the norm but the exception. We had higher value placement every single day of the week keeping the TICK's strong. In general, even on a downtrending day the TICK will rotate above and below the zero line. This is normal TICK behavior.One way to predict the TICK is by watching it in the morning session. If TICK's trade above zero over 90% of the time in the morning session, expect to see similar behavior in the afternoon session. Also, another method I use in prediciting the TICK is to bracket the highs and lows. Whenever there is a breakout of the TICK range, you can expect a shift in market sentiment. For example, let's say the TICK was trading between +600 and -600 for the last 2 hours. If the TICK makes a new high at +1000, there is a high probability of a shift in market sentiment. The TICK's may start to spend more time above zero. Hope this helps.
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The Dow Futures have broke critical resistance at 11400 after consolidating for 4 months. Are we likely to see further lift? Or will prices get rejected above this level? Post your opinions here!
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Pure trading wisdom. Jesse Livermore is a true legend in the trading business. This book was recommended by my trading buddy several years ago and I am very fortunate to have read this. Very rich in trading philosophy and good old wall street wisdom. Jesse Livermore's life is a wild roller coaster; losing and making fortunes. Core concepts discussed in this book are money management, crowd psychology, and market timing. It's a wonderful page turner especially for those who loved Reminiscence of a Stock Operator. Jesse Livermore till this day remains by number one trading hero. His market philosophy and trading strategies have had tremendous impact on my development as a trader. Jesse Livermore's strength lies in his ability to read the tape. In my opinion mastering tape reading skills can give you a tremendous edge in trading. Tape reading is pure information. This book is highly recommended for those who have a true passion in trading.
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It is estimated that 90-95% of all futures traders lose money in the markets. Most traders deplete their trading account within the first 6 months. Out of all who survive past the first 6 months, 50% of them will never make it beyond 12 months. Why are these stats so low? And why am I not surpised?
Let me explain: Most market participants enter the market without much knowledge of how the markets function. It is common to see successful lawyers, doctors, and businessmen enter the market just to lose their entire trading captial. As a trader I am in the business of risk. Without this in mind you are doomed to fail. Trading and investing are not primarily about picking hot stocks, using the greatest technical indicator, or following a trading system. The only holy grail to trading is strict self-discipline and money management.
Top reasons why traders fail:
1. Lack of market understanding
2. Being undercapitalized
3. Too much leverage
4. Not understanding trading mechanics: tools of the trade
5. Not having an edge
6. Lack of self-understanding: unaware of your own pyschological components
7. Lack of passion
Many trading/investment textbooks will tell you to seek out for low risk:high reward trades without telling you how. There is a reason why they are authors and not traders. Low risk:high reward do not always exist. But what I would like to explain in this thread is identifying high probabilitiy trades. Of course these setups can not be identified easily. A trader must gain tremendous market knowledge and insight to identify these high probability setups. The markets are an auction between sellers and buyers. The only factor that will cause a market to trend or consolidate is market balance and imbalance. It is a simple law of supply vs demand. Many traders will become too absorbed in the tick by tick intraday action. What they lack is seeing the bigger picture. Most of the intraday action is noise. The ability to filter out noise from key information is an important element in trading success.
Undestanding the bigger picture: Ask yourself two important questions when trading the markets.
1. Which direction is the market trying to go?
2. Is it doing a good job trying to go in that direction?
When the markets are consolidating, confidence among buyers and sellers are balanced. When one side expresses greater confidence, this will create a imbalance of supply and demand causing the markets to trend or enter a new price zone. What is important to understand is this: Is there market acceptance or rejection in the current price zone? Value area or value refers to the price zone in which approx 70% of the volume took place the previous day. Value high is the upper pivot of this range and value low is the lower pivot of this range. If the markets trade within value, this indicates a market in balance. If the markets trade outside of value, this indicates market imbalance. This is a important concept to understand when trading the futures markets. If prices are trading outside of value but pushed back into value, this indicates price rejection outside value. If price is trading outside of value but remains in value, this indicates price acceptance in the new zone. Usually the markets will consolidate when trading inside of value. If the markets breakout to the upside, the value high pivot will act as a key support and if the markets breakdown below value the value low pivot will act as key resistance.
High probability trading exists once you fully understand market acceptance vs market rejection and balance vs imbalance. This is the bigger picture. Once you grasp the bigger picture, you will need to look at the micro view of the markets. This involves identifying key pivot levels that will act as significant support and resistance. As an intraday trader, I will always identify: yesterdays low, yesterdays high, yesterdays 50% range, daily pivots, weekly pivots, monthly pivots, value high, value low, and POC (point of control). The POC is simply the price where most volume occurred the previous day. By doing this analysis I will get approx 25-30 different prices. I will then take these pivots and look for cluster zones. A cluster zone is any price level in which 2 or more pivots line up with each other.
For example: if yesterdays high was 11400 and the value high pivot is at 11395, this area would be a key pivot point cluster zone.
In any given day, there will be 2-5 pivot point cluster zones to look at. These are the high probability trading levels. If the markets are trading above value and there is acceptance, I will look for a long setup at these cluster zones. If the market is trading below value, I will look to short these cluster zones. If the markets are trading within value, I will look to fade any cluster zone.
These are just the basics of trade setups using pivot point clusters. In order to trade this method successfully you must understand what the market is doing. There are several market internal tools that you can use to identify the pulse of the market. They include: TRIN, TICK, put/call ratio, and PREM. Explaining these different tools will go beyond the scope of this thread. Explanation of these market internal tools are provided in the multimedia video forum.
I hope this information helps. Good luck and best of trading.
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The YM has shown an impressive bull run the last few trading days. With 4 consecutive higher value areas established, we are currently testing the upper range of the 4 month old trading bracket. With 11400 as an ultra key level, we willl need to see significant volume to asborb the sellers in this area for any movement to the upside. The remaining of the week will be crucial for the bulls. The bears will be trying to protect this zone, shorting around the 11400 level. However, with strong other time frame buying presence there is a good possibility that this level will break. This breakout can be quite drastic as alot of stop orders will be taken out in the process. A short squeeze will occur and may fuel enough energy for new market participants to start buying this break. This will lead to further rally causing a possible beginning of a new uptrend.
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Thread discussing the opening gap play.
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Two parts to this video explaining a price and TICK divergence. It is always crucial in spotting out a shift in market sentiment. One way to do this is to observe price action with TICK action.
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Chart example of the TICK's in action. Anytime you have the TICK spending 90% or more time above zero in the morning session, expect a continuation of the trend in the afternoon session.
This works on a uptrending day. The TICK, regardless of a downtrend or uptrend will usually spend more time above zero. Therefore, a downtrend can occur with the TICK fluctuating both ways.
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Trading mentor. Necessary or not?
in Beginners Forum
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Necessary? Not really. Recommended? Most definetely.
Finding the right mentor is very important as well. In my trading career I have had a total of 2 mentors. You take what fits your style, tweak it, then create your own trading style. My first mentor relied heavily on moving averages, fibs, and identifying key price levels. My second mentor was a pure tape reader in combination with market internals.
I have combined both styles to form my own. This is something you can not do while learning on your own. Depending on where you live it may be hard to find a mentor. There are plenty of subscription based chat rooms. I dont know the quality of them but I am sure if you take the free trial offers you may find a mentor you like. Also if you ever have a chance, work for a professional trader for free. Eventually he may even back you up on your initial stake.