wrbtrader

Hi brownsfan019, At first glance when I read your question I thought you were asking for example... There's a trade signal in ES but you take the trade in NQ for whatever reasons. Many futures traders only trade one market but it shouldn't prevent them from monitoring other markets that are highly correlated to prevent missing trade opportunities when their trading instrument doesn't have a pattern signal I talk about this a lot in the Trading Hammers (revisited) thread at ET and I use the term Sister Trading. This involves using a correlated market (+90% correlation at the minimum) to help with more trade opportunities in your trading instrument because there will be times when your trading instrument doesn't have a pattern signal while the correlated trading instrument has a valid pattern signal to merit a trade in your trading instrument that doesn't have a valid pattern signal. For example, I mainly trade ER2 but can easily trade any other Index Futures. When I trade ER2...I closely watch the exchange traded fund IWM of the Russell 2000. Therefore, if ER2 doesn't have a valid pattern signal and IWM does have a valid pattern signal...it gives merits to opening a position in ER2 based upon what's occurring in IWM. However, whenever I do sister trades...I manage the trade via the price action of the trading instrument I took the trade in and not via the price action of the correlated trading instrument that produced the valid pattern signal. Also, in the second half of your message it seems like your asking about managing trades in different markets at the same time that are correlated. For example, going Long in both ES and NQ at the same time. I personally don't like to take trades at the same time in correlated markets unless there's a broker platform problem. For example, your Short YM and broker A system goes down while your backup broker B is still working. If YM goes against you...you can open up a Long position in YM via broker B. This is a type of hedging to protect your original position even though I know your not talking about this situation. I just wanted to mention such to give an example of the benefit of having a backup broker. Anyways, if I'm going to open trades in different markets at the same time... They aren't going to be correlated or they aren't going to be via the same trading style. For example, a Long position in ER2 and a Long or Short position in Copper futures at the same time. Another example, a day trade in YM and a swing trade in T-Bonds at the same time. Thus, the above types of trading multiple markets at the same time are good examples of when such is appropriate in comparison to a more difficult type via taking the same position in two highly correlated markets via the same trading style. Simply, diversity in our trading is good as long as it doesn't put all your eggs in the same basket sort'uv speak. Mark (a.k.a. NihabaAshi) Japanese Candlestick term

First question and a very important question you should answer... The method you used that involves fading low volume s/r levels (pivot point analysis), have you backtested this methodology and does it have a positive expectancy??? Secondly, if your going to trade the Emini Futures...keep a close eye on regular schedule market events via a good economic calendar. You should also study your historical intraday charts to know some of the market tendencies associated with your trading instrument. For example, there's a tendency involving the first few trading days after Easter Holidays concerning a strong trend day and/or a volatility expansion day after contracting volatility. I myself expected a strong trend day the first two trading days after the Easter Holiday but when I saw the contracting volatility the first two trading days after this Easter Holiday... I knew it would happen either Wednesday or Thursday especially with three very important economic events: Wednesday -EIA Petroleum Status Report, Fed Chairman Bernanke Speaking and FOMC Meetings Thursday - ECB Announcement, EIA Natural Gas Status Report and Import/Export Price Report Looking at the above two days of volatility producers...the best bet was Wednesday because Fed Chairman speeches and FOMC events are market movers. The above info now tells you when the strong trend day or volatility expansion day is going to occur. Next, what about the direction to answer your question about the beginning of a downtrend? Lets talk about the technicals. Most traders I know and talk to in realtime (different chat rooms) were discussing a key GAP day in the past... April 3rd Tuesday 2007. Why is that particular GAP key in comparison to other recent GAP trading days? Its a GAP that the price action moved strongly and didn't retrace to close the GAP that same trading day, falling Oil prices due to easing tensions between Iran and Britain over the hostages, rallies in the Asia markets and a small surprise in the Pending Home Sales report to give some reassurance about stabilization. The above made it a day to keep in our memories as a Key S/R Zone. That's another hint...if your going to do intraday pivot point analysis...don't get tunnel vision and only see a few yards of the field. Thus, you need to expand your vision to see all of the field and that would have given you the April 3rd S/R Zone along with the contracting volatility soon after that key trading day (Easter Holiday tendency helped set this up nicely). Getting back into the technicals. Pivot Point trading (s/r levels) also implies you have an understanding of supply/demand. To merit a trade you need to define what you consider to be a shift in supply/demand to give your trade a chance to be profitable. Supply/Demand is one of those scary topics most traders don't have the time and energy to invest in... Much easier to stay tunnel vision via more simple technical trading (indicators, chart patterns et cetera). Thus, I won't get into the supply/demand stuff because there's so much discussion about it at many different discussion forums...I'll let you do your own research into that. Lets talk about Market Breadth. Almost all the market breadth indices were not supporting a bullish price action at the time of your Long positions. Thus, the probabilities were in favor of the Shorts (bearish price action). If your not trying to scalp a few ticks...you should be following Market Breadth Indices and hopefully your using a data vendor that gives you access to such intraday info. However, I'm not going to tell you what's a suitable market breadth considering I don't know anything about your trading style. I'll just mention a few popular ones as in Volatility Index (VIX, VXN and RVX), Put/Call Ratios, Advance/Declines (Lines, Volume and Ratios) et cetera. Via any of the above to correlate with your trades...I didn't see any support for any Long positions unless you were trying to scalp for a few ticks. Also, on your chart you have something called a Tick Delta histogram. I don't know what that is nor how to use it but via a quick glance...those bad trades you call it seem to be occuring when the histogram look weighted to the red (heavy on the down ticks). Therefore, how is that Tick Delta integrated into your Pivot Point Analysis? If it has value...use it and you should mention in your above question its use to give us a better picture of what your doing. If your not using it or it has no value, get rid of it because it could be giving you sublimnal messages that causes trading problems. For example, I see some price action only traders with volume on their charts but there's actually no specific use of volume in their trade methodology. Simply, its not needed if there's no specific written trading plan for such. The above also gets into the color coded Blue and Red intervals on the price action itself... I don't know how your using it but if they indicated you should have been short instead of long... You need to ask yourself why did you ignore the price action info it was giving you??? Conclusion: * Know your market tendencies * Have a bigger view of the playing field when using Pivot Point Analysis in reference to April 3rd S/R Zone. * Look for confirmation for your trades via market breadth indices in reference to that when they aren't protecting your back...its a low probability trade. * Pivot Point Analysis (s/r levels) also involves knowing supply/demand in reference to Contracting Volatility that leads into Volatility Expansion. * Use the info on your charts or get rid of it in reference to the Tick Delta and the color coded price candlestick intervals. Mark (a.k.a. NihabaAshi Japanese Candlestick term "Volatility Analysis is a doorway to consistent profits."

Hi asop, Your question is a commonly asked question on the internet among traders and there are many free resources online that can be easily researched via something like Google in which you will find in-depth explanation of what someone calls a "trend reversal" pattern. Further, there's a difference between trend continuation, trend reversal and counter-trend signals. Many traders get trend reversal and counter-trend price action mixed up as if they are the same. In fact, most of the traders I've met that had problems with trend reversal trading (change in volatility with a reason/event for the change) where actually counter-trend trading (no change in volatility and there's no reason/event to signal the change). With that said, consistently profitable trend reversal traders understand there's more to it than just the pattern signal. First of all, the best trend reversals are the ones that have a reason (market event) that's none technical and our pattern signals are just confirmation to these market events so that we can try to get the best entry possible into these market event trend reversals. For example, the market is moving upwards between 0930am est to 0959am est...up 3 points and then when a 10am est Economic Report is released the price action suddenly reverse direction. If your lucky and your pattern signal confirms an entry into such a price action...this would be a market event trend reversal while your pattern signal confirmed an entry into such a price action. Simply, your pattern signal that's labeled as a trend reversal signal does not tell you the market will reverse... It has confirmed to you the market has reversed and given you an entry signal into that market event trend reversal. How far it will continue in the new direction is another story. Secondly, there's also a trend reversal that occurs for technical reasons and these are either associated with the following: * Price Action changes in other Key Markets that have a direct impact on the price action in your trading instrument. Basic aspects of intermarket analysis. * Volatility Divergence within your trading instrument that can be measured by comparing one WRB (wide range body) to a prior WRB (wide range body) in your trading instrument. One of the easiest ways to began studying volatility changes is to recognize volatility that is contracting (smaller price ranges) and expanding (larger price ranges especially when they occur as range spikes in comparison to the most recent small price ranges). It's from these volatility changes that many of today's trend reversals are derived (Japanese Candlesticks, Double Tops/Bottoms, S/R Levels, Pivot Points, Volume Analysis, Common Chart Patterns like the Wedge and many other names you may see used at different websites or forums). My point is if you concentrate of learning about volatility itself...it will open the door and bring to light all those other trend reversal methods you've heard about. Reason why there really is not majic forumula nor secrets to spotting reversals. It begins with understanding why reversals occurs and the rest of the journey down that road will lead you to whatever reversal method is suitable for your needs even though it may not be suitable for someone else that's using a different reversal method although the change in volatility is the same regardless to the different trend reversal method that gets labeled to a particular point on the chart. As you can see from the above, I prefer to concentrate on what's causing the price action to do what it is doing prior to getting into the actual pattern signal. It's not a perfect approach to the market (I do have losing trading days) but I prefer to first turn the light on to see what exactly I'm crawling into bed with. Mark (a.k.a. NihabaAshi) Japanese Candlestick term "Volatility Analysis is a doorway to consistent profits."

Do's or Don'ts of Simulator Trading: * If you have not selected a broker...only use the simulator from a few brokers your considering opening a trading account with. * If you have selected a broker...only use their simulator. * Simulator should only be used to learn the broker execution platform and not for testing a new method unless your testing a built-in strategy code that is an option in the simulator itself. Thus, use a backtesting software or manually test your strategies and then move into real money trading with a small position size but only when you feel comfortable in using your broker trade execution platform. Most traders takes about a month to fully learn their broker execution platform while simulating trading. Then it usually takes an additional 1 - 2 months to feel comfortable using the platform with real money on the line. * No trading plan, no well defined strategy regardless if its profitable or not... Don't use a simulator until your ready to simulate your method and your ready to learn how to use your broker execution platform. There's also another use for the simulator. Lets pretend your one of those traders that consistently makes profits in the morning a.m. trading session but yu tend to lose those profits in the afternoon p.m. trading session... Only use a simulator in the afternoon p.m. trading session until you can determine (resolve) your trading problems for that trading session. However, the best solution in that particular situation is to not trade (no real money nor simulator) in the afternoon p.m. trading session. In addition, when you do use a simulator, only use the exact same position size that equals what you will be using in real money trading when you first plan to go live with real money trading. For example, lets say you will eventually trade 10 ES contracts (you have the account size for such) but you want to take it easy in the beginning and only trade 1-2 contracts. Thus, when you simulate trade...only do it with 1-2 contracts and not 10 contracts. Summary: It's only time to use a simulator when you're satisfied with your method's backtesting results, you have a well defined trading plan and your now ready to learn your broker trade execution platform. Too many traders make the classic mistake of using a simulator while they don't have a trading plan nor a proven method via backtesting. This mistake will cause trading problems when you do go to real money trading. Mark (a.k.a. NihabaAshi) Japanese Candlestick term "Volatility Analysis is a doorway to consistent profits."

Hi Nick, Everybody reacts differently to tragedy or high stressful situations. Some traders can get back into trading within a few days while others takes weeks and some much longer. My three biggest losing trading days all occurred after either a tragic death in the family or tragic death of a very close friend. What have I learned? No matter how much time I take off from trading after tragedy...when I do return I will only trade small position size and reduce the number of trades for a few trading days or weeks regardless if I think I'm mentally ready to go back to normal trading. In regards to stressful situations...best to take the day off (argument with loved ones, physical injury, health related problems et cetera) because having a losing trading day when you could have taken the day off only makes things seem worst. Thus, don't use profits to help you feel better because that will imply your trading your emotions...not good for trading and will not allow you to properly deal with what is really going on. For example, I have a close friend that had many years of consecutive profitable trading (6 figure income) until he went through a ugly divorce that involved children. He had his worst drawdown period ever and had his first losing year. However, as soon as the divorce was settled and whom got the kids (he did)... He was back to profitable trading within a few months and has been profitable for a few year (6 figure income) since that ordeal. Simply, trading itself is stressful and when you throw in stressful events from our personal lives... It's tough to stay discipline and difficult to stay focus on the task of trading. Also, trading is no different from any other profession. It's not uncommon to hear about someone going on a leave of absence from their job for 1-12 months after a tragic death in their immediated family. Conclusion is that we really need to take time off from the markets when stress like this occurs. Then when things seem to be managable again, return to trading to only take it slow (small position size) until we get into the flow of things again. Just the same, when something unusual (negative) occurs in your trading after returning... Stop trading and don't return until you've had the opportunity to resolve or understand the emotions your still trying to cope with (get professional help or counseling if needed). Mark (a.k.a. NihabaAshi) Japanese Candlestick term

I only swing trade or position trade during a few times per year during market seasonal tendencies. I've discussed one particular tendency at the below link... http://www.traderslaboratory.com/forums/f34/trend-day-confirmation-1457.html#post8215 As for management of the position, I used the same trade management as I do when I day trade. However, the only thing different is due to the wide stop, I have to use a different position size (a lot less) to control the increased risk exposure on the initial stop/loss protection. Simply, my position size for swing trading or position trading is reduced dramatically in comparison to my normal day trading position size. Thus, the issue for me is position size management (the number of contracts) and that in itself is a money management method. Mark (a.k.a. NihabaAshi) Japanese Candlestick term

There are hundreds of different ways to trade GAPs at the Open and it really comes down to your trading style along with what works and doesn't work. Also, I see a lot of statistics thrown around at other discussion forums about GAP fills and you really need to be careful about these statistics because they may not apply to your particular trading instrument nor apply to the current market environment. Simply, if your the statistical type...do your own stats involving your trading instrument. With that said, my main strategy for trading GAPs at the Open is that I don't use a strategy specific for GAP trading. Thus, I stick to my normal trading plan for my entry signals (regardless if there's a gap or not). However, if there is a GAP for a particular reason, I will manage my exit (profit target) differently than I would for a normal trade via WRBs. First of all, you must know what caused the GAP to give the trade context. If I can't find the cause or don't understand it...I exit my trades normally without any consideration to the GAP. For example, here's a trade not taken by me but taken by someone else via almost the same way I trade GAPs. Take a look at the 2min regular chart for Nasdaq 100 Emini NQ futures on March 28th Wednesday at the Open. NQ open as a big down gap around Tuesday around 1799.50 in comparison to its closing price on March 27th Tuesday at 1810.25 That's a 10.75 points as a down gap. Lets find the cause of that 10.75 gap. Go back to March 27th Tuesday around 4:50pm est there's news (market concerns) about the geopolitical about Iran the cause the NYMEX Light Crude Oil CL futures to spike up $5 (investors on the edge about Iran)... This sent the Emini Futures sharply downward in the globex overnight trading session. Here's the first key price movement...a Dark WRB formed via NQ's 2min all session globex chart at 4:52pm est. This Dark WRB has a body range of 1809.25 - 1808.50 Next, there's a bigger Dark WRB spike downward on more volatility at 4:54pm est. This Dark WRB has a body range of 1807.75 - 1797.50 Regardless to the size of the consecutive Dark WRB's...the first Dark WRB gets designated as the key s/r zone because its the first Dark WRB to react to the market news. Thus, the key s/r zone is 1809.25 - 1808.50 I'm also implying here that if your going to trade GAPs directly or indirectly, if you find the cause of the gap, that means you need to monitor both the regular session chart (9:30am - 4:15pm est) and the all session globex chart (includes regular hours and the overnight trading session). Fast foward to March 28th Wednesday, we now know the context of the GAP. We also need to keep an eye on NYMEX Light Crude Oil CL futures or any other key Oil trading instrument or Oil Index because the context of the GAP is directly related to Oil. Also, a trader that ignores intermarket analysis when the price movement in your trading instrument is caused by another key trading instrument... That's a trader trading with one arm behind his/her back (we can debate about this in another thread). Getting back to NQ Emini futures. NQ gapped down at the Open and while there's a lot of downside pressure on Oil at the same time. That downside pressure in Oil relaxes a little when Oil has a shift in supply/demand that can be visibly seen by White Hammer lines in different Oil markets 2min - 5min charts around 09:40am est. This allows NQ and other Emini futures to counter-thrust upward and attempt its first GAP fill. Oil then retraces back downwards (retracing the White Hammer line) to produce another shift in supply demand. This halts the counter-thrust rally in its tracks for NQ and other Emini futures. Next, there's the 10:30am est EIA Petroleum Status Report and with concerns about Iran. In addition, there's the 1030am est FED Chairman Bernanke speech that caught many retail traders off guard due to the fact some sources had the speech time at 0930am est. You combine Iran concerns, Oil and Bernanke...no technial analysis is needed to know that there will be an extreme volatile price movement. It dropped big time. Then around 10:42am - 1046am est...Oil halts its parabolic decline and many different Oil trading instruments put in valid Bullish Hammer patterns. Thus, any trader getting Long signals in the Emini futures for whatever reasons between 10:40am - 10:46am est... This will be the first real attempt at a change in supply/demand that could decide to close the GAP. I had several different bullish signals in this time duration (10:40am - 10:46am est) and I'll mention one I'm sure many can relate to. Take a look at your 5min chart of the NDX.X Index. A Bullish White Hammer pattern closed at 1040am est and at that same time... NQ Emini futures was at 1794.25 via the 5min chart. Tough trade to psychologically take especially after watching the big price drop in NQ. However, getting back to the 2min chart key s/r zone...the 5min chart valid bullish pattern signal serves as a warning to look for the real entry via the 2min chart. Once again, we go back to intermarket analysis considering we know what's really leading NQ on this particular trading day at this particular time (will be different on another trading day). The bullish reason to get into the Eminis occurred via the same bullish reasons in Oil. However, I'm not talking about price correlations, I'm talking about knowing what is causing NQ to do what it is doing...the real story and not the technical story... Understanding the price action. NQ price at 1046am est is 1791.50 and the key s/r zone (profit target) is above at 1809.25 - 1808.50 (a minimum reward of +17 NQ points). Further, without "intermarket analysis", this long signal would have been psychologically tough to manage due to the fact it occurred after a parabolic price drop... Most traders would have been on the sidelines watching or do a later entry or assume there will be no attempt at a GAP fill because they would have been concentrating their efforts on the possible fill in the first 30mins of trading. Also, in one of my first post here at Traderslaboratory I talked about there's are times of the trading here where you will know with high probability the direction of the price movement via repetitive tendencies about the markets. http://www.traderslaboratory.com/forums/f34/trend-day-confirmation-1457.html#post8215 This is one of those times of the year and it relates to breaking news events the day before a EIA Petroleum Report involving Oil (it happens more often than you think...enough to make some consistent big profits). Yet, this didn't turn into a trend day after 1045am est but that wasn't the goal nor should we be concerned about such because our priority is the first goal of the trade and if a trend day develops...that's ok too (it didn't). The goal was that key s/r zone 1809.25 - 1808.50 NQ moves upwards and then plays a cat & mouse game between 11:10am - 12:02pm est on low volatility. More importantly...contracting volatility and NQ at 12:02pm est is at 1795.25 or about +13.25 points away from the profit target zone. Well, we all know what happens when volatility contracts...it will expands. NQ volatility picked up until it reached a high of 1809.00 at 12:26pm est. At this point its time to exit the Long position because the price is now in that key s/r zone caused by the breaking news event back on March 27th Tuesday... The same news event that caused the price action to be a Down GAP at the Open for March 28th Wednedsday. Ok...so the profit target is reached...what about the GAP fill? I mean, should you have stayed in the trade to attempt a GAP fill. The answer is NO because the odds began to drop there's further price movement when a breaking news key s/r zone is reached. Yet, if you are the greedy type...you could have exited most of your position if your trading multiple contracts (NQ) or shares (QQQQ) and left a few on the table with a tight trailing stop to see if you can catch a GAP fill. Simply, your remainders should be managed for a completely different reason that's associated with the GAP fill. Anyways, NQ didn't fill the GAP but it still reached its profit target of filling in the s/r zone of what caused the GAP. I also have a rule of thumb in that once I've had a trade that reached its profit target via filling in the s/r zone of the cause of the GAP... I no longer consider the cause of the GAP as a profit target because that goal has been fulfilled. Thus, I go back to my normal WRB profit targets. Therefore, some traders look for trades to fill in the GAP itself. I prefer to find the cause of the GAP and then look for trades to fill in the key s/r zone caused by the key market event instead of the GAP itself. Once again, I did not take this trade on March 28th Weds 2007 but I do know others that did from the Long signal to the Key S/R Zone WRB profit target. P.S. Don't confuse my above long winded message into thinking this type of Trading the GAPs is complicated because it's not difficult nor does it require a degree in rocket science. Just remember that the market is much bigger than NQ or any other Emini Futures. Mark (a.k.a. NihabaAshi Japanese Candlestick term

Hi brownsfan019, Thanks for posting the annotated chart with the WRB exits on your VBC charts. Also, I'm curious just like PivotProfiler to know if WRB exits has been more profitable and/or less stressful trading in comparison to using fixed profit targets ??? Mark (a.k.a. NihabaAshi) Japanese Candlestick term

Hi brownsfan019, Can you post a annotated chart example of what you consider to be WRB's via a 450 share bar chart? Thanks because I'm curious to see what this looks like. Mark (a.k.a. NihabaAshi) Japanese Candlestick term

Hi All, I just want to post some commentary about WRB Analysis before this thread gets to far or before its misinterpreted. First of all, its something I developed while in High School (1980) when I did work (hand drawn charts of daily and weekly price action) for friends of the family that were floor traders at the exchange. It involves many things that's nothing anybody has heard about but it does make sense of all these things when they work together: * Support/Resistance Zones * Shifts in Supply/Demand * Trading GAPs * Changes in Volatility Many other things from entry to exit including Profit Targets. Simply, there's no reinvention of the wheel here...just something that puts the puzzle together into something that's understandable. WRB Analysis (primary) has absolutely nothing to do with Japanese Candlestick Analysis (secondary). As mentioned many times by me at another forum in a thread called Trading Hammers (revisited)...don't use Japanese Candlestick patterns or anything else (including WRBs) without understanding the price action in context. Therefore, TheBramble comments are dead on and should be apply to Japanese Candlesticks, WRBs or anything else involving technical analysis. Effective candlestick analysis requires the context in which it has developed for any reasonable assessment to be made. There’s also the vital issue of volume. Candles or bars, volume is key to unlocking the probabilities of development. (Note: Volatility is arguably a better replacement of volume and resolves some of the problems asssociated with volume analysis). With that said and moving into using WRBs as an exit strategy. PivotProfiler mentioned something that needs more clarification. I scale out of my trades while other times I exit my entire position at the same time (no scaling) for whatever reason. The only time I use a higher time frame after the first WRB for scaling out is if the entry signal (pattern signal) occurred as either a trend continuation signal or occurred as part of a market seasonal tendency (cycle). Simply, most of the time I use the same entry signal interval as my exit signal interval (example - I went Long via a pattern signal on the 3min chart...I exit via WRBs on the 3min chart). Thus, the price action involved with your entry signal has impact on how you manage your exits. This reason alone is why two traders using different entry method but using WRBs to exit...will exit at different WRBs. Therefore, the price action involved with a WRB has impact on how you manage the exit in the WRB. Further, traders using different strategies may exit a WRB different. For example... * You can exit a WRB upon the close of the interval. * You can exit a interval as soon as it becomes a WRB even though there's still time remaining in the interval. * You can exit at WRBs that cross over a s/r level. * You can exit at WRBs that form within s/r zones (there's a difference between levels and zones). * You can exit WRBs to only breakout out of congestion. Thus, before analyzing someone's use of a WRB as an exit method... You must understand their entry method into the trade and this will prevent getting tunnel vision about the WRB. Therefore, to properly use WRBs is to have a relationship with the Entry Method and the WRB. Another way to look at it...the WRB is not an exit signal. The exit signal is the price action itself while the WRB is a big alert to check and see if this is the price action you like to exit within (ex. exiting WRBs that appear at s/r levels). WRBs are like warning signs that something is about to happen (continuation of the trend or reversal of the trend) as in a big shift in supply/demand. WRBs should be telling you its time to make a decision...to exit your position or to stay in your position. Therefore, don't make the mistake of viewing WRBs exclusively as an exit signal or that the move is going to reverse against you. To do such is to say that your ignoring the price action in which the WRB is forming within (tunnel vision). As noted by brownsfan019 when learning about WRB's... My version of WRB/Big candle exits is rather simple. This is true about anything when you first began learning something in which you don't know exactly how to apply it or still exploring the basic concepts about it. In other words, my WRB Analysis today is far more advance than the simple WRB Analysis I was using in the 80's. Mark (a.k.a. NihabaAshi) Japanese Candlestick term

Hi ckait, To properly analyze trend days, you need to break them down into designated categories for study. For example, one particular trend day occurs after several days of contracting volatility as dalby suggested. However, contracting volatility all by itself doesn't tell you which direction the strong trend day will occur (up or down)...stick to your trading plan and hope it puts you on the right side of the tracks. There's another type of trend day related to market seasonal tendencies (cycles) and these occur with high probability that can involve one particular trading day of the year or several trading days of the year as a group. For example, the S&P 500 has risen higher on average by +31 points between Oct 27th - mid-November for each year since 1990 (except 1994 and 2000) with some years like last year rising much higher beyond mid-November (several strong trend days during this duration). In this particular situation, you actually know which direction the market will go and the above data is easily verifiable. There's another type of trend day that occurs as a reaction to specific key market events. For example, the week of a Quadruple Witching will produce with high probability a trend day on either the Mon, Tues or Weds of the Quadruple Witching week. However, Quadruple Witching week all by itself doesn't tell you which direction the strong trend day will occur (up or down)...stick to your trading plan and hope it puts you on the right side of the tracks. Now, for those trading days you know when a trend day will occur (as mentioned above) but you don't know which direction... You need to know what type of price action will tend to start a trend day. Then, even if you miss that early signal into a trend day, you need to recognize your trading within an establish trend day. Therefore, your going to need to have two different trade strategies... One design for the early part of a trend and the other designed within an established trend... Trend Reversal and Trend Continuation signals. Also, I didn't say Counter-Trend signals and these are different in comparison to Trend Reversal signals. Trend Reversal pattern signals recognize a shift in supply/demand. Counter-Trend Signals are pattern signals when there is no shift in supply/demand. My point with all the above, there are some trading days in the year where you know specifically when there will be a trend day. There are other trading days (not many) of the year where you know specifically which direction that trend will go. Simply, I'm not going to become rich especially since most trading days are not trend days but I will make some good dough via trend days associated with market seasonal tendencies (I only mentioned one above), key market events (I only mentioned one above), volatility analysis (I mentioned one above) et cetera... All of which helps with position size managment (knowing when to increase your size and when to decrease your size). Yep, I do load the boat on some of these trend days while still not violating my risk (money) management rules. However, if I was single and didn't have a family to support...I would do more than just load the boat. Therefore, you can predict with high probability which day will be a trend day and which direction it will go for some trading days out of the year. Mark (a.k.a. NihabaAshi) Japanese Candlestick term