It is true, as a general rule, that gaps in the futures indices at the opening tend to close quickly. But the first move away from the Opening Range can often be telling. Randolph Newman, infamous pit trader from the old New Orleans cotton exchange, and my early mentor as a rookie trader, had a saying, "If it starts up fast, it seldom lasts." Of course, Randy had a lot of sayings. But this one played right into another rule we use at Valhalla to determine an early trade trigger. And today, that trade trigger was to short the Russell (symbol MR) at the point labeled "c" on the chart above. Take the course, Pivots, Patterns and Self Recognition and learn the other Breakfast Setups our menu has to offer. Come to daytradingmethods.com and sign up there.
Monday: Continuing with our tutorial on triangles...One fo the more interesting observations about triangles is how they so often set up reversals to the current trend. There is a special reason why this particular triangle in the SMH signaled a reversal to the downtrend. Although, plainly visible, no traders I have every worked with knew about it before I showed them. Come take the course Pivots, Patterns and Self Recognition. Learn this and other important trend reversal signals at daytradingmethods.com
Friday: The first breaking trend of the day is often hard to capture. Guess wrong just twice trying to capture it and you've probably ruined your trading pscyche for the rest of the day. But often, if you're patient, a setup occurs in the MidDay session that gives you an equal if not identical opportunity. Today's midday setup came with a unique classification of divergence. ValhallaFutures uses three: SPeed, Serial and Two-Frame. Take the course Pivots, Patterns and Self Recognition at daytradingmethods.com and learn to identify each when they occur.
Thursday: Momentum Bounce and Falling Away are just two of the ways from Valhalla Futures techniques that opening trade action in the futures can signal a trending day. Since these patterns are a classification of chaos rather than geometry, it takes more practice to see them. To supplant the decision support necessary to use chaos patterns, we add rules based on relative price. The course Pivots, Patterns and Self Recognition cover these rules in detail so that exact setups can be derrived at what others may only see as chaos.
Wednesday: The triangle is the hardest pattern of all to trade with any consistency--and yet there are whole books dedicated to its opportunities. Curtis Arnold's book title includes the phrase "A Proven Method for Consistently Beating the Market", while Teresa Lo, in apparent recognition of the triangle's demonstrable treachery, refuses to trade them at all. We at Valhalla Futures have actually identified some nine different triangle patterns that recur with frequency in the index futures. The most common attribute of one of these triangles, called the Split Opening Triangle, is its false breakout in the wrong direction, just before a true breakout in the oppposite direction breaks into a trend. Yesterday, we mentioned the Split Opening as a type of opening day model. Study the chart above and see if you can discern the false breakout that is actually a signal that the pattern was about to go decisively the opposite way. Come learn this and eight other key trade triggers associated with the index triangle patterns in the course Pivots, Patterns and Self Recognition, available through daytradingmethods.com
Tuesday: Yesterday, we talked about how a day could be divided into time periods, each with its own set of trade strategies. But there is also three ways to classify the day's behavior as a whole, three day type models. Valhalla Futures refers to one of these types of days as the Persistent Trend, which behaves exactly as its named Another day model is the Test-and-Reject, which is characterized by a very convincing head-fake in the wrong direction. And the last we call a Split Opening, which trades in both directions for a good part of the trading day. Obviously, if you knew which model the day was going to follow, not only would you know when and if to get out, you'd have a pretty good idea whether or not the day was even going provide enough opportunity to trade at all. Today, there was a very important event within the first few minutes of trading that signalled just such a Split Opening day. Had you seen the signal and predicted to a friend what the character of the day would be, he might think you psychic. But in truth, you wouldn't have been. You simply would have been better informed. Come to class at Pivots, Patterns and Self Recognition and learn these and many of the other signs of a well informed trader.
Monday: Even on a relatively trendless day, the market can still be seen to be divided into three distinct time periods during the day. The morning opening, the midday period, and the time period that leads up to the close. During these periods it can be said that there is a noticeable change in market behavior. There are some logistic items that help support these changes, but crowd psychology is the key component. The first period usually breaks into trend quickly, often after a head-fake in the wrong direction. The middle period is most often characterized by a slower and at times, meandering tone. The last period can continue on in an acceleration of the day's trend, or suddenly reverse, cancelling the day's trend out altogether. Since each time period is unique in its behavior, different trading techniques are best employed. Take the course Pivots, Patterns and Self recognition from Valhalla Futures at daytradingmethods.com and learn to utilize these trading techniques.
One of the most difficult aspects of human nature in trading is dealing with being wrong. And nothing affects your intraday daytrading more than having a trend prejudice as to what the market is supposed to do in the longer term time frame. Note yesterday's blog entry of Thursday, September 30. Using divergence, pattern and relative price, a valid sell signal for an end-of-day swing position was created at the close. According to this signal, today the market should have finished down, giving a swing position a profit, regardless of whether it started the day by going up or not. But this morning's action was giving three very important signals that a uptrending day was at hand for long intraday daytrade positions. But with a commitment to the short side already in place from last night's close, would you be able to even see these signals, let alone act on them? Probably not. In fact, with a position already committed in the longer term in the opposite direction, the probabilities are very high that your psyche will suffer from trend prejudice all day, adversely infecting your daytrade decisions. And if you're trading with leveraged index mutual funds for the longer time frame, you may not be able to liquidate the position immediately. And as for a possible intraday daytrade position, you might find your internal voice saying something like "I can't take a long position in the nearest time frame while I believe the longer time frame is going to be bearish. I can't trade against myself!" And indeed, perhaps you cannot. If you are this type of trader, and want to approach each day with the open mind necessary to decipher intraday trend direction, then you must consider parting with your end-of-day swing positions altogether. If there's anything that infects your daytrading with a trend prejudice in either direction prior to the signals actually taking shape, then that thing is going to cost you your precious trading capital quickly. Get rid of that thing immediately. Your success as a daytrader will depend on it. Read Part II of the Valhalla trading manual titled Self Recognition, and come join us each day and see how we handle our mistakes at daytradingmethods.com.