Today we are going to look at the most recent
trade sequence and dissect how we used the TradingMarkets
Market Timing signals to come up with a high probability, low risk day
trade.
If we look at chart 1, we see the latest trade
sequence labeled as bar 1, 2 and 3. At bar 1 we have a big sell off that
triggers three of our S&P Market Timing buy signals. In addition to entering a
long position at the close of bar 1, we have a strong “buy bias” for the
following session’s day trading.
On chart 2 we see the following day’s 15-minute
chart where we employ our favorite morning
daytrading strategy where we wait for the market to trade for the first
fifteen minutes and buy strength above it. After the market trades for this
first fifteen minute period, we mark one tick above the high of that bar and
place a resting buy stop order there. If at anytime after this first fifteen
minute bar, the market is able to trade above its highs, we enter the market
using a buy stop.
On chart 2, we labeled the previous day's close
as bar 1. Bar 2 shows the first fifteen minute bar where we have marked one tick
above the high (the blue line). As we can see, the market never moves above the
blue line, so we do not enter a day trade. We do come close to triggering a buy
at bar 3, but we never move above the blue line.
Going back to chart 1, we now have completed bar
2 of this daily bar sequence where two additional
Market Timing signals are triggered. These additional signals not only give
us confidence in holding our swing trade, but it also sets us up to try our
daytrading strategy again for the next day's trading. On chart 3 we see the
following day, where we have labeled the first fifteen minute bar as 2. We mark
one tick above the high of bar 2 and place a buy stop order if the market trades
above it.
Moving on to chart 4, we immediately get filled
on our buy stop at 1496.25, as bar 3 triggers our buy stop order that was placed
right after the first fifteen minute bar formed. We immediately set our initial
stop right below the low of bar 2. Looking at chart 5, we see the market ramping
higher in our favor and then pulling back to the area labeled as 4. As soon as
this area holds we move our stop to just below the low at bar 4. The market then
works its way higher into what was already labeled as a possible sell zone
because this is the high area of bar 1 of the daily sequence shown on chart 1.
Chart 6 shows this sell zone labeled on the daily
chart. We already have in place sell orders starting at 1503.75. We get filled
on our sell orders at an average price of 1504. This is an excellent example of
how we can use the TradingMarkets Market Timing swing trading signals to help us
identify and trade high probability, low risk daytrading set ups.
Paul Sabo has been a professional trader for
over 18 years. During this time he has worked as a market maker in both New York
City and San Francisco for some of Wall Street's most prestigious investment
banks, commercial banks and brokerage houses. Paul later became the head trader
for a top-ranked investment advisor and hedge fund based in San Francisco. Paul
recently left his position at the hedge fund to trade his own money as a full
time business as well as working with Connors Research Group on various
proprietary projects.
Learn more about more our
Market Timing research in the "TradingMarkets
S&P Market Timing Course".
