Day trading the DOW 17/03/03

ChartMan

Legendary member
5,580 46
Great day. With a bit of trickery, I managed to extract 330 points net today one loss of 17 which I should really have held. This was done with a bit of help from ES , anticipating tops and selling, and buying back in after the pullback. NOT to be recommended for beginners. Still, here's the punch line. Following the 100MA rules you can clearly see there were two "safe" entries. These are where there is a clear bounce and pullback to the 100MA on a break. These entries were both at 7840. Playing the 100MA rules, the ONLY exit was at the penultimate peak at 8140, giving a clear 300 points . NO stress, NO hassle, feet up job. So was my extra 30 points worth the effort.? NO. It wasn't...... Had the market been a little less volatile earlier on, I would undoubtedly ended up with less that 300! But then I did enjoy the excercise....
In the next chart I'll point out a couple of things of interest. The first half today was just boring straight up.
Reward to risk?..... It didn't take long to calculate the target of 7990 from the pullbacks. The risk is always 20 points or so below the 100MA and we got in right on the nail. So Risk is 20. Our final exit was +300 so R/R was a staggering 15:1 . Even using the early target of 7990 we get an R/R of 7.5 :1
Part of my scalping excercise today was looking closely at the relationship between the move in RSI against the move in point of the DOW ( discussed last week) to determine the strength or weakness of the various moves. I can report that it looks to be a very good measure of what's going on..... bearing in mind I'm Spread Betting and getting hit by the bias most times, the 330 points could have been another 100 without bias.......
 

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plum

Junior member
19 0
trading the dow

could you please tell me the time frame for the 100MA.Sorry if this is a stupid question but Iam relatively new to this

Plum
 

ChartMan

Legendary member
5,580 46
First up the reverse expanding triangle. Watch these as they signify high volatility arriving shortly..... This one didn't "pop" significantly. Maybe because we were in "lunchtime " mode. What followed signalled the entry for the 7pm" T Time traders", with the pullback to the 100MA at 8060, giving them 80 points- still not to be sneezed at.
Next up. Take a look at the developing Bull Flag. Bear in mind in real time you can't see what's coming up. Typically, we expect to see 3 lower highs and 3 lower lows and then a breakout. In this case we only got half the flag. The first line that we could draw was across the two lower highs. From this we "guess" the lower parallel support line. See how the second low failed to reach the support line? A sign of not going all the way. Had you been scalping the top at 810 for a short, this should have rung a big bell. If you were waiting for another long entry, same bell rings!
It broke out on the next up swing. Fortunately, it tested 8110 again, allowing shorters to get out at a small profit. Then another reverse expanding triangle developed and we can see the RS Switch forming. Remember those from last week?......
What was the downtrend resistance of the "bull Flag" is now forming into support. NOTE the triangle has 3 lows and 3 highs before breaking out. These 3's occur all the time all over the place. Remember that.
So after the 3rd low we get our breakout. After a possible RS Switch, we need to look for confirmation. This comes AFTER the apex of the triangle , be it RSI or CCI. Following that apex, we need to look for a higher high forming an uptrend support line in either RSI or CCI or both. This happens as the price drops back to re-test 8110 for support.
The Exit. Classic 3 peak Negative Divergent top. The first peak was across 45 minutes ( loads of time). Here, the clue is the lower high on CCI. This should start alarm bells ringing!!! TIME to look for an EXIT. Anyway, the session is getting towards the end....The second peak in the price at 8140 was accompanied by another lower high in CCI. That's my EXIT. This will work 8/10. Last week, we over-ran by 40 points, tonight it was 6 points.
Notice how sometimes we see clues in RSI and sometimes we see them in CCI. Sometimes we get both. BONUS.
Now a final word of warning to the "beginners/ pupils". This last week has been , in general , excepionally easy money. DON'T get lulled into a false sense of security. DON'T get clever and hold overnight. One Hickup in the looming problems re war and you could see a 300 point drop over night! AGAINST you.
If you must enjoy the risk, do 1/10th your normal stake and NO MORE.
Enjoy the ride, it gets MUCH harder.... above all , if you can't watch the screen all the time and you are in the market, you MUST have guaranteed stops in place. You should have guaranteed stops in place anyway in these HIGH RISK times. Wipeout comes very swiftly. :(
 

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darrenf

Well-known member
481 3
Chartman

More great stuff. Do you ever have a losing day?

Seriously, I'd be interested to know what percentage of winning: losing days you experience and average points gained: lost. You seem to squeeze a very respectable number of points out of even what most would consider a poor trading day.

Out of interest, can you tell me why you didn't go short after the open yesterday. (17/3). At the open, the dow dropped well below the 100MA, then pulled back and at around 14.40 would seem to offer a short entry at around 7800 following your 100MA rules. Am I missing something in your system or did you choose to ignore this out of experience?

Also, could you explain what you mean by an RS switch?

Cheers.
 

bally35

Junior member
46 0
yes it is great stuff...thank's Chartman for sharing
it's opened my eye's :eek:
 

ChartMan

Legendary member
5,580 46
Yes, I do have losing days. A long time ago ,I lost my shirt trying to trade UK stocks. I vowed to myself that there must be a way to be successful and, to cut a long story short, I found it in analysing the DOW and formulating ideas into facts and strategies that worked...... This has taken some 2 years of hard slog and dedication. The other important thing to remember is that I am NOT a full time trader. I trade for enjoyment and satisfaction and I trade infrequently. I also have great difficulty in coming to terms with shorting in a down market and that I have to get to grips with. Still, like everything, patience is a virtue and it will come in time. My biggest failing has been trying to trade whilst not being able to concentrate 100%.That is now resolved. Other issues have been not being able to resist trading for the sake of something to do. I'm an impatient sort of person. That's now sorted. Lastly, overcoming fear of losing. That's now gone having learnt from others on this BB about position sizing and % risk per trade. Now,when I trade, there is no fear and no greed. Simple mechanics of entering a trade that is safe, and exiting against given rules. What happens in between is now irrelevant and doesn't cause me any emotion .
I have no records of winners V losers to quote you..... I will say this though. On an up day, I would not expect to have ANY losing trades. Yesterday I got overconfident with playing with new ideas and got freaked out into closing so I ended up with 1 loser out of 8 trades. A while ago I managed something like 20 winning trades in a row scalping the DOW with FINS,but I had some help by way of D4Free charts that were always 10 seconds ahead of FINS. So see a move on D4Free and trade it in FINS for an instant win. That "loophole" is now closed :(
Please bear in mind that a lot of my work and analysis is "theoretical" i.e. they do not reflect my trading status. Being good at TA is no guarantee that you are going to be any good as a trader. As for shorting at the open, yes it was an opportunity, but I can't give trading 100% attention and concentration to what is happenening so I prefer to hang around and wait for the "bankable" setups that I describe. Yesterday I did take a trade on the first divergence, but I considered it a gamble with a resonable probability of success, given that the market wants UP at the moment. BUT it was still a gamble..... My philosophy is "safe" trading where the risks are known and the probability of a successful trade is stacked heavily in your favour. Does that really exist? I think so.
Trading the open is always tricky and most poeple advocate staying out of the market for the first half hour. To me , that makes sense. That's not to say that you can't get some handsome gains from trading the open..... The other thing is my "fear" of shorting as I mentioned earlier. Secondly, trading with SB at the open ,you can find that entering a short near the open the price maybe 30 points ahead of the real price. What if this is a bottom? You suddenly find yourself in a trade that is 50 points against you. closing this off is very difficult to do. You get into the mind set of holding on in the hope of it going back down. That is just suicide.
RS Switch. ( or SR switch in a down trend setup). This is where the price action/market changes from being in one trend, temporarily, to being back in line with the main trend. The TA action is delayed, in that you can't see it until after the event, but it is possible to be aware of the possibility of its occurance. It's just another tool to help confirm that a major trend is still in force, and that the main trend is not reversing. Yesterday, we saw what might have been a top at 8110 and the price started to look like a downtrend was forming, which it was. We were able to draw in a resistance line across the tops of the price. This was the downtrend resistance trend line. When the price broke to the upside, it subsequently bounced off that line nad treated it as if it was a support line. The second bounce confirmed this. Hence the R/S switch- a switch in a line that was resistance, and has now become support. The second level of confirmation is when the price forms a new higher low.(8098 @ 20:14) These are ideal places to add to your position size. With skill there would have been the opportunity yesterday to get close to double points with "safe" position additions. ( the pullbacks in the early session)
This game is all about stacking the odds in your favour. What is the probability of this move continuing? Is this move a pullback, or a reversal. Is this the top, or is there more to go? Do I recognise this as a safe setup entry and so on. Adopting an attitude of "I think it's going up" without proof or reason is , again, just plain suicide. That's how I lost my shirt. Going back to the short entry at 7800 yesterday. If Idid it, there was only 20 points left in the move. By the time you decide it's a bottom, you have lost probably 10 - 20 points. I said also my divergent entry was a gamble. It was . I have seen the open produce 4 peak positive divergence across 90 minutes before the "real" bottom was reached.......
 

ChartMan

Legendary member
5,580 46
S&P 500 futures Pre Market trading. Risky. But still has opportunities and the same setups as the DOW. I got in at 859 on RSI positive divergence at 9:21. Divergence had been in effect since 7am and the price bounced on the 100MA. Still in at 10:0 looking for an exit and +11. :)
 

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ChartMan

Legendary member
5,580 46
Out for +10 at the first dip. A short sharp profit is not to be sniffed at. Waited for an entry again. Took triangle break at 868 although 864 and 866.5 were also entries, but not so safe. Target 4 points from the triangle "mouth". Just on target now and dciding if I want to be greedy and hold. :mad:
For ES I have found that if on the boundaries ( 00's and 05's) if the price moves by more than 1.25 ( approx Fib. 23%) then the move continues- for drops and rises. Being the eternal Bull, I'm not known for getting out early..... If I cant see a good reason for a top, there's little point in exiting. Trailing stops? Useful for those that don't have a clue..... Useful if you have to go away..... my theory is that if, like yesterday, you can get out within 3 points of a top, you don't need to wory about sliding stops.
At 12:45, I see no tops, just sideways with support at 870. Every possibility it will go to 875. ( as well as 870).
12:57 Getting interesting. 3 larger than normal sell volume spikes has not moved the price down in line .
12:59 3 peak neg. divergence across 45 mins so out at 871.5
The 100MA bounce didn't save us, and in anycase, there were "figures" out at 1:30. Not a good time to be in a position.
Housing stats down 7% and the price drops.
Now looking forthe next entry, probably after the open.......
 

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ChartMan

Legendary member
5,580 46
Today was a day to stay in bed :(
It happens, and you have to come to terms with the fact that some days are just a nightmare to trade. Again, staying loss free was the order of the day. I made all my gains in premarket ES. 13.5 in all. The dow netted me a measly 31 points in 2 trades. The closing 10 minutes being the highlight of the day!
You can see my entries and exits on the chart. Today was a scalpers day and they should have netted the equivalent of 200 points onthe DOW ( 20 points on ES).
Had the spike down not occured ( first close) I would have doubled my points to 60, suffering almost 30 points in bias loss.
I'm glad that's over.
 

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Bigbusiness

Experienced member
1,408 23
I find a lot of Fed rate decision days are like this. Sometimes there is little movement until the decision is announced (around 7:15pm our time). Then the Dow often goes in to wild swings. I prefer to have a day off or scalp a few points after the rates decision.
 

ChartMan

Legendary member
5,580 46
Here's a great RS Switch setup today . Who says there is no such thing as a leading indicator? RSI breaks resistance 5 mins before the price.
 

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olwenh

Active member
112 0
chartman,

thanks for these postings - I'm looking forward to following them.

I've started back at 10/3 where you're detailing the trades.

If you don't mind looking back, I'm a bit lost at the beginning of 11/3 you said that support is at 7614 & I can't see where you're getting this from.

many thanks

olwen
 

china white

Established member
979 12
Chart Man,

trading spooz very similarly to myself, apart from I got out at 870 since it is a strong resistance level (used to be a strong support for months...). matey quick question how do u load spooz on globex on sierracharts? is it a special subscription?
 

tradesmart

Experienced member
1,286 22
Hi Chartman,

Thanks for all the hints/tips/info on day trading the DJ.

It’s inspired me to give it a try my self, and I’ve now got Sierra charts with a myTrack data feed and it’s a nice flexible set-up.

Had a good day today, scalping off 119 points from 8 trades (inc. 2 losing trades, but only 10 points down)

My broker’s making more money than me at this rate!

Looking in retrospect, I can see a potential 260 points from 3 trades, so I’ve still got some work to do to rationalise my approach (but hindsight is a wonderful thing!)

Thanks again for all the help.

Regards, TradeSmart
 
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