tothetick support and resistance blog

You can see clearly how being patient, waiting for the flush out to occur, can lead to a better entry and more profitable trade.  Yes, you may miss some nice winning trades, but the goal here is to be profitable with minimal risk, not take every possible trade!

I hope this short lesson was valuable to you!  Feel free to provide feedback, and look for additional postings every week or more.

Good Trading,

Greg
Founder and Chief Market Analyst
www.tothetick.com

Fellow ToTheTick’ers, I hope that trading is going well for you!  With the increased volatility in recent months, the market has provided excellent opportunities to make money.  Our zones are consistently calling the highs and lows of the day.  If you are not consistently extracting profits out of these markets, please contact us as soon as possible so we can assist.  With proper risk management, there is no reason not to be making profits in this current environment!

This week only, we are offering a special promotion.  We are offering our 6 month subscription to all markets, including the NinjaTrader indicator and the TurningPoint System, normally $495, for only $295, with 3 bonus months kicked in(9 months total).  We want to make our services affordable to all, and we know that the longer you watch the zones, and trade the zones, whether sim or live, the better you will be at extracting the large profits available from the typical reaction when price enters one. In addition, anyone who subscribes this week(open to new or existing subscribers wishing to extend their subscription) will get a one hour training session with me, where we go over trade set ups, zone trading methodologies, etc.

If you choose to take advantage of this offer, please use coupon code “fall11″ when ordering.  In the meantime, good trading, and look for an announcement later this week of a new service we will be offering!

Good Trading,

Greg and Joel
www.tothetick.com

So who knows what POMO is?   Hopefully all of you.  If you are a trader, you should get familiar with this term.  Google it.  Because POMO has created this bull market, and will continue to fuel it for the foreseeable future.  As a daytrader, it is critical for you to know this.  The trend is up.  It’s been up, and as long as POMO continues, it will continue to be up. 

The short answer is that POMO is the FED’s program to print money and give it to the banks.  Yes, those same banks that nearly took down the most powerful economy in the world.  Knowing about POMO is important, but it is even more important as a support/resistance trader.  When the market is allowed to flow freely, the market moves in patterns.  The patterns do not always work, but the majority of time they do.  Which is why we trade them.   But, when an artificial element is introduced, such as $100+ billion per month of free money to our largest financial institutions, EVERY MONTH, then the game changes.  Throw historical patterns out the window, for the most part. 

So why am I writing this?  Because I want you, as a support/resistance trader, to keep this in mind when trading.  Especially the ES, TF, and YM.  Markets that are correlated with stocks that will be bought by banks that are flush with free money.    You’ll notice when the POMO activity is in play, these markets rally.  Retracements to the downside are small.  When this happens, when price moves up to our zone, pauses for awhile, then continues up, don’t look to short the next zone, unless a) you have a very strong set up, and b) you keep your risk smaller, and look for smaller targets.  Don’t make the mistake that many make, thinking, “It has to stop somewhere, I’m going to keep shorting, eventually I’ll be right”.  Remember, the market can stay irrational longer than you can stay solvent.  On trend day(mostly up these days), keep your powder dry, look for retracements back to our zones to enter with the trend.  Then extend the trade when price action tells you to.  Exit just short of the next zone, and wait for the next opportunity. 

When the market is trending, take trend trades.  When the market is range bound, take ‘em all.  Typically the market is range bound around 80% of the days.  That will not be the case as long as the massive money giveaway continues.  The link below shows the exact date that this massive injection of money will take place.

http://www.ny.frb.org/markets/tot_operation_schedule.html

One other note – we are having a lot of success using TurningPoint on various charts, like the 1 minute, and Renko, in multiple markets, but especially in crude.  Crude is amazing.  On a typical 20 tick range day in the ES, oil will move 250 ticks.  It trades like ES used to, many years ago, before the S&P became as manipulated as it is today.  If you are interested in this fast moving market, ping me.  Let’s get on skype to discuss.  We’ll also be discussing it in our next webinar.

Good Trading,

Greg

Did someone shut down the ES market and not tell me?  I don’t recall getting that memo…

So two things I want to express in this post.  After reading you will see why I am asking the question above, about becoming a crude trader.

1) Be very careful trading these markets!   With volume so slow, and the “normal” players mostly not around for the holidays, the market will most likely not exhibit it’s normal behavior, if there is such a thing.  Which means, the methodologies that you use, where you are trading S/R levels that are areas where those now-absent market participants are usually waiting, won’t work as well.  Why?  Because of the now-absent participants.  The fib guys, the OHLC traders, etc, are mostly gone.  Volume is pathetic.  So the market can me moved easily by little volume.  Maybe this is a good time to take some time off from trading, evaluate your plan, see what is working, and what isn’t, and improve on it.

2) Have you seen crude lately?  More specifically, our zones, and our TurningPoint System, on crude?  If I were to show you a system that produced over $1,800 on two trades with $60 total risk, would you say I’m crazy?   Take a look at the chart below:

This is today’s action in crude.  Ok, so the first trade signalled 1 minute before crude inventories were released.  More risk there, but the signal was valid.   Over $1,100 move up, with $20 of risk.   2nd one, pure money.  Signaled at 89.04, went only 4 ticks against you, then moved 74 ticks down.  That’s $740 in possible profit, with only $40 of risk.  It doesn’t get any better than that.  Not all trades are that good, but many of them are.  The key is to a) take the valid TP signals, b) minimize your risk(take small losers), and c) let your winners run.  It’s that simple.  What are you waiting for?

Play it safe,

Greg
www.tothetick.com

Note to self – when you trade less, you make more.  Remember that.  Write it down.  Again.  Sticky note on your main screen.  Maybe a tatoo on your forehead so you will see it everytime you look in the mirror(just kidding, don’t do this). 

Actually, I’m pretty good at it now.  Net is, on the non-trending days, which is the vast majority of days(80%+), support/resistance levels are excellent ways to find good entries.  On the other days, the trend days, it’s tougher.  When a large buyer or seller is in the market, they don’t really care about S/R levels, they just have to move a lot of contracts.  Yesterday it was trend down, then trend up.  Tougher to make money, but i caught the low with our zones, which turned out to be a 16 point move up.  Today, 3 TurningPoint signals, 3 winners.  But the first didn’t occur until 9:43am central, which tried my patience.

Trending days(if you are a support/resistance trader) are the days that you need to fight the urge to trade outside of your rules.  Don’t let your mind convince you that a signal exists where it really doesn’t.  That’s how you lose money.  It’s OK not to take a trade.  It’s OK not to take any trades in a day.  Or two days.  Or more.  Think of it this way: 1 point per day in the ES, $5,000 margin per contract, gives you a 20% per month return before commissions.  How many of your friends and family would give you every investment dollar they had if you told them you could make 20% per month.

Remember, not being in a position is a position.  You have made the decision that the best position to be in at the moment is flat.  And there is a very good chance that this decision is saving you money.

Trade less, look for set ups that have a higher profit potential than risk, and manage your trades well.    Do this, and you will see success.

Regards,

Greg

www.tothetick.com

Very nice day for our support/resistance zones and the Turning Point system today, and this week!  Trading ES with a straight 1.5 point profit/1.5 point stop, we have 14 trades, 11 winners, 4 losers.  Net 10.5 points per contract before commissions.  Obviously disclaimers apply, and you have to actually execute the trades, but they are so straightforward, it’s hard not to!

I’m done for the week, enjoying some free time, running a half marathon this weekend.  Have a good weekend, we’ll talk next week.  Be ready for the QE2 effect on the market, might see some strong trend days next week.

Greg

Quick blog entry – reminder to self – take every valid entry.  Nothing worse than a perfect signal that fits all of your criteria and you don’t take it.  Would rather take it and have a loser than not take it.  Excellent signals last 3 days across all markets.  Today is a tougher trading day.  1st loser since last week.  But it happens.  And the day isn’t over yet…:)

The TurningPoint System continues to perform well.  Take at look at the ES today, on a frankly very boring day, in spite of the fact that it was Non Farm Payroll day.  Just one valid TP signal today, but it was a nice 2.5 point winner in the ES, with only 2 ticks MAE(maximum adverse exposure - otherwise known as heat:)).  Signal came at 11:31 central on the 1 minute chart.  Take a look at the screenshot below.

Actually, a very good day for the Euro zones and TP signals in that market today as well.  Look at the 1st valid signal short at 8:47 central.  Signal was to go short close of that bar, at 1.4111. 1 Tick MAE, 94 ticks Best Out.  Doesn’t get any better than that!

That’s it for now.  Hope that you all stayed away from trading FOMC yesterday, it’s a good day to blow out your account.  Ping me if you have any questions on the new TurningPoint System!

Announcements

We conducted a webinar sponsored by Mirus Futures on June 9^th.  We had a great turnout and lots of good questions.  Thanks to Mirus for sponsoring us! A recording of the webinar is available on our website www.tothetick.com.

We are going to be offering a new platform that can be used with the Zones. We should be ready to make a formal announcement in a week or two.  I think you all will be very excited about the platform, charting package etc.  Please stay tuned for details!

Trading Environment

The volatility and volume have subsided from the high levels of the past few weeks.  We had a hard uptrend day on Tuesday and a “rally at the close” day on Thursday…but in general nothing earth shaking.  The cash S&P index was up about 20 points for the week.

Tip of the Week: Handling Almost Stop Outs

The following trade issue happened to me this week, I am sure similar things have happened to you.  How I handled the trade is a clue to my view of the Markets:

I was in a Long trade for 2 contracts.  Pretty much immediately after entry the trade was against me and moving down rapidly.  That sinking feeling of “I’m gonna get whacked” set in, but I stuck with it because the signal I was using was valid.  The price got to where the Bid was at my stop-market price, but amazingly nothing traded there…not one contract.  Yep, right to my stop and the price rebounded.

Bids and offers kept rising, and pretty soon I had gone from a 2 point loss/contract to a 1 point gain/contract.  My target was originally +3 points/contract.  I immediately upped my stop to break-even plus one tic, and reduced my target down to +1.5 points.  I was filled on the target a few seconds later.

What was my thinking? The trade was a loser, and I was lucky to have survived without a stop out.  I view the Markets as generally unforgiving. When the Market decides to give me a “gift” of being wrong and still making money or getting out at break even, I am going to immediately adjust my expectations on the trade and take the gift.  I have to watch it with this type of emotion or I would start trading scared and trying to exit every trade that I was taking a little heat on.  But sometimes, it’s obvious you were wrong in a trade and you should be grateful for the chance to exit gracefully.