CLICK HERE FOR HD VIDEO OF TODAY'S SHORT TRADE HELD THROUGH VOLATILE NEWS RELEASE WITH AUDIO COMMENTARY
Early posting today. No gym this evening.
I had 3 decent trades today. The read was good but the market was contracted and really did not go anywhere.
The first trade I took just after the open. It was a breakout short with micro confirmation and had a tight stop. I was 1 tick from getting stopped out of it. That is all it needed though. Had it moved up any more, it would have required a much larger stop.
It was a short into support. I will talk through this a bit because it is important. I was comfortable shorting into support out of a contraction because there is a kicker for a big move down.
The premise is that if support holds I could go break even or take a very small loss. I let it ride through the news release. I was expecting a volatile reaction.
I had 5 points open equity prior to the release. Some might ask why I did not cover. The answer is simple. I have really been trying to 'not think" at all about my trading decisions if that makes any sense.
Basically, if I would have covered and the market would have sold off 15 points, I would have been irritated and likely to take a much worse entry to try to catch it. Here is my thought process:
If I book 5 points after covering and then the market starts to selloff after the news, any subsequent entry will likely require a minimum 3 point stop to even have a chance.
If that trade does not work, I am left with 2 points profit which is insignificant and risking going negative on the day if I take another entry trying to get back into a position that I got out of.
Why not just let the premium entry work? I am risking repeatedly giving back 4-6 point excursions but covering early is risking missing additional 4-6 point excursions.
With proper prep work and understanding of market structure, I think it is easier to balance the exits by holding to targets. This can get ugly if a channel or contraction develops so I must trust that I can quickly identify these conditions.
The long I took had a very premium entry. It was actual confirmed with micro structure and below the support line. I was confident in the long because I read the depth of the extension past my zone.
This is key to my trading style and I would like to elaborate on my extension reads in the future. My inside lines act as a "baseline" or nested median of sorts. I rarely make plays off the line itself and gather information by how the markets "acts" as it approaches and comes in short of or extends a line.
I had a 5 point excursion and the price cam back and clipped me out break even almost at the low tick. I do not mind this.
One of my rare mechanical rules is a break even after a 5 point excursion. I will break it but not often.
When I see a deep extension like what we had today, combined with an extension retest, then a move up and pullback to initial support; I will never anticipate a significant run to the opposing zone.
In my experience, the market does what it did today almost all of the time. It grinded up off support but made no attempt to move back up to resistance.
A shallower pullback would have been more likely to produce the move to 1112.00 I was looking for. If it was shallower, there would have been no contemplation of a break even because the price would have never made it back to the entry point. It makes the right move fairly clear.
Some do not like passing on 4 points but I do not think I will make a career out of weak 4 point moves.
Overall, I think today was very well traded even though the profit was minimal.
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