December 14 Overlay, Trades, and Commentary

This post will go in the key posts section.

Very tight contraction at the highs today. We had the 1105.00 inside support identified in the prep today.

I also had a caution in the prep comments for a contraction and sideways market 1105.00 - 1110.25.

Even though I was prepping for a potential contraction, my play in this type of scenario is to initiate mid range positions and hold for a breakout.

I have found that I can get high probability very low risk entries mid range if the price has just reversed off a zone.

I have developed a couple specific entries that work very well for this. Up until a couple months ago, I completely avoided the mid-range action.

I have discovered that there is an efficient way to play the middle 50% of the range. The top and bottom zones each have 25% and there is a middle 50%.

When you get stopped out buying support or selling resistance, it is because a level does not hold.

When you get stopped out in the middle 50%, provided you know how to execute the area, it is because the market contracts or forms a channel. There is no area to hold or fail.

Therefore, if I enter correctly, the only thing that will clip me out of the trade is a contraction or channel forming.

With my knowledge of structure, I can quantify when there will or will not be a channel or contraction most of the time.

This provides me with an edge mid-range that I did not have before.

I call these trades mid-range inside breakout trades and I have taken quite a few of them lately.

They could probably be efficiently scalped but I hold for the range breakout which is a lower probability event. It is lower probability but high payoff.

I prefer the higher payoffs over larger samples because it allows me to make fewer decisions thus less room for error.

I had two break evens today. Both had decent excursions but not what I was looking for.

I did everything I could. My goal is to put my self in position to be in the trade when the market opens up. That was what I accomplished today.

Overnight Moves:

I just wanted to mention that for the past week or so that the major moves have happened in the European session.

We have been seeing intra-day contractions followed by overnight breakouts.

This evening is another example of this. There was a contraction today with inside support so I will be looking for another overnight extension to the upside.

Being able to recognize this type of structure can save you multiple intra-day stop outs in a contraction.