This originally appeared as a blog post in Scott Hoffman’s Futures Insight Blog on Monday, June 16, 2014.
Because they have two distinct trading sessions in a day, the grain futures markets can give you trade setups that might not occur in markets with around the clock electronic trading. The Taylor Trading Technique is one trading methodology to exploit the later market open.
The December corn futures were on the Sell Short day of the Taylor Trading Technique cycle for Monday. The Sell Short day told us to look for early session strength; this would be an opportunity for a short sale before an anticipated market selloff. For Dec. corn we would look for resistance between 448-6 (Fibonacci retracement resistance) to the 450 area (psychological resistance).
Last night saw CZ open at 444-0 and rally to a session high of 449-2 shortly before the close of the night session. This rally took it up to our resistance, giving us a price area to use as for a reference price for the day session.
The day session opened at 448-4 and made a high of 449-0 before selling off. This failed rally gave us our short sale opportunity, shortly after the day session open. The initial stop loss could go above Friday’s high of 449-6; if it rallied above there we would close out our trade, taking a relatively small loss, leaving us free to look for another opportunity.
As it turned out, the stop loss was moot as corn quickly sold off. Friday’s low of 443-0 was the first downside target; this was hit around 9:20 AM. The break of Friday’s low led to a selloff to the session low of 441-2 (a move of about seven cents / bu.) If you wanted to take a quick profit, the 9:45 AM failure to clear the previous low for today was a signal to cover shorts. If you wanted to hold out for more, last Thursday’s low of 438-6 would be the next downside target.
Essential Guide for Futures Swing Trading
In this guide, experienced trader and broker Scott Hoffman explains the trading methods he uses to analyze and trade the futures markets and to publish his trade advisory, Swing Trader’s Insight.
STOP ORDERS DO NOT NECESSARILY LIMIT YOUR LOSS TO THE STOP PRICE BECAUSE STOP ORDERS, IF THE PRICE IS HIT, BECOME MARKET ORDERS AND, DEPENDING ON MARKET CONDITIONS, THE ACTUAL FILL PRICE CAN BE DIFFERENT FROM THE STOP PRICE. IF A MARKET REACHED ITS DAILY PRICE FLUCTUATION LIMIT, A "LIMIT MOVE", IT MAY BE IMPOSSIBLE TO EXECUTE A STOP LOSS ORDER.
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