Yesterday I wrote about the Taylor Trading Technique Sell Short day in the eMini S&P Futures- how the TTT told us to anticipate a selloff and how we could short the market when we had confirmation of the selloff. (You can read that post HERE.) The TTT posits that markets move in a repetitive action / reaction manner so the odds would favor a rally today, and in last night’s Swing Trader’s Insight update I listed the eMini S&P futures as a TTT Buy day for Friday.
For Friday’s TTT Buy day we might look for a move lower early in the session as the bearish momentum was expended. This puts in a bottom, the market begins to rally and we look to go long when we have confirmation of the rally.
If you were trading last night you were able to trade the initial trend reversal. Using Thursday’s 1948.50 low in the ESU as our reference price, the eMinis dropped below that level at the 5 PM open and subsequently rallied back above it around 6:45 PM- the “official” TTT Buy day entry. It continued the advance overnight, making a session high of 1958.75 by 6 AM Friday morning.
Now, I don’t generally trade overnight. There only so many hours in the day and I don’t like to trade if I can’t devote my full attention to it. For this reason I often look for alternate entries for the following day, assuming we have already had the initial TTT entry (confirmation of the directional signal).
So when I was writing this morning STI watch list I was looking for another potential trade entry for the day session. We could either look for a pullback to support (I listed 1953.00) or a rally above the Fibonacci retracement level at 1960.25. The Fib level marked a 50% retracement of the selloff from Wednesday’s high to last night’s low.
I often use 50% retracement levels as a reference price- if a market makes a solid move through a 50% level I look for that move to continue. For this reason I may use them as a trigger for a trade entry, assuming the market will continue to move in that direction.
Thus, for the day session we would look to go long when the market rallied above the 1960.25 Fib level. (I also drew the 1958.75 overnight high on the chart, following the overnight pattern setup I discussed yesterday.) The initial long entry occurred in the first 10 minutes of the day session and the market traded back and forth over this level until a definitive move higher around 9:45 AM.
Looking on the intraday chart, we could place the initial stop loss below the 7 AM low at 1954.75 (giving an initial risk of just over 6 points) or below the day session low of 1957.25 if you wanted a tighter stop.
There wasn’t an obvious early profit target for this trade. There weren’t any intraday highs or lows to use. For the 50% retracement entry I usually have a profit target of the level at which the move began and Wednesday’s 1978.00 high seemed pretty ambitious. The best course of action (assuming you didn’t have your own objective in mind) would have been to trail your stop loss higher; the intraday pattern of higher highs and higher lows was evidence of the uptrend.
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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