The “Three Up, Three Down” Trading Strategy (Part 5)

06/26/2009 12:01 am EST


Timothy Morge


If you will, please think back to the beginning of this article. I love to teach and I am in the “giving back” period of my career. These moves came mid-day, well after our pre-market sessions ended and too far in advance for me to accurately predict where a probable entry would form. I was able to catch a ride on the slide, but would the traders who attend the pre-market sessions be able to apply these techniques as the day unfolded? Would they find an entry after the break of the three drives to the bottom?

Let's look at two charts I received, unsolicited, after the market closed that day:

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Dave S. sent me this chart after the close, with these comments:

"Hello Tim.

Thanks for spending time reviewing the market structure during your morning sessions. This (chart of the) ES today shows a good example of the 123-hit-the-range-then-break set up the range test 1-2-3 or however it is called. This was another great trade today using the stuff you have taught me in the morning sessions. Again, thanks for your teaching efforts as they have improved my trading."

Dave chose to sell the top of the 1-2-3 range at the test of the down-sloping upper Median Line, anticipating a break of the bottom of the range, and he put his stop above the prior swing highs, much like I did in my own trading.

And here's a second chart, from another trader who attends the morning pre-market sessions:

Click to Enlarge

Wayne T. waited for the three drives to the bottom line to be broken and then sold a re-test of the midpoint line between the upper parallel and the Median Line. He ended up closing his position at 908, earning a nice, 15-point profit.

He said: "I really took advantage of the great trading using this 1-2-3 set up today! My account is growing nicely and I hope everyone is taking advantage of these techniques you are teaching in the morning sessions."

There are traders who can just plain trade, but they don't really have a repeatable trading methodology. I am fortunate to have developed a trading methodology around repeatable patterns and it is clear that this methodology can be taught. There is no better feeling for a teacher than watching their students successfully (and in this case, profitably) apply what they were taught. It is a sign that you were able to teach what you set out to teach, and as a mentor, it is a sign that your own profitability is due to a teachable methodology, not just your own innate trading ability.

I received 15 e-mails that day, all outlining profitable trades in the stock index futures markets. And when I thanked everyone the following morning for sending me their e-mails and charts with the profitable trades, four or five more traders chimed in that they, too, had caught the move and promptly sent me their charts from the prior day! I can't show the 20 or more charts here, but you can bet I felt 100 feet tall that morning! I made a nice profit on the move down the day before, but more important to me, many of the people who attend my morning sessions caught it as well, using a technique I taught them that same morning!

I wish you all good trading. Read Part 1 | Read Part 2 | Read Part 3 | Read Part 4

Timothy Morge

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