Validea is an advisory service which assesses stocks based on the investing criteria of many of the ...
The Daily Process
03/18/2015 6:00 am EST
Austin Passamonte, of Coiled Markets, outlines why it’s important for traders to always position themselves amidst the sideways congestion ahead of the next directional spike or slam (or both) to follow, citing the market action of last Friday for support.
Through Sickness and in Health
Trading is merely part of the daily life process, fit in there as time and life permits. Never the other way around, because no one ever dictates—through his own desire and will—how life will actually unfold. Best laid plans of mice and men…
S&R by Any Other Name
All financial markets have been rather low energy for the past week or so, too. By that we mean hours of straight sideways chop with minutes of directional surge moves sprinkled within per crude oil futures. The game here for all players alike is simple: position yourself amidst the sideways congestion ahead of the next directional spike or slam (or both) to follow.
Any other expression of that is merely different lingo describing the same act. Trendy new terms you see traders use lately such as supply and demand and value or similar such are just cute ways of saying resistance and support. Nothing else. The trading game is nothing more than positioning yourself around resistance and support, regardless of its label or designations.
Friday’s session was rather run-of-mill for me. Nothing exceptional either way. The day began with a premarket sell that was closed for +25 ticks on a trailed stop while I had to leave the office for awhile. In retrospect, with benefit of hindsight at the end of day, simply leaving that order open through the entire session would have been one and done for 100+ ticks booked. But who knew? More importantly, who could have possibly known at any time?
No one on earth, unfortunately. Hindsight is such a worthless tease to traders, isn’t it?
Following that, I shorted supply in the next sideways zone a few times with repeated chopped stops. You never know which countertrend thrust is merely one of numerous pullbacks that hold or the next abrupt v-turn move that blows five miles the opposite direction. So you treat them all the same with judicious stops that don’t allow large losses to happen. End result of this entire sequence was -30 ticks for -5 ticks cumulative.
Eventually that supply zone failed to attract demand and the next leg lower ensued. Caught that one for +50 ticks thru a run-of-mill, rather pedestrian price move. Net result is now +45 ticks cumulative for the day.
After that, no further price movement happened for the balance of the day. Once again we go back to the whole hindsight thing where you couldn’t know at the time whether price movement was over with—or far from over with—for the day. My personal choice was to keep trying, selling supply and then buying demand zones with no real culmination of either term. But you never know…could very well have been another +50 to +100 tick move in there anywhere.
End of day result? +47 ticks after too many turns in a trending, low energy trading session. Not a poor day and not a great day. Just an average day in the life of a trader. At least, the life of a trader who is part of our fold.
By Austin Passamonte of Coiled Markets
Related Articles on STRATEGIES
The Roman philosopher Seneca wasn’t talking about the stock market when he wrote that “T...
The Dow Theory was originally referred to as “Dow’s Theory,” since it was based on...
When stocks are selling at valuation extremes and consumer optimism is at one of the highest levels ...