The monthly S&P500 Emini futures candlestick chart has not had a pullback in 14 months. This has...
How to Train Your Eyes to See Charts Like a Pro (Part 5)
08/20/2010 12:01 am EST
If you like the corner trade entry, which profit target would you use? Would you use multiple profit targets? What is your risk/reward on the trade you framed?
Because I would only take the corner entry trade if I thought it would be able to realistically reach the prior major high, if not the Median Line, I was not interested in taking profits at the minimum target at eight ticks. But you can see that any of the profit targets I outlined would have worked, and if you had taken profits at some of them, you would have missed sitting through some significant pullbacks in price.
Yet using the simple idea of moving my stop profit order underneath each swing low as it was confirmed by a higher high to "box in" profits allowed me to stay in the trade and ride it higher as price continued towards the Median Line. The original maximum risk/reward ratio on the framed trade was 75 ticks if price had gone to the Median Line in one bar, a risk/reward ratio of over nine-to-one. The actual risk/reward ended up at 16.5-to-one, for a net profit of 132 ticks, which is $4,125 per contract (132 X $31.25) !
As I stated several times, the more you practice drawing in market structure like swing highs and swing lows, gaps, and multi-pivot lines, as well as take the time to consider where large traders (whales) may have left their orders, the better your trading will become.
In the next article, I'll show you a similar high-probability entry and a "second-chance" entry for trading bond and note futures in case you miss the first opportunity for the trade or are uncomfortable with the initial stop loss order.
I hope you found this article interesting and informative. Take the time to practice drawing and planning out your trades and your net profits will grow accordingly.
I wish you good trading!
By Tim Morge of MarketGeometry.com
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