Monday, February 12, 2007

Russell 2-12-07

After Friday's afternoon profit taking by bears, Monday morning opened up immediately with more bearish activity. This morning presented several excellent momentum opportunities.

First trade for the morning was a short reversal trade at 6:35 at 811.00. This trade was exited at 808.50 for 2.5 points. Next trade was a long reversal trade at 7:10 at 805.70 for 1.2 points. Last trade was a short reversal trade at 808.50 for +0.1.

Well I will say that this morning's trades were entered flawless and I'm very pleased with the low amount of heat I took in these trades. However, I feel in a way that I traded Friday (which was a losing day for me) better because the exits were no where near what my rules dictate. The first trade short should not have been exited until my second entry at 805.70 which would have meant an additional 2.8 points. The second trade should not have been exited until the third trade entered at 808.50 which would have meant an additional 1.6 points. The last trade was also exited prematurely.

After several hard days of making little if any points, it is very difficult to follow the rules. However, today is a clear example of why the those rules must be followed - especially when it is hard to do so. You only get opportunities like today once or maybe twice a week so when it happens you need to make the most of it. Today's net should have been +4.2 points greater than it was.

Net for the morning: +3.8 points
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Anonymous said...

hi ted,

I've been following your trades
for a few weeks now and still trying to understand your entries.

They seem to be almost all reversal trades..
picking short term tops and bottoms.

In hindsight, the tops and bottoms with the dotted blue and red lines are obvious.
But, what made you decide at 6:35 that the top was already formed and it was going down?

How did you decide that 7:10 was the next reversal up?
(how many blue dots formed before you went long)

thanks again for all your insights
and sharing your great system.


Lord Tedders said...


Thanks for the comment. It's good to have someone asking about my methods since it keeps me on the straight and narrow.

To answer your question there are two things not shown on the chart that help me make my decision. The first is that I use a 55 tick chart on the Russell with RSX set to a 13 length. This helps me gauge when to enter a short (when overbought) or a long (when oversold). This helps really keep my entries tight and with the least risk possible. Obviously I use this in conjunction with the 610 tick chart which gives me my over all view of the market.

The second, and this is more hard to describe is the Market depth. I use this at turning points to guage the strength of the market (i.e. tape reading) by observing how "fast" the market is moving. When I see the market stall at a certain price point - then I know that a market reversal is likely to happen. To get a feel for this I recommend watching the tape yourself in realtime or do what I do for extra practice - use either NinjaTrader or a similar product to replay market action tick by tick.

So for the 6:35 trade I saw that the 610 tick chart was overbought and about to roll over (green lines going over to purple). Also I saw that the 55 tick chart was overbought as well. This meant the market had little short term upside energy. When the market stalled - bam I was in. This was a great entry and I saw basically no heat on the trade.

The 7:10 reversal was even easier in the sense that after a devastatingly fast bear move, the market began to consolidate while both 610 Tick and 55 Tick chart RSX was completely oversold. Once the market stalled I saw this as a perfect entry.

Now please take into account that my third trade (and many of my trades) was not anywhere near as perfect as these two.

Hope that helps.