A Professional Approach to Trading Futures

[steven46]

Today is Jan 10, 2025

We post our standard Markup showing the larger context (daily candles)
on the right side, and hourly candles on the left side.

For the daily chart, we see what looks like a potential reversal, based on
the liquidation (activation of resting orders below the previous "weak low")
We also note that the skew (red line) is in close proximity to the VWAP (Black
Dots), and that signifies a symmetrical market, meaning that the odds of a
move up or down are about 50/50 (currently). In our experience what this
means is that the market is waiting for economic news (Ave Hourly Earnings
and Unemployment). In addition, this morning the American People will get
to see the person they elected to be President, sentenced as a convicted felon.
A remarkable display of cultural decline.

Going forward it is our job to create scenarios so that we can trade this next
US Session. As usual, we have already reviewed previous historical charts
(Dec 6th for Ave Hourly Earnings, Non-Farm payrolls & Unemployment Rate)
We attach that chart below so that readers can see how that played out. Notice
that the initial reaction was significant, then at the open, the Market created a
strong green candle. Professionals view that "risk event" as an opportunity for
a scalp, and were able to obtain +5 and +10 if they stayed in the trade. We are
NOT suggesting that this session will be the same, only that there is a tendency
for repetition IF the data is similar.

Good luck

 

[steven46]

Hello Traders

There is an interesting lesson that can be learned from today's ES Market

The previous post contained two charts, The first was Dec 6th, and the point
was to show how the market reacted to previous economic data.. The pattern
was simple. At the release of data (prior to US session open) price reacted strongly
one (1) hour later the US session opens and it reacts similarly

Today the US session displayed interesting symmetry. At the release of data, the market
reacted strongly in the opposite direction (this is called a "tell") because it foretells the
the probable direction of price when the US session opens. Sure enough, the US session
opened and continued lower.

The reason I ask students to review prior charts is to obtain some idea of what to expect
IF the release of data is similar. In truth, it is equally important to understand the context
which in this instance, changed. Skilled traders look at both, in order to anticipate how the
market might react AND in order to create reasonable scenarios (price reacting both higher
and lower).

In this case, the market reacted to data that was SO positive, it created the impression that there
would likely be FEWER rate cuts in 2025 (according to the "FedWatch tool" traders rely on). This
caused the market to move lower. Was there a way to anticipate this? Well if you work for a top
tier institution and/or have access to the best analysts, yes. But if like most of us, you do not have
that resource available, what can you do? Simple, go back to the "Tell" (The initial candle after the
release of data). That candle (1:30pm London time) will often let you know (a full hour in advance),
which direction the market will take when the next session opens.

 

[steven46]

Hello Traders

Got up a bit early to look for continuation entries (short)
and found this

Just a scalp however I like these because odds of success
are high AND they are so predictable

Good luck

 

[steven46]

Difficult to do this (post) and manage trades properly

I am out here, probably early, but wanted to preserve
my scalp. I entered on a limit order, filled at 32.25
and am out at 25 for +7pts

As mentioned previously I trade units of three (3)

Nothing more until the US session opens (a little more
than one hour from now).

 

[steven46]

Finally, this reversal occurred just after my exit
as buy orders came in to lift the offer. Strong
move suggests higher prices at the open if we
can get above the VWAP

Whatever the case, we will adapt accordingly

Good luck

 

[steven46]

and here is the larger context for my decision
to short the market prior to the US session open

1) Break of Structure Fails in the overnight (Asia-London)
Session
2) Multiple test/fails on the smaller time frame
3) Statistical Skew concurs

When structure, price action and skew agree, odds
favor the move lower.

I expect this to be a busy day, so I won't be posting again
during the US session.

Good luck

 

[steven46]

Good Evening Traders

On the right side, a chart with Daily Candles and a VWAP envelope
with 1st standard deviation bands on each side of the median (VWAP)

On the left side, a chart with 15 minute candles showing current price
as of 6am (London Time) AND my targets for Tuesday & Wednesday of
the coming week. We assume a trending move higher based on the
inauguration of the US President Elect. As always, if we are wrong, we
have a "Plan B" (initial targets below current price), all of which are based
on estimates of local volatility. For readers who may have read my previous
posts (and paid attention), it should be evident that price has already broken
out above the 50 period EMA, pulled back, and then institutions entered
orders to buy, moving price higher. At the open of the US market (about
2:30pm London time), traders will want to know whether those institutions
will continue to add to their already profitable positions, or will they take
profit. We are betting that their will be a little bit of both, with a minor
pullback (initially), followed by resumption of previous trend higher.

We do not show the skew, because we create it just prior to the US open
Based on experience, we believe it will be (initially) to the upside. As with
most sessions, the first hour will tell the story and we will adapt accordingly.

Good Luck

 

[steven46]

Referring to the previous post, readers can see that our scenario
was accurate (this time). London session opened and went sideways
until shortly prior to the open of the abbreviated US Session. Then
price pulled back slightly. Institutions came in to buy the market 60 min prior
to the open. This is a strategy used often by institutions and commercials
who know that if they "trap" participants out of the move, they will chase
and those late entries will extend the move. The "tell" is the initial WRB (Wide
Range Bar).

Here in the US this happened early and skilled traders able to anticipate and
manage the trade had a very profitable day, +30 pts. I am done for the day.

 

[steven46]

Hello Traders (Those of you who actually trade)

Here in the US (on the West Coast) it is 6:30pm and the Inauguration process
is completed. The United States now has its first convicted felon president. What
a remarkable achievement, and (in my opinion) a sign of America's cultural decline.

Getting Back to Trading

We post another chart referencing price action from the previous London Open.
Notice the way price moves relative to the central point (VWAP Median), and how
it then moved both higher & lower to test the 2nd SD (Standard Deviation Band)
and even the 3rd SD, before returning to test the Previous London Open. This was
one of three (3) possible scenarios that we (and other professionals) considered
and will trade in the next few days.

Trading Plan(s)

As mentioned we have three (3) possibilities in mind for this week. They are obvious
as follows

1) On Tuesday, for the first 30-45 minutes, price will create a 10pt trading range,
and within that range, either a wedge (3 pushes up or down) or a double bottom
will form, from which a trend move will occur to retest our previous target 1, and
then (possibly) continue higher towards target 2

2) Again on Tuesday, it is possible that news will impact the session as US institutions
start to see problems with many of the over 100 executive orders that were signed.
If that is the case, we see price staying within a trading range (approximately 20 pts)

3) Finally, depending on the reaction of institutions worldwide, to possible Trump tariffs
and the pending earnings reports, we could see a reaction to the downside, as institutions
sell, to protect profits. This would foretell a stronger correction to the downside of about
10-12%.

Tomorrow will be an interesting day

Good luck

 

[steven46]

Here is the London Session and (again) we
see the opportunity that presents itself due
to the volatility generated by the Inauguration
of the US President.

Based on the markup, we saw two (2) setups
(breakouts) and each one produced five (5) pts

We will get some sleep now so that we can be
ready for the US session in about 5 hours

Good Luck

 

[steven46]

Here is our mid-day markup showing entries based
on the identification of price action as "trading range"

Once we identify the price action we adjust our approach
as necessary. In this instance we assume that institutions
are waiting for earnings and response to the initial "Executive
Orders" put in place by President Trump. In addition we have
earnings coming in and those are also dependent in some ways
for on response to those same initial orders. Trading range
strategy is simple. Once the range is established, we wait for
tests of the boundaries. We also enter at tests of the VWAP.
As seen in the chart attached below, there have been several
good long entries to this point in time.

 

[steven46]

Target 1 hit (again)

Refer to previous posts for context and
trading plan outline

Done for the day

 

[steven46]

Hello Traders

Let's just go right to the bottom line

The VWAP envelope is the most effective way to know what the top tier
institutions are doing RIGHT NOW, and what they intend to do, during each
successive bar or candle. The way that is done is fairly simple. You look at each
bar or candle in terms of size, how the bar or candle closes, and where it closes relative
to each VWAP band. IF a trader really wants to make a change (for the better), THIS
is the tool that they need to learn to use.

Good Luck

 

[steven46]

This is simplification of the process I teach
It applies to the type of open known as
"Trading Range"

Opening Trading Range

Step 1 Evaluating the Open

We base our trading plan on the idea that initially
institutions are signaling each other (using specific
types of orders to buy and/or sell). During the 1st hour
or so, these orders tend to offset until a specific constellation
or pattern is created. Recognition of the pattern(s) is critical
to anticipating when to be alert and ready to enter. The chart
attached below shows one of the patterns (that we call a "weak
high or low, also known as a "failed auction"). Once we recognize
that pattern, we then need confirmation. We get that confirmation
when a single bar extends above or below the pattern. As it extends
it activates resting orders (stops) and that is part of what fuels the reversal
in the opposite direction. So once you see that, you wait for a breakout
the other way.

Step 2 Trading the Breakout

This is simple. You wait for price to break above or below a "Key Reference"
Key References include A) Previous highs/lows, B) VWAP bands, C) 20EMA
D) A specific price (also known as a "big round number"). Once price CLOSES
above or below one of these "Key References", Entry is possible at, above or below
the next bar (we cover the specifics in our class).

Step 3 Management

Management of the position is a critical step. Success is dependent on learning
to manage emotional impacts (also known as risk aversion). This (for some) is a
make or break issue. Successful traders learn to manage emotions in a number of
ways. One effective method is to address the additional tasks necessary to evaluate
whether to A) Hold, B) "Scale in/out" or C) Exit with a win/loss on the position.
We show struggling traders how to focus on the data that really matters, not on
their irrational fears.

 

[themarket]

Hello steven46. I'm interested in the US open, thanks for sharing.

 

[steven46]

You're Welcome

Hope you enjoy the posts

 

[steven46]

This evening as the London Session Opens, I thought
I would post a very simple, stripped down chart that
consists of only price and a 20 EMA. I have marked
the tests of the 20ema, and it should be clear that
one could (if they were patient) simply trade the tests.

Also on the right side, is a chart with our standard VWAP
envelope and readers should note that yesterday, price
tested one of the institutional targets 6,135.75. As I have
said (many times) this is not coincidence.

 

[steven46]

And here is another version using a more (for me)
familiar chart with VWAP envelope.

Tomorrow will be interesting, because at about 1:30 London
time, initial jobless claims will be released. That "candle" will
be an indicator of market's direction until 4pm London time
when newly elected US president (and convicted felon) Donald
Trump will speak. THAT will be interesting. We have no forecast
for price after this time period and will not be trading it.

Good luck

 

[steven46]

Here is the price action shortly after release of Initial Jobless Claims

Notice that the skew (relationship between the red line & VWAP median is positive
suggesting higher prices well in advance of the release. Most commercials were
building positions in shortly after the open of London session.

 

[steven46]

We are done for the day, and today's session was
easy to trade IF a person were able to manage their
emotions and wait patiently for price to breakout
of the periodic trading ranges.

As mentioned in the previous posts, it is common for
price to create a trading range at the open. For persons
unfamiliar with the term, "trading range" behavior consists
of bars or candles whose bodies overlap, and have prominent
tails. This behavior is easy to identify within the first couple of
bars/candles, and once you see it, my recommendation is to
monitor and wait patiently for price to breakout.

As seen in the attached chart, price did eventually breakout to the
upside as expected, and when it did, it created a +10 pt excursion
which is very common. Institutions want (need) a +10 move to make
it worthwhile to justify acceptance of risk. Knowing this makes it easier
to hold a position. It is this clarity and knowledge that allows me to
make a good living, trading mostly for +10 pt moves (rather than
smaller "scalps")

The most challenging part of this profession is knowing when to enter
a position and where to place a reasonable stoploss.

Good Luck