Trading mid range has always been one of my weaknesses. Regardless of what time frame you are on, if you are in the middle of a range or a channel, the market is at a tipping point and it is difficult to determine the probability of what a given rhythm will be. Yesterday was an example of that. Without a doubt trading yesterday, I developed experience in trading a certain rhythm. Yesterday was a low VIX, low vol. grind higher. It traded in a very tight 5 minute channel and consisted of mini consolidations follow by mini breaks with very hard to navigate retracements.

I had the early bull bias nailed, but price neared prior day resistance, I got into trouble. My initial bias was that price would remain in the consolidation/range it had been in after Wednesdays run higher. My trade premises were thus shorts with the expectation of it rotating back down. As you can see that never happened, and I was doomed to fighting the tape, scratching and reentering higher getting squeezed all the way up. I gave back the nice profit I created this morning. When I finally realized what was happening, I started looking for fades, but given the low VIX grind rhythm, to find a fade that paid adequately was something I could not accomplish. The entries were nearly impossible to time. As the old saying goes, never short a dull market. Fades work best in emotional markets. Yesterday, that panic and emotional overshoot was not there. The rhythm was setup by the daily bull channel, supported by hourly bull trends within the channel.

 

The pink bar represents yesterday. Before the day opened, you can see air to the upside as price was in the middle of this channel. Price had also been somewhat consolidated over the past 2 days or so. That pink circle shows the bear trap that drove my bullish bias in the early part of the session. Shorts were stuck and they got chewed out. I'm not saying I should have bought and held long, or got long as it retraced from the 3rd/4th/5th pushes, but I need to recognize this market rhythm and no to not try to short it. Oh yeah, and look at 3 line break.

 

 

Trading is all about remaining objective and adapting to different market rhythms and conditions. I will admit I got a tiny bit emotional yesterday, after giving some back, I was too eager to try to get it back. I was afraid of missing the one and only fade opportunity, thinking it would really be my only chance to scrape out a winning trade. The result was loss and frustration. With each day in front of the screen, I get better at identifying when I'm dialed in and when I am not. As I build the armor each day, I get closer to that tipping point where my trading potential will breakout and my very own Chinese Bamboo Tree will grow to the sky.

 

 



Today was one of those very strange days where I had the market rhythm pegged to the tick. I was able to feel where the market was likely to go, placed my orders got filled and saw price move in my favor almost immediately. It is fascinating how some days this can happen, and others it feels like you are fighting the current all day long. I believe what it has to do is aligning yourself with the current market environment. For me, certain market patterns, chart patterns etc. are more easily identifiable. For example today, the 60 min had put in a nice bull cup, at the bottom of a daily bull channel, and we opened up gap down (the blue line on the 60 minute chart) with air to the upside to fill. Tick opened at -900 and price just wasn't really going down. All day I was able to maintain my bull bias and take advantage of any tests lower. The key will be screen time. Learning how to identify the immediate rhythm with conviction and knowing when I don't have it and to avoid any trouble. The daily bull still seems to be in control. That doesn't mean that everyday is a bull day, but it serves as further confirmation for bullish price zones.

Rhythm showing a 2 hour bear trend channel within the daily bull channel. There is air on the 120 min channel as well as air on the daily channel. When these two rhythms align around 1650, I think there will be very high % long premises. Today we just chopped around inside of the top of that 2 hour trend. The high % trade today was the buy at the open, air fill to the top of that bear trend. Tonight something will give on the debt ceiling incident. Something will either be passed or in a more surprising turn of events, the gov't will temporarily shut down. Either way I believe there will be some sort of price reaction that could muddy the waters OR provide some great opportunity. Bottom line is be careful, stay patient and play your game. Not taking action is always better than taking losing action.

I hated today's action. As the market opened, I never was able to get in synch with the rhythm, pace and market pattern. I was also strapped for time because I had my other business obligations looming. I don't know why, but I was putting on position in a market I had no feel for. Maybe because I felt pressured to get something going because I wasn't going to be there all day? Or maybe I became complacent due to recent successful trades. Either way I got chopped up in that red circle there. No bother though. Every mistake is just an indication of where I am in my development as a trader and provides a lesson on what I need to do to improve!

Price traded in a range again today. But todays support and resistance levels were lower than the prior days. Could be a sign of weakness... Also, a slightly sloppy head and shoulders pattern is forming on the high time frames. Could see air on the daily channel fill down to 1650 if this breaks down. The break is hard to catch, so don't get emotional and try to preempt it, there will always be opportunity in the wake of a market splash. Let things develop and let the logical side of your brain stay in charge.

Week 3: The Tao of Poker

Rule 249: Enter the white fear. A really devastating loss can change your perception.
There is a certain kind of loss that is psychologically crippling. It is of such intensity and dimension that it takes the wind out of your sails and knocks you completely for a loop. It is both the magnitude of the loss and the way it happens that grants it special recognition, moves it up into your "Top-5" list of horror-shows. It almost feels like a personal offense, a betrayal the way it happens.

Will such an occurrence make you change your long-term approach? Probably not. But you'll never think of things in quite the same way again. Something changes in you. For you now know this type of situation is out there. it can exist and it can happen. From now on it will always be in the back of your mind, and will color the way you view the world forever.

 

Pretty inopportune action overnight. I caught a nibble at a long at that green dot. But price seems to really be on the fence at this 1690 level. I guess as long as its holding above I'm biased long. Be aware though that sooner or later a direction will be decided upon.

The 1690 support was tested about an hour after the open. Price traded below support for about 15 minutes, probing as low as 87.5. By retaking the 1690 support, stuck shorts set up a great long premise. As you can see on the 15 min. chart above, this second 1690 probe short showed a weaker stochastic. This plus the VIX (which isn't pictured) gave added conviction. I entered at the green dot when the bull cup patters was completed. Price eventually ran out of momentum at the 1700 resistance, which has proven to be legit. It finished down back at 1690. This has been like an extended MATD oscillation environment reacting to Friday's bear trend. Looking forward to see how this develops. #dialedin