Trading Ranges

Jim Cramer said so…

Today was a day where patience paid off. Before the day begins I usually mark my charts with support and resistance levels. I had several resistance levels between 1.3604 – 1.3610; most recent swing high 1.3609, pivot resistance 1.3610 and value area high 1.3604. This forewarned that this was a level to watch. At 9:35 the price went as high as 1.3615 and with no follow thru we shorted at 1.3610. Price took approximately 1 hour and 20 minutes to go down to our target with little retracements. A very easy 75 pips.

Because it is Friday I have a rule about entering trades after 11 am CST. But if you did not have this rule you could have use the Fibonacci Retracement Tool to knock out another 100 pips as price corrected EXACTLY to the 38.2% retracement level before taking another plunge.

Have a great weekend.

Doji’s are a well known Japanese candlestick pattern, but I beleive Bill Eykn gets credit for coining the term “doji sandwich”. What is a doji sandwich? It is a doji sandwiched in between an up and a down candle. When you get a doji sandwich near a support/resistance line it is a pretty reliable signal that the market is going to reverse.

In the above screen shot the doji appears at yesterday’s high which would have provide you with a low risk entry (stop 1 tick above YH) before promptly selling off for a good 10 – 12 points. I did not take the trade as it was too close to the pit closing time.

In 2003 Douglas E. Zalesky published “Discipline for Day Traders”. The introductions starts:

The success that a trader achieves in the markets is directly correlated to one’s trading discipline or lack therof. Trading discipline is 90 percent of the game. The formula is very simple: Trade with discipline and you will succeed; trade without discipline and you will fail.

Well this has been quite ironic in that when I traded well, and with discipline, I lost money. When I traded on impulse, I won, and won big.

I know that in the long run this is a recipe for disaster. I’ve already traveled that road. The reason for this post is to acknowledge that the money I made this week was a fluke. Time to cleanse the thought that today’s trade can be repeated. Time to get back to disciplined trading.

Trading mantra #15

Love To Lose Money.
No I’m not crazy. What I mean is to accept the fact that you are going to have losing trades throghout the trading session. get out of your losers quickly. Love to get out of your losers quickly. It will save you a lot of trading capital and will make you a better trader.

Monday is the day the market will pay you to be disciplined.