Friday, December 10, 2010

Slow down on Soft trend days

Some days, such as 2010-09-09 are hard trend days. Signals are clear and well trades usually succeed with trend or counter-trend. In contrast a soft trend day such as 2010-09-10, operates much slower with lots of overlapping bars, trapping traders in both directions.

Except the clear A2 at b27, the rest were all terrible looking signals for longs. Nearly every short signal failed and counter-trend traders who shorted all the way to the top lost terribly. Faders do well on days with overlapping bars with lots of tail. Today was possibly a great day to enter on limit on failed L2.

Another way to get around overlapping days is to slow down and move to a 15m chart. The trading style that would get you chopped up on a day like this would work great on a slower chart.

Today gave an A2 long at b9 and a failed L2 at b24. As with slower chart, you do have fewer signals, but they do tend to work better. As you can see, there was not a single bar that dipped below its previous bar all the way to bar 21.

Just as you slow down in a slow market, you should speed up in a fast market. The opening hour is usually fast moving and slowing it down on a 1 minute chart will reveal some interesting trades. The opening bars created a trading range and b27 broke above it and failed, giving a failed Break Out (fBO) signal. This move went to a measured move of the size of the range.

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