Tuesday, March 15, 2011

Wide range days

The first time a huge gap down appears in a down move, there is a very good chance it will be bought and turn into a bull day. Bear moves bring large range days and one needs to exercise great care when trading these, especially the first few bars.

One option is to trade a shorter timeframe, but you need to be more agile and your failure rate could be higher. The second option is to trade fewer contracts, which is not usually an option for traders who are already trading small size. The best option therefore is to only enter on small bars and even on big days you will eventually get such a set up.

When there is a strong trend move at the open, you should always take a 1st pullback and hold it till you encounter signs of trend termination. If you get a windfall because of a couple of large bars, its ok to exit and wait for the next trade or end your session.

On a FOMC day, its best to wait for a breakout bar and go with its failure. Today we had a strong bar b58 whose low did not trigger and the price broke above the trading range. a BP long trade at b62 gave a measured move of the trading range between b36 and b58.

Traders who held till the end of day or sold at the 3rd push of the spike and channel from b59 to b76 profited 30 points or so and this is something you can often see in wide range days of bear moves.


  1. Hi cad - I love reading your stuff. Great work.

    I hope it's OK for me to ask questions about older posts.

    1) How did you identify b2 as a fbo and where did you enter? Above b2?

    2) Why isn't b5 the 1rev? The gap down open was prior strength. Would it have been a valid trade?

    1. I may have entered mid-b2. This is a kind of entry I do not normally take, I prefer to enter only on the 1PB. Basically on a smaller timeframe it was a fbo of a small range. When the recent day ranges are very large (30+pts) and each bar itself is large, I will often trade a lower timeframe.