In This Issue
Trading 101: Understanding the environment you are trading in
Reports and Expiration Notices
From Elliott Wave International and E-Futures.com
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by Ilan Levy-Mayer, Vice President, Cannon Trading Co. Inc.
Many clients have asked me in the past what I think is the key to day-trading the e-minis (mini SP, mini Dow, Mini NASDAQ, mini Russell) successfully. While I don't think you can pinpoint one major factor and trading is a combination of many factors, ranging from capital, skills, emotional capacity, training, experience and more, I think that recognizing the type of trading day I shaping in front of you is one of the biggest keys.
I would say you can categorize the "day-trades environment" into 3:
1. Choppy, directionless day.
2. Strong trending day
3. Volatile day with actions on both sides.
If we knew the answer to what day this is going to be before the market started, our chances of trading well would increase significantly, however, I have yet to find a way to predict that in advance. There are times that the first hour of trading combined with other factors can help you though. I will touch on that a bit more after explaining the types of strategies I believe are suitable for each of the trading days types mentioned above.
1. Choppy, directionless day
Most suitable for "trend fading" approaches. This can be done in many ways. Configuring support and resistance levels and trying to "sell high, buy low" against these levels with the assumptions that this is a range bound day. Another strategy will be to use over bought, oversold indicators and use them as triggers for buy and sell. Examples can be, selling the market once price crosses above upper Bollinger bands or buying the market when %R or RSI suggest oversold levels. Needless to say it would be more than smart to use stop loss orders in case the market does break out.
2. Strong trending day
Days like this, are fun if you are in the right direction. I use different indicators such as oscillators and stochs to limit my self to either attacking only from the buy side or only from the sell side. In case of an up-trending day I will use pull backs to re-enter the market only from the buy side and I will use cross of fast moving average or stochastics on lower time frames to re-enter the market. Biggest mistakes traders do on days like that is trying to predict bottoms or tops.
3. Volatile day with actions on both sides
Personally I like these trading days the best. Technical indicators like DMI crosses, MACD, support and resistance levels work well on days like that and the range allows for profit on both sides.
The SP market for example has evolved over the last two years and now days we see much more choppy days (type 1) than we see type 2 or 3. A few reasons for that: The market is right now in a mature cycle, the evolution of automated strategies and back testing has increased the level of traders who buy oversold intra day and sell over bought intraday, therefore contributing to narrower trading days and the new SEC rule that eliminated many of the smaller size day-traders on the equity side (what I call the 25k day-trading rule).
Now for the big question, how do I recognize what type of day it is?
No magic answer here (have you ever seen one in trading?). A few factors I like to look at before starting the day:
1. What type of day did we have the last few sessions? If we had a couple of volatile days in a row, chances for choppy day increase.
2. What reports are due? Days with multiple reports on different times of the day can contribute to type 2 or type 3 days
3. Where are we on the daily/weekly chart? It is always important to view the bigger picture in order to get an idea for smaller time frames. If you know for example that 1225 is a major support on the daily chart (as it was a couple of days ago) you may use that in your day-trading as a short trigger once support was broken or as a long trigger if it held, even though it is not a support / resistance level intraday.
4. Overnight trading and the first hour of trading - If the market made large overnight moves, stronger chance of having type 2 or 3 days. If the market is unable to take out first hour, hi/lo stronger chances for type 1 days.
Those of you who wish to expand on the topic, view charts, formations and indicators used for each of the trading types, please contact us so we can include you in the next webinar targeting this topic.
Happy Trading!
Disclaimer:
Trading commodity futures and options involves substantial risk of loss. The recommendations contained in this letter is of opinion only and does not guarantee any profits. These are risky markets and only risk capital should be used. Past performances are not necessarily indicative of future results. This is not a solicitation of any order to buy or sell, but a current futures market view provided by Cannon Trading Inc. Any statement of facts herein contained are derived from sources believed to be reliable, but are not guaranteed as to accuracy, nor they purport to be complete. No responsibility is assumed with respect to any such statement or with respect to any expression of opinion herein contained. Readers are urged to exercise their own judgment in trading!
Source: Moore Research Center, Inc.
| Date | Reports | Expiration & Notice Dates |
|---|---|---|
| 06/22 Thu |
7:30 AM CDT - USDA Weekly Export Sales
7:30 AM CDT - Initial Claims-Weekly 9:00 AM CDT - Leading Indicators(May) 9:30 AM CDT - EIA Gas Storage 2:00 PM CDT - Cold Storage 3:30 PM CDT - Money Supply |
FN: Jul Crude Oil(NYM)
Jul Coffee(NYBOT) |
| 06/23 Fri |
7:30 AM CDT - Durable Orders(May)
2:00 PM CDT - Cattle On Feed 2:00 PM CDT - Livestock Slaughter 2:00 PM CDT - Dairy Products Prices |
LT: Jul Corn Options(CBT)
Jul Rough Rice Options(CBT) Jul Oats Options(CBT) Jul Soybeans Options(CBT) Jul Soybean Oil & Meal Options(CBT) Jul Wheat Options(CBT) Jul US Bond Options(CBT) |
| 06/26 Mon |
9:00 AM CDT - New Home Sales(May)
|
FN: Jul Cotton(NYBOT)
|
| 06/27 Tue |
9:00 AM CDT - Consumer Confidence(Jun)
9:00 AM CDT - Existing Home Sales(May) |
LT: Jul Nat Gas Options(NYM)
Jul Heating Oil Options(NYM) Jul Unleaded Gas Options(NYM) Jul Gold Options(CMX) Jul Silver Options(CMX) Jul Copper Options(CMX) |
| 06/28 Wed |
9:30 AM CDT - API & DOE Energy Stats
|
LT: Jun Gold(CMX)
Jun Silver(CMX) Jun Copper(CMX) Jun Palladium(NYM) Jun Nat Gas(NYM) |
| 06/29 Thu |
7:30 AM CDT - GDP-Final(Q1) 7:30 AM CDT - Chain Deflator-Final(Q1) 7:30 AM CDT - USDA Weekly Export Sales 7:30 AM CDT - Initial Claims-Weekly 9:00 AM CDT - Help-Wanted Index(May) 9:30 AM CDT - EIA Gas Storage 1:15 PM CDT - FOMC Policy Statement 2:00 PM CDT - Agricultural Prices 3:30 PM CDT - Money Supply |
FN: Jul Corn(CBT)
Jul Oats(CBT) Jul Wheat(CBT) Jul Soybeans(CBT) Jul Soybeean Oil & Meal(CBT) Jul Rough Rice(CBT) Jul Natural Gas(CBT) |
* Please note that the information contained in this letter is intended for clients, prospective clients, and audiences who have a basic understanding, familiarity, and interest in the futures markets.
** The material contained in this letter is of opinion only and does not guarantee any profits. These are risky markets and only risk capital should be used. Past performances are not necessarily indicative of future results.
*** This is not a solicitation of any order to buy or sell, but a current market view provided by Cannon Trading Inc. Any statement of facts herein contained are derived from sources believed to be reliable, but are not guaranteed as to accuracy, nor they purport to be complete. No responsibility is assumed with respect to any such statement or with respect to any expression of opinion herein contained. Readers are urged to exercise their own judgment in trading!