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Canadian Dollar Neutral Correction

How to make a daily pre-market strategic plan using Moving Averages with Trading Power Zones

Economic Calendar

August 26th, 2009 - Issue #495

Canadian Dollar Neutral Correction

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How to make a daily pre-market strategic plan using Moving Averages with Trading Power Zones

by TradingEmini.com

By using moving averages as dynamic support and resistance you will equip yourself with a very powerful tool to prepare before the market opens and provide yourself with a blueprint to catch the major moves in the first couple of hours trading before the market becomes choppy over lunchtime - being prepared means you take high probability, strategic trades, rather than reacting emotionally to minor market moves.

The basic technique is to use a synergy of the same period length Exponential Moving Averages (EMAs) across multiple long time frames, for instance, Weekly, Daily and 60 minute charts (on a 24 hour basis).

Every day, an hour before the market opens, you can use these synergies to determine the price levels where the probabilities favor longs (buy, the market will trend up) or shorts (sell, the market will trend down) and where the market is likely to go sideways, be choppy and rip out your stops, so best not traded.

Because EMAs provide simple, fast, accurate entry signals they increase your likelihood to press the trigger and improve your entry prices, which reduces your chances of being stopped out only to see the move take off in your direction. At the same time they also provide you with target and stop loss levels, allowing you to trade with tighter stops, controlling losses — a cornerstone of any trading plan.

Knowing your targets and stop loss points in relationship to the EMA support or resistance means you can calculate a trade's profit ratio before taking it to determine if it is worth taking at all. For example a 1 point stop loss risked with a 3 point target equals a profit ratio of 3:1, a healthy trade, worth taking. Losing trades are inevitable and unavoidable, but by taking high profit ratio trades, even with fewer winners than losers, you stand a greater likelihood of ending the day profitable.

These charts show how you could have prepared an EMA based strategic plan at 8am August 13th and applied it day trading, finishing by 11am on the S&P500 Emini. The strategic plan provided the big picture and the dynamic 60 minute chart moving averages provided great entry and stop loss positions.

At 8am EST establish the key levels. There are 60 minute EMAs at 1012 and 1009.75 and Daily EMAs at 1002 and 998.50. Therefore the strategic plan is to Buy above 1012, don't trade the chop between 1012 to 1009.75 and sell below 1009.75 with the Daily EMAs as targets and reversal points.

Chart from August 18th

Using moving averages and price action keeps your system succinct yet dynamic and you avoid the lagging nature of more complex indicators i.e. your have an indicator that predicts rather than follows price action. The less, but more immediate, the data you focus on, the more you will be in-tune with the market and your trading day will be less stressful. This greatly reduces the risk of destructive psychological behaviors like revenge trading, chasing, hunting for an ego affirmation reversal during market hours.

So be prepared and keep it simple, it's what the professionals do, they know before starting the day the major support and resistance and trade and adapt around these numbers. The beauty is the EMAs constantly adjust with price which floor pivots don't being calculated on static previous day open-high-low-close. EMAs provide both strategic positioning and keep you in-tune in real time.

To learn more about TradingEmini.com's techniques you can join them for their Last FREE 2009 Webinar 26th August 16:00 EST. They only do two of these a year so it promises to be something special.

Register here: https://www2.gotomeeting.com/register/752907234

Disclaimer

Past results are not necessarily indicative of future results. The risk of loss in trading can be substantial, carefully consider the inherent risks of such an investment in light of your financial condition.

Day trading can be extremely risky.

Day trading generally is not appropriate for someone of limited resources and limited investment or trading experience and low risk tolerance. You should be prepared to lose all of the funds that you use for day trading. And more, you should not fund day-trading activities with funds required to meet your living expenses or change your standard of living.

You should be wary of advertisements or other statements that emphasize the potential for large profits in day trading. Day trading can also lead to large and immediate financial losses.

Day trading will generate substantial commissions, even if the per trade cost is low.

Day trading involves aggressive trading, and you will pay commission on each trade. The total daily commissions that you pay on your trades will add to your losses or significantly reduce your earnings.

Day trading on margin may result in losses beyond your initial investment.

An investment of less that $25,000 will significantly impair the ability of a day trader to make a profit. Of course, an investment of $25,000 or more will not guarantee success.

Economic Calendar

Source: Moore Research Center, Inc.

* 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!