2min ES today (oct 28)

[earik]

Watching the ES today as I'm working on broker stuff and thought I'd share. Usually, people trading 2min charts seem like they want to take 20 trades. I sort of like the opposite approach, basically looking for one good trade and then being done for the day. Now that we have insane volatility, you can trade a 2min chart like you used to be able to trade an hourly...

Anyway, check it out:

(right-click on the graphic to expand into a larger window)

es_2min_oct29.png (20.02 KiB) Viewed 5728 times

Starting at the bottom and working my way up:

Astotrader Energy: this one is a forecast where to expect a change in trend. We know it ahead of time, which means you can ignore the rest of the day and just focus in this one area. Usually you get one or two in a day. Basically, just look for the bump. Today, that was the green rectangle. Since we're dropping into there, that makes this a good place to look for a low.

Ultrasmooth momentum: this is the pink line. I think simple divergence signals work best with this one. I've drawn a couple out in white. Higher lows on momentum with lower lows on the market is a bullish divergence. That's a buy signal setting up at the right time.

9-5 Count: See the gold "5" right there a few bars before the low? That's another buy signal.

Fractal Trend Index: at the top. Big peaks happen when the current trend runs out of steam. Pretty reliable, especially in conjunction with momentum and 9-5.

Put it all together, and you get a pretty clean buy signal there at the 10:30 low. Buying the bottom is risky, and it's better to get in on the first small pullback. (Bertha traders know all about this.) I've put a light blue arrow where that happened. The crazy thing is that the move from 10:30 to the first high (by the red "9") is over 10 points! Back when I started, people used to scalp for a couple ticks. Now we can do it for 10 points! Anyway, on a 2min chart, that's about as far as technical swings go, so that would be the first profit take, at the minimum. Twenty years later, and these technical tools are just as great as they were back in 2000.

Earik

[earik]

Figured I'd continue the post into today. Same indicators as before:

(right-click to open/expand in new window)

es_2min_oct29_thurs.png (23.68 KiB) Viewed 5707 times

There were four interesting areas, which I've labelled ABCD...

A: The morning drop. We had momentum divergence, a blue 9, and a fractal trend peak. Note that the most reliable fractal trend indications happen when the red line is at or above the dotted green threshold line. We were just there on this one. Back when I used to work at the CBOT, we'd only trade the first and last hours of the day because that's where the biggest moves always happened. Doesn't quite work like that anymore, especially with current volatility, but I always like seeing clean setups right at the beginning. This would have been a good one to jump on.

B: This is the reverse of the last signal. Bearish divergence, a gold "5" above the bars, and another Fractal Trend peak. Last time was a long, this is a short.

C: This is the time when the AstroTrader forecast said to look for a trade. It happened at the pullback, rather than a big high/low, but still counts. Add the Action Zones indicator to your chart and you'll see what going on. Not a lot of technical support though.

D: I watched this one live. Pretty obvious short setup, although the market extended a bit beyond where the technical stuff all fired. You never want to enter at the market with turning points though, and the entry was easy on the pullback, and good for almost 15 points. This one reminded me of an old webinar/showcase that I did on trading the 9-5 Count years ago. What you do is wait for a 9/5, then (assuming a sell) look for the signal to hit when you get a close under the highest low that occurs after the signal actually registers. If you look at this chart, that gold 5 would have triggered an official short two bars before the final high. So even though our 5 seemed early, it didn't actually trigger until just the right time.

Earik

[kmorgan]

Thanks, Earik. Much food for thought.

Did you script an extra input to get the dotted green line in the Fractal Trend Indicator?


Best,

Kim Morgan

[earik]

Hi Kim,

Yes, but you can download that script in the library (http://www.wave59.com/library). Search for "Fractal Trend" and you'll see it.

Earik

[earik]

I've done two days, so might as well close the week out with this set of indicators...

es_2min_oct30.png (25.58 KiB) Viewed 5685 times

There are five interesting areas on this chart. (You can right-click and expand it out to a new window if it seems squashed.)

A: We had momentum divergence, a gold 5, and a Fractal peak here. Since we're looing to go long, the trigger for the 9-5 happens when you close over the lowest high. I drew that point in with a little white trendline and a red arrow. This was a tricky one, because although the tools were correct, if your stop was too close, you'd have been taken out before the rally. This is why trading multiple contracts is SO MUCH EASIER than trading just one - you can scatter your targets and stops all over the place, and it makes it that much harder when the market feels like being capricious.

B: This was the first bump on the AT energy forecast at the bottom. I was looking for a low here. It's a really broad bump though, which makes it confusing. We had an 8* on the 9-5 Count, which is just as good as a blue 9, and there's arguably bullish momentum divergence going on, although you have to really squint your eyes to see it. I really wanted there to be something here, but it's just too messy. This is a pass.

C: 9-5 Count gave us a gold 5, right on top of bearish momentum divergence. We're *just* out of the energy bump, so with this set of tools, only two or two-and-a-half signals, so probably another pass. But, if you were watching the Fib Vortex (see another post in I made), it would have been really hard not to go short here.

D: Momentum divergence, a blue 9, a Fractal Trend peak, and an energy bump. That's a long. We ran up a couple points, but then broke lower. That's a loss or a wash.

E: The market really wanted to run to the gold 5, which was the actual bottom. Triple divergence going on, which is usually pretty solid (and which usually means you get a second chance at an entry). The energy hump called for a bottom, and it only gives one or two indications in a day, so it's still calling for that bottom. Not quite as clear as point D, but definitely another entry, and this was the one you'd have to have jumped on if you wanted the day to be profitable.

All in all, not as easy of a day as the past two, but that's trading. If you were on your toes and trusted the tools, you'd have been OK. But if you were trading with tight stops, you'd have been hit at point A, and definitely at point D, and that would have been painful, especially since both of those trades ultimately would have worked out. (Psychologically, that's the absolute worst!)

One of the things I've noticed is that certain days have certain characters. It's like the weather. There are days when things are easy, and the market throws softballs your way. Then, there are other days when the market is in a mood, and it feels like everyone is trying to hunt your stops. I've seen much worse, but this was closer to one of those days. That first test of the lows at point A was the big clue, as well as the slop in the energy forecast at the B-C area.

Earik