Friday, January 05, 2007

Trading with MP

Below is today’s DAX 2min chart I use for trading now.

DAX1

To the left you see an arrow marking the POC level prior to the breakdown, which happened at 09:13 on my charts. You also see the marked downslope, which I saw and marked, but did not trade as it is just a setup idea forming right now, which still needs to be verified. Later at 9:42 I took a DAX long at 6686, as I saw a possible turn up.

Reason for the trade:

DAX trading above the new POC at 6683.5

CCI forming a sling and possible shamu pattern (as it was called a few years ago in Woodies rooms)

T&S (not seen on the chart) showing buying bias in the DAX

Other indexes I follow (FTSE and IBEX35 showing a similar pattern, so the markets were in sync)

 FTSEIBEX

Target: The previous POC area at 6700

I could have taken the FTSE or the IBEX35 (see charts above) instead of the DAX and both contract would have netted me a better result than the 6 ticks I took from the DAX which continued swinging around the POC, but I had reasons to trade DAX

1.       DAX has more liquidity so if wrong the chance to get out with no slippage is a lot better than in IBEX35, which is notorious at jumping my StopLimits (and I hate trading with StopMarket orders)

2.       FTSE can be very slow if going against a trend and it had a big Gap down today, so any upmove might have been faded (as it actually happened with the DAX)

3.       A shamu pattern, if it works is very powerful, so an uptrust into 6700 was sure a good possibility

Exit at 6689, as DAX was not able to jump the low volume area between 6689 and 6694, which marks the zone of imbalance between the 2 distinct bell shaped cones seen on the price histogram and CCI at extremes

 

Follow-Up: DAX retraced to the low of the range and is now making another attempt to trade up to the previous 6700 POCDAX Follow-up 

A trading system is still in development, but the charts became less cluttered with the removal of all EMA’s, Bollinger Bands or other lines I had on it. I see setups developing again, so it seems a path worth following

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