The Cyclical Nature of Trading.....

Hi everybody,

The 3min ES was quiet yesterday with no valid automatic setups, but that was OK. This is all just part of the natural way markets unfold, in that we have quiet times, and then times when small losses unfold, along within times when the good profits come through. I call this the Cyclical Nature of Trading....

As we have had a hard time over the last few days, it will not be long before we get some brilliant good profits come though. Sometimes this is one of the hardest thing new amateur traders have to learn, in that we don’t get big profits each and every day. That is not how the markets work. In fact most of our time as a professional trading is risk control, keeping our trading capital in tact ready for the big trades. Professional know and understand this, but how the market really unfold in the real world is a lesion that most amateurs find hard to learn.

Thanks, Steve

PS, take a look at the Advanced Blog, to see how learning to become an Advanced Trader will help when the standard setups are quiet. Here you will see how MTPredictor has nailed the high or low of the day for the last few days running, which is pretty amazing !

My favourite setup

Hi Everybody,

You should all be with what I call “My favourite setup” as I out detailed it many many times before. It is when I look for the “first correction” off a “initial rally” off an “important low” to unfold as an abc pattern. Well that is exactly what we got on the 3min ES yesterday.

As you will see in the Advanced Blog, there was good initial support from the 15min Chart, so when this TS3 buy unfolded it was a good one to consider, even though the STF was red at the time. The target was the Typical Wave 3 WPT. As you can see, there was a massive +8.4R Profit (ignoring slippage and commission) available as the Typical Wave 3 WPT target was reached !

This is why I love this setup so much, as it carries such a high profit potential.

Thanks, Steve

100% initial risk guideline

Hi Everybody.

When you are unsure of the “larger degree” position, you can consider using the 100% initial risk guideline to help protect open profits. This us covered in the Trading Course, but basically means than once a open traded has exceeded the 100% initial risk level, you move your initial protective stop to break-even.

As you can see, this helped avoid an otherwise -1R loss on the 3min ES yesterday, making this a “break-even” trade.

So I hear you all ask – why dint we use this all the time ? Well, short-term charts often need more “wiggle room” than Daily charts. So when the “larger degree” position is clear I normally suggest not using this guideline. Only use it when you are unsure or against the larger degree trend.

Thanks, Steve

PS, if you want to see how well these markets unfold, then take a look at today’s Advanced Blog, where we see how the 3min NQ unfolded absolutely perfectly as defined by our more Advanced Tools. Being able to nail virtually every high and low throughout the day is amazing, and in MTPredictor you have the tools that can do just that !

A hard day for the Standard traders.

Hi Everybody,

It was a hard day for the standard traders among you yesterday. But as we all know, the markets unfold in cycles, where Profits and losses cycle round with the quieter time. I call this the cyclical nature of trading. It is just that the standard setups are in the hard part of the cycle at the moment. It will not be long before the good time (profits) come round again.

But this is why I encourage you all to follow the Advanced Blog and learn how to use some of the more Advanced tools that are in MTPredictor. As you can see from today’s post on the Advanced Blog, when you do, you will be able to take advantage of some great trades. This will more than make up when the standard setups are having a hard time.

MTPredictor can nail turns in the market brilliantly, you will see this on the 15min ES chart. The tools are there in the software, it is up to you whether you wish to take the time to learn how to use them. To help you, I post Advanced examples on the Blog everyday as well as go into more detail in the Trading Course.

Thanks, Steve

DP from Wave B low

Hi Everybody,

Yesterday was a tricky day, with the markets basically just chopping sideways all day. Days like this are always hard to trade. But we did get a TS3 sell on the 3min ES around lunch time. The ES then declined into the DP from the prior Wave b low. For those of you who read these Blogs regularly will know that this is a “minor” support level that can be used when markets are going nowhere (choppy).

As you can see, at this level there was a small, +1.8R Profit available (ignoring slippage and commission).

For those of you who are slightly more experienced, you will also see that there was a high volume (VSA) spike at this DP support level. This gave added weight that a low was in the process of unfolding, and as such profits should have been protected.

Thanks, Steve

Correct Position Sizing....

Hi Everybody,

Yesterday we had a brilliant example of why the use of correct Position Sizing is so vital to long term success. Using the Standard setups we had 4 trades on the 3min YM, 3 were loses and one 1 winner. On the surface this looks bad, UNTILL you look at the profits and losses when using correct Position Sizing. 3 -1R losses equals -3R down, BUT (and this is the important point), the one profit was +4.1R (ignoring slippage and commission). So this one profit wiped out the three (-1R) losses and put you into profit overall.

This is the main concept that most losing amateurs don’t seem to grasp, that you can have more losing trades than winners and still make money overall. Successful trading is about keeping your losses small and having big profits it is not simply about having a high % of winners. In the “real-world, having a high % of winners is actually very hard to do. Therefore it is far easier controlling your losses, as in this example. In fact if you read the Market Wizards Books, many of the world’s best traders only have about 40% winning trades. Most losing amateurs never seem to fully understand this point.

However, I understand that we all like to be “right”, so let’s take a look at the 15min trend on the Advanced Blog and see if these losses could have been avoided....

Thanks, Steve

A good day for the Standard Traders

Hi Everybody,

Isn’t the Cyclical Nature of Trading amazing ! After a few harder days for the Standard Traders among you, the 3min YM then gave us this lovely TS3 buy set-up. This was a completely standard setup, with the TS3 buy falling in line with a Blue STF. The YM then rallied to the first profit target, where a nice +5R Profit (ignoring slippage and commission) was banked as the STF was weak.

A perfect and completely standard setup and trade management..........

Thanks, Steve

15min trend

Hi Everybody,

For the Standard Traders among you, it was a hard day on the US indices. Yes hard days do happen, this is just part of the Natural Cyclical Nature of Trading. But, was there a way to avoid some of these losses ?

Yes, but it did mean using the 15min Charts for trend (rather than the STF), so this did require a slightly higher level of experience over and above the basic standard trade management guidelines. This is why I spend so much time on this Blog, trying to educate you all to become better traders, because I know that to get the most from trading takes experience and hard work. But (as we will see on the Advanced Blog), this hard work is defiantly worth it .....

Thanks, Steve

Russell in on the action later

Also, for those of you who follow the Russell Index, we had a nice TS3 sell later in the day that made a nice +2.2R Profit (ignoring slippage and commission) as well.

So a bit like the day before, on the surface a hard day, but with Patience and Discipline you should have some out OK

Lastly, if you would like to see how amazing MTPredictor really is, please take a look at the Advanced Blog for a trade I was following myself yesterday for a massive +10R !!

Thanks, Steve

Mind the Gap... Part 2

But notice the difference on the 3min YM. Here the TS3 sell was “within a whisker” of filling the gap. And on the YM, the short trade was not stopped out, and went on to reach the DP support zone for a nice +4.3R Profit (ignoring slippage and commission).

Please note, I am not saying that this always will work, but most experience traders will always be aware of “Gaps” and how the markets likes to fill them..........

Thanks, Steve

Mind the Gap...

Hi Everybody,

Yesterday was a hard day, but there was one trade that I would like to look at in a bit more detail. And that was the TS3 sell at 10:54 on the ES and YM.

But first, let’s look at the Gap Down on the open. As the more experienced traders among you will know, gaps will normally “get filled”. So taking a trade where the market is trying to “fill the gap” as we had on the ES yesterday should always be vieww3de with caution. So this was the first sell on the 3min ES yesterday and was just the second one as well.

But this leads me nicely onto how markets do unfold differently. On the ES the 10:54 sell had “not quite” filed the gap, so let’s look at the YM in the next post.

Thanks, Steve

Patience, Patience, and more Patience

It was not only the ES that had a good trade yesterday, the YM got into the act as well. But, as with the ES, the TS3 sell on the 3min YM only arrived very late in the day.

As you can see, this TS3 sell caught the fall in the last hour of trading, for a nice +2.7R Profit (ignoring slippage and commission). Add this to the Profits from the ES and yesterday turned out to be a good day, even if you did have to wait a long time, the Profits were there...........

Thanks, Steve

Patience, Patience, and more Patience

Hi Everybody,

Yesterday was a good example of why you need Patience as well as Discipline when trading. Yesterday the markets were very quiet for most of the day with the 3min ES just drifting lower slowly. However, the ES gave two sells signals later in the day, the first for a -1R loss, but the second was for a +2.9R Profit (ignoring slippage and commission).

AS always, the Profits was much larger than the losses, therefore making money overall.

So the lesson here is even though it may be quiet, all “day traders” must be there for the whole day as you never know when the profits will arrive.....

Thanks, Steve

Tricky trade management, Part 2

If we now turn to the 3min NQ (see chart) and if you also look at the 3min Russell (not shown), both these markets were at DP support. Sp with this in mind, it would have been a good idea to look to protect at least some of your open profit on the 3min ES short trade. Especially as you had two -1R losses earlier in the day and we were expecting a hard day yesterday.

In this way, you could have come out of yesterday break-even, which is always a good result when it is a hard day.

This is all about gaining experience and “learning” to become a better and more experienced trader....

Thanks, Steve

Tricky trade management

Hi Everybody,

Today I would like to look at a short trade on the ES yesterday and how to manage it, especially as it was slightly tricky.

First, I would say that “normally” I would suggest sticking to the “standard” trade management guidelines if you are a Standard Trader. But my goal though these posts is to move you beyond this level to become a more experienced trader.

So here was the position yesterday. We had a good day the day before, so we should have been expecting a hard day yesterday so when we had two -1R losses early on, our aim should have been to look to get back to break-even for the day (as we were expecting a hard day). So my question is whether there were any signs to help you protect this 3rd good trade ? Normally we look to the DP form the minor Wave b low, but on the ES it had not quite got there............ But this is where we keep an eye on all the 4 E-minis.

Let’s take a look at the NQ in the next post

Thanks, Steve

NQ helps as well

There was also a nice TS3 buy later in the day on the 3min NQ. Please see the chart. His resulted in a nice +2R Profit (ignoring slippage and commission). Adding this to the -1R from the ES and the +3R from the YM meant that we had a good day on the US e-minis yesterday...........

Note: as the STF was blue, the sell setups were avoid by the standard traders among you.

Thanks, Steve

Loses can happen....

Yesterday was also a good example of how loses can and do happen,. All traders know that loses unfold when trading, there are just too many vendors and Gurus that never mention losses. This gives a “false” impression that trading is all about a high % of winners, it is not, successful trading is all about keeping the inevitable losses small.

Here this -1R loss on the 3min ES was small when compared to the +3R Profit on the YM (see post below)

Small losses and big profits (not their number) is the real key to successful trading....

Thanks, Steve

A good day

Hi Everybody,

Yesterday was a god day for the Standard Traders among you. The day started with a TS2 buy on the 3min YM.....

AS you can see from the chart, after a long time, the YM did reach the first projected profit target. At that time the STF was weak, so standard traders would have taken profit at that level for a nice +3R Profit (ignoring slippage and commission)

A standard and automatic trade that was managed using the standard trade management guidelines........

Thanks, Steve

My favourite setup

Hi Everybody,

Sorry for not posting for a few days, but I have been away on a well needed vacation.........

Now I am back, I see that we had a brilliant long trade on the 3min ES. In fact this was my “favourite trade” and one that I have talked about many many times before. It is my favourite trade because catching the end of the Wave (2) correction, to them be able to trade the strong Waver (3) represents the highest Profit / lowest risk trade there is. In fact, MTPredictor was designed in the first place to catch this very trade..........

Yes, I know it is against a red STF, and I will explain why this is in the Advanced Blog.

But, as you can see, at +10.4R Profit (ignoring slippage and commission), this was an amazing trade !!

Thanks, Steve

A quiet day

Hi Everybody,

After all the excitement on Friday, it was no surprise that yesterday (Monday) was a quiet. This is just the Cyclical Nature of Trading at work again.

Today I would like to remind all the Standard Traders among you to use the STF for their “trend direction”. Advanced Traders can override this, when the pattern is correct, but in the early days the STF will keep you in the right direction most of the time. For example the two sells on the 3min YM yesterday should both have been avoided as the STF was blue.

Thanks, Steve

A good day on the e-minis, part 3

As profit was being taken on the 3min NQ short, a TS3 buy was coming in on the 5min Chart. The first one of these buys ended up as a -1R loss, but the second nailed the low perfectly. The NQ then rallied strongly for the rest of the day. The result was a nice +4.1R Profit (ignoring slippage and commission). So even after the -1R loss earlier, this mean +3R Profit overall. Yet again, a brilliant example of how small losses and big profits can make you money overall.

So overall it was a very good day on the US e-minis and is yet another example of how the good days will follow some harder days that unfolded midweek. This is just the natural cyclical nature of the markets and something all professional traders know and understand.

Thanks, Steve

A good day on the e-minis, part 2

As the ES was on the way down to its minor DP support zone, the 3min NQ gave a nice TS3 sell. Notice that the NQ made a “double top” a few bars later so this was not a -1R loss as the first short was never stopped out.

As you can see, the NQ then declined to reach the first project profit target, were profit was taken as the STF was weak, for a very nice +3.2R Profit (ignoring slippage and commission.

This was a completely standard setups and standard trade management.

Thanks, Steve

A good day on the e-minis

Hi Everybody,

Friday was a good day on the US e-minis with a number of good trades. Top start with let’s look at the ES.

The day started with the DP nailing the low of the day !! Although this would have been an Advanced Trade, it does show how powerful the tools are in the software. Then we had a TS3 sell. The ES only managed to decline into the DP from the prior Wave b low. But I have shown this support zone in prior posts. A nice +3.6R (ignoring slippage and commission) Profit was available at this level.

But, why would you want to take profits at this DP, after all it is only a “minor” support zone ? Well, as we will see, there was a lovely Automatic TS3 buy on the 5min NQ at this time which would have give extra “weight” to a low coming in. This is why I always say that it is a good idea to keep an eye on all 4 of the US e-minis

Thanks, Steve