A Cold S&P 500 E-mini Market Rapidly Turns Hot
It's going to be a bit of a quick recap today (compared to yesterday's, at least) so hopefully nobody minds. Part of the reason why I'm a bit short on time is due to a pretty long trading session today of 3 hours in ES. This was because the first 90 minutes were fairly slow with only a few trades and I felt I should keep pushing once we finally saw a bit of movement.
You can see the area between the blue lines where we ran a live session for 90 minutes today. The action around the resistance area was very poor and didn't offer us much of anything in terms of quality opportunities. Once we finally saw some downside momentum we went for the trade and started the day off with a loss.
It's never fun to start the day off in a hole, but each trade stands on its own and you just have to move on.
From there we had our first quality trade of the day for a short. This was a more advanced trade than many that we take but when the right setup presents itself an experienced trader is going to take advantage. This is part of the more advanced section of our curriculum here at STA so once traders find some consistency they can look to add more aggressive setups and bring their results to the next level.
Originally I had my normal 2 point target, but after seeing the resistance rejected I wanted to at least get a look at the 1548 area before taking an exit. Price broke through with loads of momentum so I just had to hang on for the ride until the next area.
Another short from here for a quick 2 points (I actually tried to move my target again and was too late) and momentum was fading fast so it was time to stand aside for a bit. As you can see, around that second blue vertical line we had a pretty ugly area to work with so it pays off to be patient and wait for higher quality setups to occur. I tried another aggressive trade here on the long but I quickly recognized the risks and only took a three tick loss.
Riding The Knife's Edge
I decided to keep pushing on since the day had yet to offer much, and it wasn't long before we got what we were looking for and much, much, more. This short from 1545.50 was an absolute beauty and the best runner I've managed in the year so far. Sure, some guys out there who hold a trade all day might have made more than 7.75 points but not many of them can do that on low risk. This trade had a maximum risk of 1.25 point, or 5 ticks. We made a profit of 7.75 points, or 31 ticks. That over 5 times the reward compared to the risk! Gotta love those ones as they really make a big difference to the bottom line.
I managed to catch this one not because I necessarily expected it, but simply because the market forced me to stay in. I initially wanted to see the reaction at the lows and when we quickly broke through I moved my target to 5 points and brought in my stop. Price kept going well outside our bands and it became obvious quickly that a target wasn't the way to go. I removed it completely and simply trailed the move (the purple lines) on the way down. This meant I had to give up some profit at the end because I was giving the trade room to breathe but it was well worth it. Keep in mind we can't use this type of management often - this was a very special, high momentum situation in the market.
Never worry about giving up a handful of ticks when the market is flying! Too tight a stop in these conditions will do you no favours.
After that I quickly realized that my exit was far from ideal as I wanted to get right back in. After waiting just a moment to see the market reaction I tried another short and it worked out well. I had started with another 5 point target (you never know after a move like that) but after an extended stall I took the 2.25 points.
One last short failed and it was time to call it a day. It was a long one for me as I often focus my trading mostly on the first couple hours of the day but today it really paid off to stick to the charts a little longer. I was determined to keep trading until the move failed so taking a full loss was a good ending point. As you can see on the right of the chart we actually had a couple more opportunities that worked extremely well, including another short that did work out for 5+ points.
Gotta love a little injection of volatility in the market!