Emini Day Trading Lessons: +7.5 Points – Looking for Fibonacci Extension Confluence
After a slow day yesterday with only a few good opportunities today's action really took off out of the gates! Assuming you were able to recognize the market structure and momentum there were some excellent points to be made in just a handful of trades.
Understanding the market context is crucial to planning your trades!
Our initial pop up at market open made it clear where the market was headed. Although we missed this initial leg, getting the pullback was as easy as setting an order and waiting. Although normally our targets are 2 points initially in a case like this we should adapt to the market conditions and expand our expectations for the trade. As you can see in the trading picture below I had two areas set in light blue that I was looking for on this trade. These were placed well before price made it to these points through a bit of simple technical analysis.
There are specific times when Fibonacci Extensions are useful and this is just such a case. Many people out there place extensions all over their charts and make a mess of lines. This can look deceptively useful as it always allows them to say their area was hit somewhere in their dozens of lines, but it doesn't really help us during actual trading to plan and manage our trades. So in this case it's just about keeping it simple by using the swings and searching for a bit of confluence. Nothing is exact in the markets but tools like this, when used properly, can help guide us and provide a bit of a mental edge that we need to hold our trades for greater profits.
In my case I definitely missed out on a good chunk of the move. I initially set my target at 1493.75 and planned to adjust higher if the price action was very strong. As it reached the target I was not seeing the short-term strength I wanted and thought a pullback was likely so I left the target and had it filled. My plan was to exit, reload with a new trade on the pullback, and hold for the next target. As it turns out we only had a small blip here before continuing up for a few more points. Had I seen some additional micro-momentum on the move up I would have held to aim for more but as it was I was happy with the exit even once I saw what I missed out on.
A trader will never get every point every time so don't worry about occasionally missing out.
I then avoided the pullback for market structure and short-term momentum reasons. Instead of leaving an order I decided to wait and see the reaction of the pullback first which confirmed my initial thinking that it was best avoided. It's crucial to know when NOT to take a trade and in a case like this we had a number of factors that no longer made the opportunity valid except for very aggressive traders.
After the market re-established itself there was an aggressive long that was passed on followed by a perfect trade in line with the day's move. As overall market momentum was slowing the target was kept at the initial 2 points. I got a little lucky here to get filled almost on the edge. Doesn't happen every time, but certainly nice when it does!
One last long attempt failed and only a couple ticks were lost using aggressive trade management and a quick exit. We don't always get the chance to minimize losses but when the price action and momentum is clear it's important to take advantage and reduce our risk.
We were now turning over in the medium term and entering a likely consolidation period. The first aggressive short was passed on but the second was again picture perfect with a target set 2 points away at the support area. While it's always possible we could see a breakout here having those points off the table is the safer plan. At this point we were getting into New York lunch and 7.5 points were already banked so it seemed best to call it a day.
- Strike While The Iron is Hot - March 1, 2021
- The Path to Becoming a Full Time Trader - February 22, 2021
- Looking to 2021 and Beyond - January 20, 2021
