This is that 4th trade I made today mentioned in my previous post. The entry was completely justified as there was a nice trendline break, on the 55 & 610 tick charts as well as a very nice TRIX Divergence on the 610-tich chart.

Typically this kind of play will be able to build up some nice downward momentum. But today was not a typical day. It was very much trending day as noted by the highlighted NYSE-TICK range which had spent a grand total of about 1 minute below the 0-Line all morning.

Thus, what should have been a profitable trade had I exited when the TICK pulled back to the 0-Line again, turned out to be a loss when I failed to take my counter-trend profits off the table.

But my blunder did not end there. For when prices failed to fall and took out the 55-tick declining trendline at around 10:38am, I clung to the hope that prices would change direction and make back some of my day’s losses. Up until that point, I had been trading very well. True, I did not have any profit to show for it, but that’s life. After this point however, I compounded my mistakes and had hit my daily stop limit within a short order.

I failed to recognize the mental shift that occured until it was too late. This mistake combined with a trading day that already was not in optimum sync with my trading style proved to be too much for me today. All I can do now is to take my lessons and move on to tomorrow.

This play is my bread & butter play for a number of reasons. First of all is the obvious 3+ Convergence of

1.) Negative Trendline Break (TL-)
2.) Negative TRIX Divergence (TXD-)
3.) 2nd Negative NYSE-TICK hook (2nd TCKH-)

If you’ve been following my blog for any period of time you know that when I get 3+ converging factors on any play, my win rate is over 80%.

The other thing I love about this play is that it gives a clear and concise signal when it fails, thus no guessing or human error enters the equation. After entering the trade, simply place a stop above the most recent pivot high and if it gets hit then the pattern failed. Its that simple. No ifs, ands, or any room to shoot yourself in the foot. Stop hit, get out.

The only difficulty is in trying to figure out where to set your profit target. I’ve found that I can easily get a 2-tick scalp out of this setup but usually this is way undercutting the plays potential. I’m still working on the optimum target, but in the end a lot just depends on the overall environment in which the play sets up and how the markets are doing on the other timeframes. I took a mere 2-ticks here on this play, not because I thought that’s all I could get but, quite frankly, becauase I was scared of the One-More-Trade Curse and wanted to hit my Net Daily Goal and be done with trading for the day. So aside from feeling a little more yellow, I don’t have much to complain about :-D

These are the 2 trades I entered this morning that took me to my Net Daily Goal. The green circles are where I entered & the red circles are where I exited. The primary entry setup on both trades was a breakout above a descending channel.

The first trade sported a very nice positive Trendline Break (TL+) , This also coincided with a positive TRIX Hook (TXH+). The other confirming evidence that is not shown here was on the market delta chart. While price was making new lows, the number of trades taking place at the bid was unusually low for such a decline. Oftentimes in the ER2, this Market Delta Footprint will be in the -1000 or less area on such a decline, but this morning it was in the -300′s.

So when I saw the reversal I went long and put a stop under the day’s low. When price pulled back a little bit on the 55-tick chart a drew an FFF+ and exited my position for +1.35 points on its completion.

Price continued to rally and then I saw another nice setup, again in the form of a positive trendline break around 9:46. For confirmation I had a higher pivot-low in the NYSE-TICK and that’s about it. I really would have liked to see another confirming signal, but I knew that if price could push to new highs then I would not have much to worry about as my 774.40 target was very conservative, especially given the target zone of the larger FFF of around 776.

After sitting through a nail-biter of a pullback, price chopped around for a few more minutes and then took off to my target.

Today’s play is not dissimilar from yesterday’s.

After seeing the break of the triangle, I watched the volume closely to make sure that it wasn’t running away or anything. Then I calculated and drew my target line by projecting the max width of the triangle downwards from the breakdown.

Prices practically dropped in a straight line to the target area. Typically with a fade, I’ll just have a limit order waiting at my desired entry price. But when I see prices dropping really rapidly, then I like to get a little more confirmation first before taking the play.

Here I got what I was looking for when prices rallied through that very steep trendling right in the vacinity of the target line. Also note that the TRIX had also just reversed.

The play also set up a little mini NYSE-TICK Fade. While true it is not as solid as yesterday’s -1000 TICK reading, based on where the TICK had been ranging for the entire day up to this point, it was practically just as good for this sharp decline to -500 was a far cry from the prior low of -100. This is where you need to keep an eye on the day’s history and range. Having spent the majority well north of the 0-line, a foray down to these kinds of levels are definitely fadable with other confirmation.

So I entered 765.50. The natural target was the base of the descending triangle. I cut half loose at 766.50, a few ticks below the base. I then brought my stop to break-even to see if I might be able to get a little more with it; I didn’t. I ended up closing the rest out for a half-point profit a few minute later.

Remember, that when targeting, you don’t want to always take your profits right at the target zone for there will likely be a number of people thinking the same thing you are. That is why when the margin is wide enough, I often opt to simply go the conservative route and take my profits 2-5 ticks below the target area, depending on how wide the move has been…just something to keep in mind.