For those of you who follow my blog I just wanted to let you know that I switched locations this morning to www.dmtrader.com. I’ve been wanting to get into designing WordPress themes and owning my own hosting/domain provided the easiest way to do that.
Just thought I’d give people a heads up.
P.S. I tried subscribing through Google Reader and it gave me an error. I’m working on getting that corrected but I know a lot of people use Reader so it was worth mentioning.
I was asked on Twitter yesterday to explain how I pick my line in the sand/important area(s) for the day. That’s a great question.
I feel like a lot of traders try and answer this question. Just because of how dynamic the answer has to be the answers tend to be slightly incomprehensible. I’ll try and keep this as simple as I can. If you have questions beyond what I cover please submit a comment and I’ll respond the best I can.
When I try and identify the most important area for the day I am simply trying to identify the area where that buyers or sellers need to stay above/below to maintain control of the market. So the real question is “How do I identify the most important area to both buyers and sellers?”
There are two main components to how I try and identify that.
1) How is the market responding to value are levels (Value Area High, Value Area Low and Volume Point of Control)?
2) What needs to happen for the buyers to move the market buyer and what needs to happen for sellers to move the market lower?
When I look at the value area components I try and keep it very simple. Is value moving high or lower? Is VPOC shifting higher or lower? The answer to that question can tell you a lot about who is in control right now.
Identifying what needs to happen to go higher or lower is a bit more tricky. For me personally I like to keep things a little bigger picture when it comes to the levels I trade. I know it doesn’t always look like this on the charts I post but I try and view the market in sections of LVN-HVN-LVN.
If you start stacking those on top of each other then you can start to see a market’s volume profile. To get to the next HVN buyers keep to push above a LVN, then buyers need to push through that HVN to get to the next LVN. Likewise, sellers are going to defend each one of those levels and try and push the market the other way. Fairly basic stuff.
The point is that every morning I ask myself, “Where are we now and what o buyers and sellers need to do to get where they are going?” If we aren’t near an important LVN then I will look at the previous day’s profile and value area to determine where I think the best reaction from both buyers and sellers will occur. If a LVN/HVN lines up with an important volume profile level than that brings even more weight to that area. Furthermore, you need to combine that with what happened overnight and what is happening in the morning when you are creating your trading plan. If you have a LVN at yesterday’s VAH and it also happens to be the overnight high then you can definitely say that particular price is very important to both buyers and sellers.
I understand that this might seem simple and not applicable but really there is no easy way to explain it. The problem with explain the process of finding that “one” level is that it is a very dynamic process and everyone views the market in a slightly different way.
It might not make sense but that is my process. I’m thinking in the next couple of weeks I will take one day and write down my thought process for finding that specific day’s important area(s). Sine this is a dynamic concept it might be better to take a day and explain it in “real time”. For now this will have to do.
Again, this is one way (more specifically, my way) of doing this and trading is more about risk management than it is about being right when it comes to an important area in the marketplace. Just keep that in mind. If you want clarification on something feel free to drop me a comment and I’ll respond asap.
I’ve been thinking a lot about the concept of mastering something lately. The main reason for this is because I feel like I’m in a place where I am a jack of all trades but a master of none. I’ve done sales. I’m pretty decent at it. Not the best but good enough. I’ve done trading. I’m not the best but I’m decent. I’ve done computer programming. Again, good but not excellent.
I took this week to really try and reflect on the concept of mastering a skill. These are some of the conclusions that I came to:
1) What you should master is probably more important than actually mastering the skill. This is kind of a “what came first the chicken or the egg” statement. If you break it down it is pretty obvious that you are going to want to jump head first into something that you enjoy. It just makes it easier. Unfortunately that seems to be the hardest part about this process. Which leads to…
2) Think past the first level of any skill (and profession that comes from that skill). For instance, I like computer programming. I like designing websites. However, things aren’t always as they appear on the surface. Much of the life of a professional programmer is spent trouble shooting, trying to figure out what your client actually wants or attempting to babysit end users through simple tasks (no ma’am it’s the big red button in the upper right hand corner that has a giant X running through it). Nothing is what you see on the surface level and absolutely nothing is how you think it is.
3) Being a professional is about enjoying the grind that comes with your profession. Every profession has an element of grind to it. Even professional athletes. Listen, I’m the first guy when in a group of people to say “oh come on I’d love to get paid millions of dollars to play baseball!” I then refer myself to point #2. Nothing is ever as it seems to be. Don’t get me wrong, I would love playing baseball all summer, but there would also be times when it just sucked. One often overlooked characteristic of a professional is the ability to simply grind through the monotony.
What do you like about trading and investing? I hope it’s not the fast money or the excitement because at some point that wears off. You have to enjoy the things like looking at charts, not putting on trades and taking losses to be a professional trader. Just like most professions it doesn’t take a PhD to be a good professional trader. But it does require time spent learning the craft and an understanding of some of the things that you will have to grind through on a daily basis.
If you are seasoned then you understand what I am talking about and have (99% of the time) mastered that. If you have been doing this for a decent amount of time then you probably understand what I’m talking about and master this about 50-75% of the time. If you are newer (1.5yrs or less) then you think you understand these things but for some reason refuse to believe me and everyone else who says these same things. You can’t enjoy money and be successful at this business. You have to be successful at this business so you have the ability to enjoy money. For most of us trading is the closest thing that we will ever get to being a professional athlete. Most athletes at the top of their sports enjoy or at the very minimum understand the process that it takes to be successful land make money. We should all treat trading that same way.
E-Mini S&P 500 Futures
Key Level(s) For Today
1535, 1544 and 1551.25
Areas to Note
Gaps: 1521, 1542.25, 1549.25
NVPOCs: 1515, 1538, 1550.25, 1542
Economic Releases
None
Notes
Key support and resistance areas are outlined on the chart below.
E-Mini S&P 500 Futures
Key Level(s) For Today
1549.75-1550.25 and 1554.50
Areas to Note
Gaps: 1521, 1542.25
NVPOCs: 1515, 1538, 1550.25
Economic Releases
Jobless Claims 7:30am CT
PMI Manufacturing Index Flash 7:58am CT
House Price Index at 8:00am
Existing Home Sales at 9:00am CT
Philadelphia Fed at 9:00am CT
Notes
Key support and resistance areas are outlined on the chart below.
E-Mini S&P 500 Futures
Key Level(s) For Today
1532 and 1544
Areas to Note
Gaps: 1521, 1534.50, 1553.50
NVPOCs: 1515, 1538, 1555
Economic Releases
FOMC Meeting Announcement and FOMC Forecasts at 1:00pm CT
Ben Bernanke speaking at 1:30pm CT
Notes
Key support and resistance areas are outlined on the chart below.
E-Mini S&P 500 Futures
Key Level(s) For Today
1544 and 1551.25
Areas to Note
Gaps: 1521, 1534.50, 1553.50
NVPOCs: 1515, 1535.25, 1545.75, 1555
Economic Releases
Housing Starts at 7:30am CT
Redbook at 7:55am CT
Notes
Key support and resistance areas are outlined on the chart below.
