Trading Live Online Annual Mastery Program Weekly Trade Review May 13, 2009

Trend Day SP 500 Emini Example of trend day down in sp. LH and LL, small corrections. A few ab=cd sell patterns. Notice any ab=cd buy patterns on this day did not bounce much….

Conditions that can lead to a trend day Narrowing of range, such as an NR7 day (narrowest range in past seven days. First published by Toby Crabel in ‘Day Trading with short term Price Patterns and Opening Range Breakout’ Large gap opening, if a trend follows it may or may not be in the direction of the gap Neutral market closings; the market closes in the same area it opened. A trend is more likely to continue than end A true trend day opens on or near its highs or lows and closes near the opposite end of the range Here are some conditions that you can make a note of that can lead to a trend day. There will be times you have these conditions and you do not get a trend, it is not a guarantee, but conditions you need to learn and be aware of as a trader. Look for those sideways ranges, coils on higher time frames, when you see coils within coils be on your toes for a trend type breakout. Large gap openings….important, trend is not always in the direction of the gap open. Neutral closings, eventually market will move away from this price level, you will likely see this as the market is coilng…

Characteristics of Trend Day Trading Price will move away from the open price Break of support and resistance areas Market opens on or near its high or low and closes near the opposite end of range Uptrend – Higher highs and higher lows Downtrend – Lower highs and lower lows Trend days can be preceded by large gap open – may or may not trend in direction of gap Wide range bars first 15-30 minutes Shallow retracements or corrections Price on a true trend day many times will have a long 15 or 30 minute price bar, where price moves in one direction away from the open price with very little pullback. If there was large gap open watch how price reacts to the gap area. If large gap up open, does it hold the gap and move away from it with momentum. If it moves down from large gap up open, watch how price reacts at the gap close area. Are there long wide range bars, are ticks making highs or lows, are all indexes moving together, are advance decline confirming the move, is the Vix trending opposite of the price. Watch the retracements, a strong trend will have shallow pullbacks. Exception is if there is very high volatility such as we saw last fall and winter.

Trend Day up Followed a Large Gap up open Study this chart, notice the very shallow retracements, very strong trend up. You can see very small ab=cd patterns on this. Notice the long consolidation, don’t let that necessarily fool you and think because its stalling trend is over. Small ab=cd buy pattern at start of that consolidation.

Tips for Trading the AB=CD Pattern in a Trend Watch the size of the previous corrections; example if market has been making 3 – 4 point corrections use that as a guide for entering a small ab=cd pattern AB=CD Patterns are corrective patterns in a trend, they are called complex corrections Most likely you will not see deep corrections on a trend day, more likely shallow corrections, possibly to the .382 or .50. If a strong trend, use the current retracements with the ab=cd pattern, the pattern may not form a full CD leg if the trend is strong. Using market orders on a trend day can be helpful in entering trades The ab=cd patterns are corrective on a trend day, and anticipate the trend continuing, whereas on a range day the ab=cd patterns may just be testing the highs and lows of the range.

Two AB=CD Patterns formed during strong Trend Day Actually 3 ab=cd sell patterns formed, talk about how a trader might manage this type of trade. Second correction was the .382 retracement from the open price. Again this is a corrective pattern on a trend day. Notice the gap up open, the trend was down following the gap up open. Notice also the strong close below the gap close area.

Ticks on a Trend Day Price lows with Tick Lows Tick Lows with Price Lows

Vix on a Trend Day Price Trends Down Vix Trends Up

Advance Decliners on a Trend Day Price Trends Down Advance Decliners Trend Down

Example of Trend Day Trade Plan TREND DAY TRADING PLAN 1). What Market Will I Trade? S&P 500 E-Mini Contracts 2) What Set-Up Will I Trade? 1st Hour Range /Narrow Range Day Trade set-up 3) Conditions Preceding my set-up- 1) Trend-Uptrend Higher Highs, Higher lows-Downtrend- Lower Highs, Lower Lows 2) Large Gap Open- gap held, followed by long bars 15-30minutes of trading, remember trend day may not always be in direction of the gap 3) All Indexes Trending in the same direction 4) NR7- narrowest range in the past 7 days, next trading day use 1st hour range for trade 5) Inside Day- when price trades within the previous day’s Highs and Lows 6) # days consecutively trading in one direction 7) Close around Open 8) Fibonacci Ratios- look at 5,15,60 Minute Time Frame & see how price reacts at the fib retracement levels-test/retest . 4) What Trend Type Pattern will I be trading? Small AB=CD pattern correction, Consolidation pattern- Bull, Bear Flags shallow pullbacks 2-5 points, Triangle pattern. 5) My Time Frame- Entry on 5 minute time frame- 15 & 60 minute use as filter. 6) How many contracts will I be trading? 2 Contracts 7) What Type of order used to Entry? Buy Stop 1 Tick above 1st Hour High Sell Stop 1 Tick below 1st Hour Low 8) What is my Entry trigger? When I see conditions preceding my set-up (#3) Identify NR7 day before- (storing energy) - Use the 1st Hour Range- Place Buy stop/Sell stop direction of breakout- Reverse Position if fails at one end of range, opposite end of range. 9) What is my initial Stop Loss? 5 points above/below the entry 10) What are my initial Profit Targets? Exit 1st contract (T1) limit order at 2 pts profit- Exit 2nd contract (T2) limit order at previous Highs/Lows, support/resistance areas- look at Fib retracements- Globex Highs/Lows previous range area as final exit.   11) How is my Stop loss moved/Trailed? Will manage stops for Breakout Trend using 5 Minute Time Frame- Move stop ¼ Tick above/below completed 5 Minute candle- after I have 2pt. profit- as trend moves in direction of breakout ( use visual )- Try to keep stop out of way- Will close all positions out by end of day…