CL trading day Sep 27 2017

posted in: Market Recap 0

The Anatomy of a bad trade…

Today I would like to show you what a bad trade looks like.

Right from the open the market went up and I suspected that it was caused by some overnight traders that got short in the overnight low area. Short term inventory was long and overnight inventory was ambiguous with probably some shorts at the low.

I saw this and it was confirmed by the P volume formation in A period from the Pro Suite for NinjaTrader 8 software as shown on the image on the left.

As the market trend on the daily and weekly is bullish I knew that shorting here would go against the trend but the weak buying that took place on the last 2 days as well as in the current market as shown by the image below coupled with today short covering in A was giving me some incentives to short the market.

The mistake I did was to anticipate a market turn based on a P short covering formation. Remember that short covering can also be the start of a new auction attracting new money.

 

 

 

A better way to approach the trade would have been to wait for a pullback from the fat part of the P formation below yesterday’s high with a stop on a new intraday high or sell near the 2 day high at 52.28 with a stop above overnight high at 52.34. The latter was the trade to do.

 

 

I got stopped out when we traded above the P formation. That was a small loss but I just wanted to show you how thin the line is when it comes to make money in the markets.

Today was also the release of the oil inventory number which put extra volatility to the market. After the release D printed a fourth TPO at the POC lowering the odds of a trend day.

My range to focus on became the 2 day high at 52.28 and the overnight low at 51.67.

When we find intraday POC prominency I always try to find a range of trading.

When we opened the E period we had an opportunity to buy the low of the range.

The intraday high was questionable as we left a weak and a poor high so the overnight high became the high of my trading range at 52.34.

I was ready to sell only after repair. Unfortunately the market just died for the rest of the day except for a quick move down seen in J period.

I understand that I am more of a patient 1-2 trade(s) a day trader but for more aggressive traders there were two other short term opportunities inside this rotational day. As shown on the image below coming form the Pro Suite software ( from the VTI template display ) the breakout of the inside bar ( D ) and breakout of inside bar ( I ) offered short term quick profit trades.

 

Good Trading !