Today I had one of my signature Set and Forget trades that worked very well. I really need to study these trades and understand why I love them so much and they make me the most money by far.
Futures:
1st Trade: (-$16) Micro Reversal Intraday Reversal
Options:
2nd Trade: (+$90) Micro Reversal Intraday Reversal
1d:2m
-Both of these trades were based on the exact same thesis. Lets go over it.
30d:30m
- We have 2 channels in this picture above. The upwards channel has parts where we break below the channel and when that happens AND we continue higher back into the channel, Those zones are demand areas where (in general) a large amount of orders will sit so they are key levels to lookout for. That is why I put them in Gold color. Very important. As you can see we broke through the first S1 (support 1) level on the 30m chart which was at 398. We tried to find buyers in that area and failed. The reason why we failed is because we have been hammered with constant economic news. We had GDP come in slightly worse, Income and spending slightly worse, CPI was slightly worse in Feb, jobs still growing, etc.. These things create large macro moves in the market and since the market is a prediction mechanism, these small but large macro changes can have big effects on where the market will stand in the coming years. Since we broke below the 398 level then we were going to most likely go down into the next level of demand which was at 393.54. In the morning we had spending and income coming out which the entire market already knew would be bad (since CPI was already bad). I think once you get compounding of bad information in the market you can get people who are way too eager and decide to short on every pop without realizing that we can get very extended to the downside and have very strong relief pops. That is exactly what I was looking for.
- 1st Trade: Futures
In this trade I was anticipating the bottom a little too early. I know that buying a backside move is usually just a terrible idea but for all those reasons stated above combined with a bullish MACD on 4h, I was looking for longs. I knew that If I was going to go long I would have to give this shit some serious room to move if I wanted to make money because buying reversals are so tricky since many will fight to keep the trend in play. As you can see we almost always have that last wick lower (bear trap) then we rocket back up higher. I got stopped out on a previous wick and then once I saw the bottom wick out at 393.64 and spike back higher above the 13 and 26emas I knew that this was my chance to get in for a bigger move. I then switched to options probably to save my own mental capital since I am much better at setting stops and letting them go in that account compared to my futures account.
-2nd Trade: Options
I got aggressive and got in very fast with a 48 delta contract with my stop being at the low of day since if that was broke then the whole funamental thesis of the trade would also be broken. I set my stop right near the previous lower high from this mornings opening range candle becuase I though we would hit resistance in that zone which we did (it was also the low of day from the previous days session) I rode the trade the whole way up to that spot and sold it for about 2 SPY points in gains. This is the trading that I love to do and the trading that I excel in. I need to find more opportunities where I Can get in for either reversal or continuation, set a wide stop, give myself maybe 2 chances maximum, get in, set stops, let it go. I do think that one reason I do well in this strategy is simply from the fact that I dont get too caught up in the timing of the trade. Timing is EVERYTHING in trading and I have had my fair share of overmanagement of a trade thesis and losing while the thesis was 100% correct. That is the most frustrating time to be a trader in my experience. I try to avoid that at all costs but its very difficult. I am getting much better at learning that the entry needs to have some room to wiggle or I will just overtrade the thesis. This trade did make me $90 but I wouldve lost nearly $50 if it did not work. In my head I want to only risk like $20 so its hard for me to think "ill risk $50 on this trade" but those are the ones that work the best for me. Its a slippery slope because if I am wrong then i get frustrated and if i mistime the trade then im extremely frustrated and If I make a rash decision using this strategy I can easily take 3 losses back to back and be down nearly $150. That is the risk with trading like this but so long as I stay EXTREMELY patient and aggressive at the same time, I think this is the way for me.
