Here is a look at how I construct trades. I never just wade into the market because I see something happening in the last few price bars on the chart. Never. My trades are constructed from background conditions and market structure. The following trade is one I took live before a group of over 175 traders on Friday.
The Game Plan
As I explained to the group in advance of taking the trade, I never step into the market without a game plan. I always do this the night before. My game plan then gets updated when I review the overnight trading through the Globex market when I come down to my trading desk two hours before the US session opens (9:30 ET). Often, the overnight trading confirms my game plan, and this gives added confidence.
Sometimes, the next day’s trading doesn’t work out as I had planned. This is good, too, because I know immediately that the market is doing something different than what my analysis indicated. This is valuable information. I can adjust and make good trades. As long as I have a plan for the next day, I’m good, no matter what the market does.
As I told the group of traders before the US open, my plan for the day was to be a buyer. I said that in constructing my plan for today, I could see that the market had sold off for the last three days. On the higher time period intraday charts, the market became over sold when it reached the 1398 low at B. Given these conditions, I was looking for a test and possibly a Wyckoff Spring of yesterday’s low (B).
The Trade
As the US session opened, I mentioned that the overnight trading had brought the market lower to C, but that there was not a strong down move in the overnight action. Instead, the market simply drifted lower during the Globex session. This added to my bullish bias. I tried an aggressive buy at 1396.00 prior to the US open, but ended up scratching the trade as the market drifted aimlessly sideways for the next 50 minutes. If the market doesn’t go in my direction within a reasonable period of time, I can be wrong and have found it best just to exit.
The market did finally start to rally and pushed up above yesterday’s low at 1398.00. This was what I had been waiting for. I knew that odds were very good the market would return to yesterday’s low and test it before pushing higher. It did at D and this was my entry.
The initial target was a rally back to the Globex high of 1402.50, which it did. The next target was the two-day low of 1404.25 at A. Because the live webinar was coming to a close, I took the trade off at this level to book profits of 5.25 points.
I wasn’t upset to see the market rally higher. I try not to look to buy the low tick or sell the high tick. I am happy just to take a piece out of the middle. Later, the market pushed up above yesterday afternoon’s high of 1407, showing good strength on the Weis Wave. The first pullback at E was another good setup that gave a nice trade into the downtrend supply line (F).
If you are interested in learning to trade a Wyckoff Spring like this, you will find this tutorial very helpful by clicking here: The Wyckoff Spring. It is a two-hour video on this one trade setup, showing all the details – including when not to trade them. There are over 50 charts example of springs, and all the information needed to trade them.
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