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You are here: Home / Uncategorized / Anatomy of a Trade

Anatomy of a Trade

February 28, 2011 by DrGary Leave a Comment

Patience was the watchword for today, as it so often is.  We have been in a nice rally the past two days after a good selloff.  So, we can expect that the market would pull back at some point soon.  That point happened today.

What I would like to show in this post is how to integrate market structure and trade setup triggers.  We start with the 9,000 Tick Chart, a chart that incorporates the overnight data into a readable form.

This is a multiple-day chart showing trading activity over the past several days.  The market has rallied up strongly from recent lows.  There are seveal things to be aware of in this chart, including the wave structure, new momentum highs, price spread expansion, and the like.  As important as these elements are, I want to bring your attention to the support line at 1320.  You can see that the market had significant trading around this level with with lows, rallies and absorption.  Levels like this often become vital locations for support and resistance at later times.

One of those times was today. 

We can see that the market had difficulty advancing this morning.  Because of the lack of progress (SOT), sellers came in and the market sold off.  But look where they sold it to: right back down to the 1320 level – a level we could pre-identify as support.

5-Minute ESLooking at the 5-minute chart, you can see that the market was oversold in the trend channel (red lines).  Buying anywhere in here was sound; the small Spring was ideal.

The market then rallies up to the downtrend line.  We have a confluence of trend lines here (with the resistance line) and it is a good location to take a piece of your trade off. just below this level.  Bring the stop to break-even or better and see if the market holds and pushes through this level, which it does. 

The next level is 1326.00.  Take another piece off a tick or two below here and bring your stop to just below 1324.00 as the market rallies higher.  The market volume has expanded on the rally bars, so odds favor higher prices. 

We look to take the final piece of the trade off at a tick or tow below the morning high as we are near the end of the trading day and volume has expanded dramatically.

This is the kind of analysis we do in the Deep Practice group.  We meet weekly on Thursdays, but all sessions are recorded so you can view at a convenient time.  If you would like to develop excellence in your trading, check out Deep Practice with Dr. Gary.  We would love to have you join us!

Deep Practice with Dr. Gary

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Filed Under: Uncategorized Tagged With: day trading, market analysis, Wyckoff method, wyckoff trading

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