ES – The One Thing Traders Must Know

ES – The One Thing Traders Must Know

ES – The one thing traders must know.  In a word, it’s structure.

The S&P e-Mini (ES) is one of my preferred trading markets.  Because it is so actively traded, this market typically has excellent structure.  What is structure, you might ask?  It’s the areas of support and resistance that the market creates and reveals by its own actions on the chart.  When a market is actively traded like the S&Ps, it is usually well-behaved and creates obvious market structure, which can then be traded.  This is what makes the S&Ps such a good trading market.

ES – Structure on a Recent Trading Day

This recent day’s trading shows excellent and highly tradable market structure.  After the US open, the market formed a high at A, and then began to react.  Although it pulled back, the market showed little interest in reversing direction.  Instead, the market rallied up and over the swing high at A.  Note the strong volume on the rally at B driving the market through resistance in a 10-point rally to a new high.

Trade Entries off Market Structure

The market then fell back to old resistance at A, now support, and triggered a Wyckoff Spring at C.  Normally, this kind of setup is a strong one, but it just didn’t result in higher prices on this day.  A trade taken at C was scratched as it reversed at D respecting the resistance at B.

The S&P e-Mini came back down to the level of support first created at A and strengthened by the price action that occurred after making the high at B.  Note the volume and the price action on the pullback to E.  Volume was light and price action was choppy; there was no significant selling.  The strong price action at E created another long opportunity.  This time, the resistance at the highs of B and D was easily broken.

Trade Exit off Market Structure

A diagonal trend channel set the target for this trade allowing for a profit target of from 8 to 10 points depending on entry and exit.  A nice trade in the S&P e-Mini.

ES – The One Thing to Know

Simple, straightforward and easily seen, market structure is the most important thing to know about the markets you trade.  It can tell the knowledgeable trader direction, support, resistance, trend, congestion, mark-up, and mark-down.  And, as illustrated here, structure informs entry and exit.