Every trading market has its own special patterns and oddities that will communicate its intentions. Patterns don't always work every time of course, but even that can be a clue of underlying extreme weakness or strength. Just like knowing a spouse well, learning to read your special market can pay dividends. Read on to learn more...
More Observations From My Trading Notes:
"After a BIG, major e-mini decline, wait for the secondary test – the first spike is TOO EARLY – the second test pays off faster and may even be a better buy. It’s also a chance to see if the ticks confirm a higher bottom, volume comes in and price action looks like the market is going much lower to scare the sheep. If this scary secondary low does not hold, then something is definitely wrong and the market is likely going MUCH lower afterwards."
Yes, the old panic and double bottom. “Scaring the sheep” is one of my favorite sayings with the e-mini market. The sheep usually herd themselves into the middle ranges. They love to buy and sell there to feel comfortable.
The middle is a nice place to enter at first, but actually, the risk is higher later. When the e-mini market swings hard to the rails, it always dumps some of the sheep out of the truck onto the road for the wolves to get. The other sheep are watching and hoping it won't happen to them, also. They hold on tighter but some of them jump to their deaths anyway. That’s what you want to see. If you train yourself to be an extreme range commodity futures buyer and seller despite feeling this fear, then you are progressing. It's an unnatural thing to do. That's a good thing.
This fear is a good indication of an intermediate pivot point. It's nice to be on the sidelines ready to enter. This is a great position in itself. You want to feel scared without even having your money in yet - that’s what you're looking for. Feeling comfortable about entering an e-mini futures trade is a red flag, believe me. You want a “shaky hand” on the mouse when it clicks. No one is so good and confident in their forecast not to feel fear, unless they are a market psychic (unlikely) or have nothing personal to lose. (more likely)
Observation:
“Much patience is needed for a move to evolve, once entered.”
We’ve talked about this before. I guess I kept writing it down throughout my notes because I often violate it. In fact, if I read over the full fifty-five pages, I see themes that emerge. To become a better e-mini futures trader than you are now, you need to write this stuff down and constantly review it. I’m always amazed at how much I forget, even after reading it over and over.
But after a long time of reviewing, it becomes second nature and part of your instinctive intuition. That’s your goal. You want the lessons and rules you have observed over time to trigger something inside your body whenever an e-mini turning point is taking place. When it happens with me I feel this funny swinging of my head, like I’m getting into balance. I also get a fearful feeling knowing that I soon need to put myself at risk. Your own trading trigger will probably be different.
Effective, intuitive, discretionary, e-mini commodity futures trading is acting on your own internal signals when they occur in real time. (read that again) It's not easy. If it was easy for everyone to learn, the market would not pay much for this skill now, would it?
Good Trading!
There is substantial risk of loss trading futures and options and may not be suitable for all types of investors. Only risk capital should be used.
Thomas Cathey - 27-year trading veteran heads the managed futures division of Thomas Capital Management, LLC. View his TimeLine Trading market predictions and get his complete 44+ lesson, "Thomas Commodity Trading Course" - they're all free. http://www.thomascapitalmanagement.com/commodity/welcome.htm Main site: http://www.ThomasCapitalManagement.com
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