Wednesday, May 21, 2008

An Open Fade Lesson

Despite my recent spate of posts on systems, I have not given up trading the Qs. The emerging "system" trades component of the blog is intended to augment the revenue stream produced by the Qs. The markets are unpredictable and you can never project when trades will setup or how much will be gained (or lost) with each incremental trade. Since diversification is always a good survival tactic, the system trades will reflect a totally different approach to trading. . .one that eliminates many of the irksome discretionary issues. In addition, as mentioned last week, my spin on system trading is focused on a non-directional performance, and I hope this concept will become clearer in future posts as I move towards deployment of the system models. In the meantime (and for ongoing system trading education) see Rob Hanna's post on other system blogs and of course, check out Futures Truth.

Above is a picture perfect opening fade trade. Those who have followed me for a while know I watch the open on 2 minute bars watching the 9:35-9:45 window for a reversal or a continuation.
Today's action was classic.
After surging out of the gate and hitting R1 at 9:38 several things happened that foretold the reversal.
The TICK formed a slightly bearish doji at 9:38, followed by a bearish bar at 9:40
The NYAD formed a spinning top at 9:40 while the NYAD signal line turned down at 9:42
The failure of the Qs to follow through at 9:40 and a retreat back through R1 to close below R1 was bearish.
This was followed by another Qs close below R1 - bearish.
My stort term trading indicators( RSI, STO and STORSI) all fire SELL signals at 9:40.
I enter short at 9:42 at 49.51 with a retracement back to PP as an initial target.
The Qs hit PP at 10:14 and now the 10/20 MA have confirmed my SELL and are running wide apart. I close half the position at 10:18 on 49.21 and put in a stop at 49.38 for the remainder.
With the 10/20 still on a SELL I watch S1 for the next downside target.
The Qs finally close below S1 at 11:08 and I close the rest of the position at 48.96
Trade results:
Time in trades: 9:42-10:14 = 32 minutes; 9:42-11:08 = 86 minutes
Trade gains: 49.51-49.21 = .30; 49.51-48.96 = .55
A good trade with no regrets and I'm off for the rest of the day.

2 comments:

Cucca said...

Whooooo Hooooo, nice fade (isn't that how anyone makes a living off the Q's, fading the gap?? Although, there wasn't much of a gap), I have to work on my "trap door", as I'm outta there if they pull back and fill the gap first, before doing three to five bars up without filling it, before a reversal bar.
Anyway, I'm a little dubious on the black back ground, although, Homer shows up well, yeeee haawww!!
I actually like Jim's new setup,
http://www.stockbuddytrades.blogspot.com/ .
Hey, it's just me, I probably had someone I didn't like in a prior life, that used a black back ground.

bzbtrader said...

Cucca,
Actually, I changed to the blackground (clever, huh?) as a form of tribute to the Clueless One while he is on hiatus. I also have an anthem that goes along with it - http://youtube.com/watch?v=ihtZtUpn7sQ that pretty much reflects my attitude about things. Hope your travels are proving enlightening.