Blue bars nail the highs and lows

8/29/2010

This is a quick update with the 10 minute TF chart from the last week. The blue bars did a great job of telling us when we were at a high odds reversal area. The yellow bars tell us when the market is contracting. When the market is contracting that means that a expansion is near and to look for a big move. We only use the yellow bars with the bigger trend.

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What our members are saying:

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Happy Trading,

www.eMiniSchool.com

Blue bar high and low!

8/23/2010

Today we gapped up to bigger resistance. In our member video last night we had the 616 and the 619 area as our upper levels for today. The TF high the 618 level and we had blue bars telling us that the move up was coming to a end. From the blue bars at 616.00 the TF dove down to the 604.00 area and we also had blue bars at the 605.00 area to tell us we were at a important low!

From that low the TF corrected perfectly up to our sell zone and our sell signal was at 609 and the TF fell down to the 602.00 area and then we had blue bars to tell us that the move down was over as well.

The blue bars are there to give us real time knowledge that without the Kill Zone indicator would not be seen. We have rules that say we trail the stop to the prior blue bar once they appear and let the market take us out of the trade. This is valuable on many levels not just to say to exit the trade. What if you were not at your computer to see the sell signal but you turn your computer on to see we are at a blue bar low? This would give you the rules to NOT go short because the move is most likely over.

Trading is about getting odds on your side for that moment in time in a way that you can repeat. It is also knowing the direction and knowing when that direction might end. with trading it is about going one more step or question further to really understand how and why the market moves like it does.

Happy Trading,

www.eMiniSchool.com

PS. We do not trade every color change. We do not have a magic indicator. The indicators are built for the patterns we trade. They are there to confirm the pattern and give us a visual on where to enter and where to exit.

NQ Blue Bar High and Low!

8/18/2010

The NQ had a 30 point range today and our Kill Zone indicator did a good job of telling us when the low and high had odds of being put in for the day. When the indicator is peaking the bars will turn blue and this is a sign that the move prior to the blue bars is most likely over. If you are in a trade and the blue bars appear this is where we would move our stop very tight to the prior blue bar low (1 bar stop) and let the market take us out of the trade.We also had yellow bars telling us a big move was about to occur.

Even though the NQ has a less per point value it is a great instrument to trade especially if you are trying to build your trading habits. Less money per point is good thing not a bad thing even though most people look at the negatives with the NQ's. There is plenty of volume to get filled and the range of the day is usually double the ES.

In trading our job is to make points. The money made from the points is just the end result meaning; the instrument you trade is a vehicle to make the points and that is it when day trading. Do you really care if the ES is at 2000 or 1000? No, all we care about is movement and if the NQ has a much bigger range it is easier to make the points. Commissions are cheap so it doesn't really matter if the NQ was $20 a point or $30 does it? No, we just care if it is moving.

If you are frustrated trying to trade the ES you are not alone. It is acknowledging it and moving on to something that might fit you better as a trader. If you are a scalper the ES is even that much harder to squeeze out a few points. It is the time sitting in the trade that could be killing your confidence!

Happy Trading,

www.eMiniSchool.com

Trading Variables

Trading Variables

With trading it is not as simple as adding 1+2 to get the result of 3. We wish it was that easy but there are so many variables with trading and it is our job as traders to adapt to situations that are changing minute by minute and pattern to pattern. 1+2 does equal 3 , but someone else might be looking at the equation as 3-2 = 1! Everyone has their own opinions and look at the market differently that’s how we get the moves to trade in the market.

Some traders start out trading with the mindset of I will follow the rules and therefore I will make money. This sounds reasonable but it doesn’t quiet work in those steps. Yes, there are rules to follow but inside those rules are variables and the variables are what makes or breaks traders.

Here is a brief overview of basic and variables:

Trading basics:

*Patterns

*Impulse and correction

*Contraction and expansion

*Time Frames

*Emotions (good and bad)

*Mindset (scalping or position day trading)

Trading Variables:

*Multiple Time Frame patterns (Waves within waves)

*Impulse (the market is strong going up or down but there are minor waves within the larger wave making it hard to hold the trade and clouding my reasoning we are in a impulse)

*Correction (Is this going to be a simple ABC or is it a complex ABCDE)

*Contraction (market is getting into smaller range on the small time frames because the bigger time frame is at a target or a decision level)

*Expansion (The market is getting ready to break the contraction and go into a expansion, but it will fake you out multiple times on the small time frame)

*Multiple Time Frames (why use certain time frames over others) * Smaller chart is going up, but it is going up to bigger resistance*

*Emotions (Your emotions are very high on winning trades and very low on losing trades clouding your thought process for the next trade).

*Mindset (Some days you feel like scalping and some you feel like you can hold the trade longer)

These are just some of the basic things that we can look at with our trading. The variables are what take time to learn and the only way to learn them is to first know the basics. Without the basics we would not know the variables to the basics. Are you following me here?

It takes time to learn the basics, much more time than people will acknowledge or accept. Everyone wants results now and we want to know everything there is to know about every aspect of trading, but this is not a realistic approach in our opinion. You must see it for yourself, this way you can see the pros and cons to your thoughts. No matter what your charts say you will still have thoughts, some good and some bad. It is learning over time to know when a thought is bad and skipping those thoughts and go on to the next question in your mind. You are weeding out the bad and replacing it with the good.

Everyone is different and everyone has different thoughts at certain times when trading and that is what makes trading good meaning; the buying and selling is opinions and without those opinions we would not have a market to trade. Taking it one step further we are actually trading everyone’s emotions all day long. There are quick irrational emotions and there are bigger more thought out emotions (the bigger and smaller patterns).

Maybe the entry method is wrong for your mindset?

If you can’t hold through a correction then don’t attempt to do that. Wait for the correction to be over and then enter the trade. If you wait for the correction to be over now you will feel like you are getting in the trade too late. There is always a con with every pro with the markets. The point is if you are trying to enter with one mindset and then hold the trade with another it will not work.

Are you scared to enter the trade?

If the 3 and 10 minute are both green and the scalper chart is going up everyone can see that but if you are in a constant state of fear you will be paralyzed with the markets because the fear of losing is too great. Usually the end result in this emotion is you will enter the trade too late right at the top of a minor wave and then will get stopped on a minor correction. You should be cautious with your trading not scared!

Being a scared trader means you are trading real money too soon and this will build bad habits. I know everyone says trading is easy and Blah, Blah, Blah. It’s not! And facing that fact will save you money because you will not be in a wrong mindset.

There is a fine line with being confident and cocky with trading. It is that fine line within yourself that you need to find and stay with no matter how big the range of the day might be. If we are too cocky that means we might not be looking at both sides of the story meaning; If someone is dead set that the market is going up they might only be looking at a small time frame. Sure, we have our outlook but it is having two outlooks and then gaining odds on which one will play out. Again, sometimes the variables might be something out of our control like news.

In trading when people say “if I only would have done the opposite I would have made money”

Trading with the trend in the market will feel wrong. Why is this? The way humans think is to react to something and will result in you trading against the trend meaning; wait for the market to go up 10 points and then short it. It’s that reaction emotion that kills most traders, and the fact that no one wants to wait they want to be in now!

Because we want to trade with the trend we must acknowledge these facts and accept them not fight them. When it feels wrong it is probably right with the markets.

When wave 1 is made it is like pulling back the bow and arrow. After wave 1 correction this is when you are holding the bow and arrow all the way back. After the correction and we get a green bar it is like you are releasing the bow and arrow going forward to sling shot forward. If you go long too soon you will have to sit through time and price as the bow and arrow goes back further until it releases.

Have you ever used a bow and arrow? You know what happens if you don’t release the arrow when it is pulled back? The arrow will just flop on the ground and this is the same result if you enter the trade too late. You are entering with no thrust behind you.

Just as the arrow will fly through the air then ultimately angle down then hit the ground. We do not want to jump on the arrow as it is losing steam and heading for the ground. So when the arrow is losing steam why would we jump on in hopes the arrow goes a few more feet? We wouldn’t and this is the same as jumping on a scalp long right at the top of the wave.

Think about it with a bow and arrow there is variables on how far the arrow will go. There could be minor wind gusts or major wind gusts right? But if you know the arrow is going up why would you go against that direction?

Once the arrow is released you really don’t have any control over the variables. Yes, you might think the wind is minor but once it is released the wind could pick up but that doesn’t change the fact the arrow will go in the direction you point it. Our patterns and indicators help us get the direction before we release the arrow towards the target. Sometimes it will be a bull’s eye and sometimes the variables will be too great and it will not make it to the target. Or we pull to hard back on the bow and it snaps! (This is getting stopped on the trade as it takes out the last low)

Conclusion:

If you are getting hung up on the variables you are not giving the trade a chance. Once in a trade, we cannot control the variables but we can manage them with moving stops. If the trade is in a major wave then a minor stop has more odds of getting stopped. If we enter off a minor wave then using a major stop is too much risk. It is you understanding this and trading accordingly to the conditions.

If you’re overall outlook is right but you are getting stopped on minor waves switch to something that is less dollars per point. Learn to trade the major waves and in doing that you will also have real time experience in watching the minor waves because you will be sitting through them.

In our opinion most traders are trying to break down the minor wave on the smallest chart and this is adding too much confusion into learning the bigger patterns. Once you learn the bigger patterns the minor waves will just be something that is normal within the chart not something that consumes your overall thinking process!

Happy Trading,

www.eMiniSchool.com

Would you?

8/9/2010

In this post we will look at how we confirm the scalper trades. We always want to only scalp in the bigger direction and skip the counter trend trades. We still must know how to trade the counter trend trades so we know how the charts look but we want to skip those trades. In doing this we are building discipline and over time if you can master your discipline you will build confidence but it will take time.

Would you go short when our bars are green?

Notice the 3 minute chart went from a contracting state to an expansion state two times on this chart and both times we had yellow bars telling is the expansion was about to start. Our bigger outlook is up and we go over this with every member every night with our member videos. We show why we have the outlook we have and why.

Both of the expansions we in the direction of our bigger outlook and this is where you should take advantage of the situation and make it worth the risk you are taking. Are you trading the same amount of contracts on every trade? With the trend or counter trend?

First it is learning how to know the bigger pattern because the bigger pattern tells us the trend. There are steps to the process and without knowing the steps how will you know the questions to ask yourself in real-time? In trading it is you constantly asking yourself questions and then finding the solution based on the odds and the charts are what give us the odds. There are bigger , medium and short term odds to understand and use on every trade.

You can enter on the 3 minute chart but sometimes the 3 minute chart will not give us the best entry signal and this is why we also use the scalper charts for entries. This way we can still participate even if there is not a perfect 3 minute signal. Like with today we had a contraction early and then the yellow bars and then a breakout so if you missed the best entry on the 3 minute you when then look to the scalper for a entry and then obey the scalper rules.

The blue bars did a god job of telling us that the high was in for the day and that the move from the yellow bars was most likely over and to not look to re-enter long even though the trend was still up. When day trading it is about taking some out of the middle of the move.

Would you stay long when the blue bars appeared?

Would you go short when our bars are green?

Would this help you understand the direction of the market?

How can you know if a indicator is worth using? Make it a paint bar study and if the bars are red and the price is going up then get rid of that indicator!

All indicators are tools but most will confuse you more than help you or scare you out of trades that should be taken.

In both of the expansions on this chart most all indicators were pegged at the top saying that the market was actually overbought. Put a fast stochastic on your chart and you will see what we are talking about. This might scare you out of the trade or worse you might actually take it short!

If something is not working stop using it and find something that does. This might sound very basic but most traders still have up the indicators that have no value because "this time" they might work and that is not good enough. If we had a choice to have 3 standard indicators or no indicators we would choose no indicators. At least this way we are only trading the patterns without adding in confusion to the patterns.

Happy Trading,

www.eMiniSchool.com

$850 with 1 trade!

8/4/2010

This chart might seem different that most charts you see, why? Because if you look we are actually adding contracts to the wining trade. Most traders will want to add contracts to losing trades to get a better average entry price. In our opinion this is the wrong way to add contracts and the wrong way to trade. Why make a losing trade worse?

Today range was not that great so we exited way before our actual bigger target. The reason we exited early was the fact the bigger time frame is making a wedge (or contracting) so we do not want to hold for a home run when the odds are saying otherwise. We took the profits at the smaller wave target and you can see it was a good spot to exit.

Adding to winning trades can get you much better bottom line results. It is just having enough confidence in the direction and in yourself to stick with the trade. There were actually a counter trend trade that was good for 3-4 points today but we did not take it.

Happy Trading,

www.eMiniSchool.com

19 point rally off of blue bar low!

8/3/2010

Today the market opened weak and went down to the bigger support pattern on the 60 minute chart. The chart in this post is the NQ 3 minute chart. The NQ is a great contract to trade especially if you are learning how to trade for the bigger moves. Yes, it is only $20 a point , but the Range of the NQ is much bigger than the ES and you can build good trading habits when you can give the trade more room and learn how to hold the winning trades longer.

In trading there are many different mindsets you can have. Maybe you are a scalper or maybe you can hold trades longer. It is interesting when we ask a group of traders what is scalping? there are many different answers. One person told us he is a position trader going for the bigger move. We asked what is the bigger move? He replied that he is always going for the bigger move, you know like 4 ticks on the ES. WHAT! 4Ticks!

Trading for ticks is nowhere near position trading. Position day trading is trading for 6-10 points on 1 trade. Anything under 1.5 points is scalping in our opinion. Having a trading goal of 3 ticks is more like gambling because not only do you have to be right on price but more importantly if your timing is off even for 4 seconds you can lose money and still be right on the direction.

It is important to know if you are scalping for 1 point per trade that it is so important to know how to read the bigger charts and know where you are at in the bigger pattern. Scalping for ticks is actually harder than position trading but most traders will skip to scalping because the "risk is lower". In reality the risk is not lower because scalper take more trades than a position trader. For every trade that is entered you must go through the emotional risk and the money risk.

Think of it this way: If you take 10 trades for the day and you risk 1 point per trade your overall risk for the day is 10 points. If you took 2 trades with a 3 point stop but you were going for 7 points your risk for the day would actually be only 6 points which is less going for 4 more points of profit. Of course this is just an example but we want to point out that even though scalping seems less risky in reality it is not and the cost of commissions are more when you are a scalper.

We are not saying scalping is bad. We have our scalper system but the difference is when we talk about scalping we are still going for minimum 2-3 points on the ES.

It is also important to know scalping the ES over the TF or NQ is much harder to do meaning; it is much harder to scalp the ES. I know everyone especially new traders get sucked into only trading the ES but scalping the TF an NQ is much easier because the movement is faster and the range is bigger. Trade what moves!

Looking at the chart in this post, would you scalp long when our bars are red?

Only scalp in the bigger direction, you will be glad you did!

Happy Trading,

www.eMiniSchool.com

Blue Bar Low!

8/2/2010

Here is a quick chart from today. The TF gapped up and on the minor pullback after the gap the bars stay green. This is a good clue not to short the market at a gap open. Once we made the high at 664.00 area we did have a counter trend short. It is important to know how to spot the counter trend trades but only advanced traders should take the counter trend trades.

If you did take the counter trend short at the 662.00 level the TF fell to the 656.00 level and then we had blue bars telling us if we were short to look to exit the position. Following the blue bar exit the trade was +6.00 points!

Once the blue bar appears if we are short we follow trail the stop to the high of the blue bar. This way if the market falls more we can still profit but once the blue bars come in we want to play the stop very tight.

The blue bars were the low of the day! Once we get blue bars we are looking for the market to reverse its course.

It is important to know that with any indicator they are there to confirm the patterns. Our indicators are made specifically for the way we trade the markets.

Happy Trading,

www.eMiniSchool.com