My preferred timeframe is the 18-day (monthly) trend. But occasionally I will day-trade. In this post, I’ll examine the conditions under which I’ll entertain the idea. I’ll answer questions that have been asked by quite a few:

“Your blogs tell me that you subscribe to other ‘tipping’ services. Why do you do this? How do you reconcile your call to us to form our plans with your own actions?”

Fair questions. But let’s turn to the day-trading question…..

Last night I did a day-trade. The ‘heads-up’ were studies by Sentiment Trader (http://www.sentimentrader.com/) and Quantifiable Edge (http://quantifiableedges.blogspot.com/) - both are subscription services and I subscribe to both.

Both services produce statistical studies to determine edges. Both did a study regarding the post FOMC price action; QE did an additional study where the ES had two consecutive up days. I like both because the parameters for their studies are well defined and the results clearly articulated.

But here is the most important point: I don’t take a trade just because a service recommends it. The services produce data; I then use that data as an input into my decision-making process. I treat this input as part of my context. The other factors were….

  • On Monday, the ES touched the lower edge of my statistical time and price window. You will recall that in my video on Monday, I said that my preferred time zone for a resumption of the downtrend was the end of August/early September. Given that the ES was already at the bottom of possible resistance, if the market was going to prove my ‘time analysis’ correct, we would have to turn down early this week and resume the up move at the end of this week or next week.
  • In addition, the way I use the Stock Trader’s Almanac showed that yesterday we had a high probability of having a lower close than Monday.

So when the market had an open gap down and failed to close the gap within the first hour, this raised the probability of a strong trend day down. The figures below show the entries and stop. Given that this was a contra-trend trade on 80-minute chart (day-trading timeframe), my profit target was mean ATR -1/2 stdev (20 - 5 = 15). With the high at 1301.75, I estimated the low of the day to be 1287 (1302 - 15). So I set a profit target at 1287.75.

The trend day never eventuated but the market never came close to closing the open gap. And, given the context I felt there was enough of a potential edge to hold till the close.

Yesterday’s trade also shows why and how I subscribe to services. They supplement areas in which I lack expertise - but they are not substituted for my plan. Instead they form just another input in my decision-making framework.


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