» The Coach and the Quarterback Blog for Trading Success: Ray Barros

BarroMetrics Views: The Coach and the Quarterback

For today’s blog I have taken an analogy from Denise Shull that represents the co-operation between the left and right brain when it comes to executing a trade.

The Coach prepares for the trade - just as the Coach prepares for the Friday’s night football game. In that preparation, the left brain provides the direction. And so it was the case in my recent ES trade.

For those that read my Forum-Twitter letter, you’ll know that I was short the ES (S&P e-mini futures) going into Wednesday’s trading. Figure 1 shows the possible H&S on the cash and Figure 2 shows the boundaries of the Primary Buy Zone.

What I said in the update was that although the H&S had been broken. we still had not seen acceptance below the neckline. I also said I was placing my stops above 1055 (basis Sept). The video showed that if we saw acceptance above the Primary Buy Zone, the likelihood was we’d see a move 1132 (basis cash).

The alternative scenario was acceptance of the H&S breach of the neckline and a down move to a target around 980 to 965.

Prior to Wednesday’s price action, I did lean to the bearish side because we had seen a couple of closes below the neckline.

So the play the Coach called was to stop and reverse above 1055.

Now let’s look at what the Quarterback saw on Wednesday - Figure 3. The early drive up (A to G) was not necessarily bullish. The critical time period was ‘H’. When the ‘H’ period extended the range, the ES had a bullish pattern. To negate the bullish pattern, we needed to see rejection of prices at higher prices of the extension. Instead we saw acceptance and that suggested continuation.

Figure 4 shows the next level of analysis: if H did not result in rotation, then we could be seeing a slow trend day which meant that the high for the day would be around 1054.

What is important for me to make clear is the Market Profile analysis at H was not left brain thinking. Prior to H, I analysed that I was looking for a rejection of any range extension. At the end of ‘H’ my dominant thought was - ‘trend day going higher, stop and reverse now at 1055′.

It was only after executing the play that I did a left brain check of the right brain action. This is the same as the Quarterback. Once a play is in motion, he has only micro seconds to decide what to do given the circumstance.

So what does this mean for discretionary traders? Well….

…it leads to the inevitable conclusion that the normal admonition to ‘execute your plan’ needs to provide for room to allow discretion to play a role in the execution process.