You’re in for a treat if you recently signed up for the mini-course on ‘mechanical’ trading. This recorded lesson covers the basics while linking them to more advanced concepts so that they are easy to understand. We executed several profitable trades in real time, drastically limiting risk by using the lesser charts (in one case, two-tick price bars). Finally, you’ll see how even novices can practice daily with real money while limiting losses to practically nothing.
There are some hidden gems here. As usual, we looked for trades that could be forced, and we found them in plentiful supply. Most of the time we were a step or two behind the trigger but still close enough to see the choices we made justified in real time. The 15-minute chart continues to be the best vehicle for day-trading. We used mostly ‘mechanical’ set-ups, sometimes in conjunction with ‘reverse’ patterns, to fashion triggers and stops.
We went hunting for day trades using ‘mechanical’ set-ups during this hour together. Even though stocks have been under considerable selling pressure lately, the opportunities we found were both bull trades that used ‘mechanical’ triggers to get aboard. This was essential in AMZN, a $2800 stock that requires an entry method guaranteeing no slippage. We traded just a few shares, but that’s all you need to make money with a stock that moves as much as this one. The other play was in AAPL, where the 5-minute chart offered a perfect pattern so subtle that we had little competition exploiting it. Applying ‘mechanical’ set-ups on charts of lesser degree yields so many opportunities that it becomes possible to find potential winners at any time of the day one might wish to trade.
Setting up trades that can be initiated with limit bids or offers is the main focus of this lesson. Such trades are a built-in feature of all ‘mechanical’ entries, and we can use them to trade single-share lots of a $3000 stock if we so desire. There will inevitably be losers now and then, but if the initial idea was a good one, there is no reason why we shouldn’t attempt a promising trade a second time. There are some examples in this lesson to illustrate the point.
https://vimeo.com/692022709/761f046dbc/ We used a potentially important rally target at 172.05 in AAPL to execute an inspired 'reverse-pattern' short that must be seen to be appreciated. The expiring at-the-moneys (Mar 25 172.50 puts) were not acessible due to a problem with Tradestation, but for the record, they went from 1.66 to 2.23 in the minutes after the stock topped 18 cents above the target. AAPL has been struggling for loft since, so you should check out its chart when you read this to see how things turned out.
Stocks were in an epic short-squeeze, allegedly reacting to “hopeful” news from Ukraine. This allowed yet another demonstration of ways in which Hidden Pivot entry tactics can dance a sprightly jig around even the most violent price action. Trade set-ups during the session focused mainly on the E-Mini S&Ps, where we squeezed off two easy winners in 30 minutes, the first of them good for a very quick, $800 gain on paper. The larger goal was to get short ahead of a potentially important top in this bear rally -- and so we did, as you can see for yourself.
A pretty good session, our hour together featured a ‘forced’ trade in gold futures that made a theoretical profit of several hundred dollars in just a few minutes. The set-up was framed within an rABC pattern, but the trigger used ‘mechanical’ levels so that we could initiate with a limit bid. We also pondered rABC logic in the context of several popular symbols, including Chipotle, Beyond Meat and the E-Mini S&Ps.
We spent most of the session trying to force trades in symbols that looked busy, but we were stymied by a mid-morning lull that followed gap-up openings in many vehicles. The lesson was not without its rewards, however, since merely chasing trades requires all of our logic circuits to be firing properly. Check out the gambit in March Crude, which involved cutting risk down to size in a futures contract known for its nastiness.
There are some big ideas here that are geared toward avoiding traffic at ‘D’ targets, which have become all the rage with ABCD-pattern players. For starters, we have determined to invert our rules when the patterns are too obvious. This implies, for one, that we will look to get short the first time a C-D rally-leg touches the green line. And we need to be prepared for trends to narrowly miss hitting their targets when we are attempting to trade against the trend. Toward the end, there is material concerning the midpoint pivot, which we used to produce a quick, high-confidence winner in the E-Mini S&Ps in real time. Check it out!
We considered some of the subtler aspects of rABC trading, including the usefulness of attaching ‘mechanical’ levels to the tail end of reverse patterns. This allows one to get long/short via limit bids/offers, as opposed to using the green line for stop entries. As always, we took a magnifying glass to trades that on first glance looked to be easy winners. Some were, but in a few cases the trades failed by a hair to trigger. Nearly the entire session was spent trying to force trades, which are usually in abundant supply when the lesser charts are used for this purpose.