Kane Trading - Education for Serious Traders

					November 26, 2003 Commentary- Today I'd like to discuss a few aspects of this column, and then we'll move on to a few charts. First off, I would like to thank everyone who has sent in the feedback that I asked for in my last column. So far, the results are leaning towards more follow-up in exchange for a little bit less market variety. I will wait for a few more responses to come in, and then do my best to respond to the desires of the readers. I've also received a few questions about what time I plan to post the commentary, which days, and so on. At this point I am trying hard to post one commentary for each trading day. I will make that post as soon as I can after the trading day has ended. Sometimes my schedule prevents me from doing this directly after the market closes. On those days, I will post it as soon as I reasonably can that night. I know this is a bit tough on my east coast readers. I'm hoping that once the website responsibilities, and the extra work that I have been doing in these 'early days', settles down, I will be able to be more timely for the east coast. As far as posting days, in general I will post Monday through Thursday after the market closes. Even though Friday's commentary will be dated for that particular Friday, I consider that commentary more of a 'weekend' commentary. Hence, I will post it some time before Sunday night. This way I can take a little break from the website (and trading) after Friday's close, and have more time to think about, and select, the best material that I can for the column. This leads me to why I'm bringing all this up now. I got a few e-mails asking me where Wednesday's commentary was (don't you folks ever take a holiday??). I thought I was clear that Wednesday was my last day this week for watching the market. I may glance at the charts on half-days, but that's it. So this Wednesday is like the end of the trading, and column posting, week for me. I then planned to post the Wednesday commentary some time before Sunday night. I apologize that I wasn't anywhere near as clear on this as I could have been. To respond to the requests, then, I'm getting this posted Friday morning (but still dating it Wednesday), and the next column will be Monday, after the market closes. Again, thanks for the constructive feedback, and I'll do my best to listen to my reader's needs. And hopefully this has cleared up what I plan to do with the column. Let's look at something interesting I thought about with Wednesday's trading. One of the things that I feel that 'pattern' traders and Fibonacci traders have to watch out for is focusing so hard on the patterns and numbers that they miss out on something obvious on the chart. Just because you have chosen the style of trading that you have doesn't mean that you shouldn't at least keep an eye on some of the 'old school' stuff. I think one of the things that I do particularly well as a trader is retain some of my 'older' and more basic skills, and integrate them into my pattern and Fibonacci trading. Just because I trade a lot of patterns and use a very Fibonacci intensive approach to trading doesn't mean that I don't also 'just play the trend' from time to time, for example. I also find that by watching the basics that many other traders watch, I can see the areas where the 'wrong-way crowd' is going to be getting suckered. I love moving average crossovers. I have them on many of my charts. Do you know why? I know that an absolutely huge number of traders are watching, and using, them. I can put some selected moving averages on my chart, step back, and sometimes in an almost uncanny way, say something like: 'OK, give this a little bit more, get ready, here it comes, OK, now, here comes the rush up and then the slam down and the bail out.' You can just see the traders getting set up over and over again in these certain areas. In my opinion, the ever-proliferating small hedge funds, called 'hedgies' by many, just sit around and do this to small traders all day long, especially with the market action so poor (compared to the 'bubble' bull market days). Take a rough guess what the program trading volume is at the NYSE. Approximately 41%! And that is not a new phenomenon. If you want to check into this, go to their website and see how long this has been going on. My point is how do you think the 'hedgies' choose the spots to play this game? They watch all the basic areas where new traders will try to trade. I want to have an idea where things may happen. Let's look at a 3-minute chart of the ES, and we'll try to see if something simple was evident. I'll start with the sharp sell-off in the morning. The ES is trending down nicely on this 3-minute chart. Many traders are getting on board this trend and shorting. I see nothing on this chart to alert me to any problems with this approach. But, as I mention so many times, where's the context? If I'm trading the 3-minute chart, I'm getting my 'context' from the 13-minute chart (and maybe even the 60-minute chart). Let's look at the 13-minute chart. That changes everything. I don't need any Fibonacci or any patterns or anything to see trouble. Do you see it? Let me add a line onto the chart. I drew a line through the approximate middle of that congestion that formed after the big gap and run on Monday. This is a 'do or die' area. If they break it, the next move would likely be to close the gap. But this is where the most likely spot for a reversal is going to come. And if it doesn't, that tells me something. But one thing is for sure; I don't want to initiate a short right on support that appears this significant. And if I'm short, I want to be ready to aggressively manage my position in here. Let's see what this did with that area by the line that I drew in. Although one may have been using some serious Fibonacci in here (you know I was), one still shouldn't overlook the obvious and the basic, the 'old school', if for no other reason than you know how many traders are watching those areas. I look at it this way: I follow my game plan, but I also follow everyone else's game plan, too. The next commentary will appear on Monday, December 1. In that column I will look at one more aspect along these lines that I was not able to get to in today's write up. That is, unless something more interesting happens on Monday.


	NOTE: Reading this page or any page on the Kane Trading website, or utilizing this website and any material contained herein in any way, shall constitute an acknowledgement that you have read, understood and agreed to all the disclaimers, terms & conditions, and policies of this site.

	This website is best viewed with MSIE 6.0, text size set to medium, and screen resolution set to 1024 by 768. Copyright © 2003 Kane Trading. All rights reserved.