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 October
17, 2004 Commentary (weekend edition)-
Today I'm
going to talk about Trade
Management for a moment, and then we'll look at some charts. I have
finally finished the rough draft of Trade Management. It has turned out
to be longer than expected, on the order of 244 pages as it sits right now,
with more charts than I planned on. Once I got going I had to do what was
necessary to convey the concepts. It has turned out far better than I expected,
and I'm really happy with what I have put together.
It will be a
great feeling for me to wrap this one up, and 'complete' the book series. Once
I have this one ready to go I will update the books page and the book package
deal, to include this one. Since I do at least six proofs from this stage, it
will still take me a little while to get this to the printer, but we are
getting a lot closer, and it won't be long.
I think my
diehard readers are going to be really happy to get this one, after this
ridiculously long wait. And I can get back fully to what I like to do most,
which is spend just about every waking minute in front of my screens, looking
for trade setups. I will keep everyone posted in here as to the progress, and
hopefully I will update the What's
New page also with the status of things. I won't be putting the new
books page revision up this time until I actually have the copies back from the
printer, though.
Let's move on to some charts. This is going to be a simple
commentary. That's my theme for today, simplicity. I am going to show two very
simple trade opportunities that appeared on Wednesday and Thursday of this last
week, one on the 3-minute SMH chart, and one on the 3-minute ES chart. I am
finding some decent action popping up here and there, and if I'm patient and
wait for the clear setups, I feel there is plenty of opportunity in this
market.
I'll start with the SMH.
The SMH gapped up huge on Wednesday, and
formed this pattern. My focus was more on the ABCD pattern, but it was also a
5-point pattern, and I showed it that way on the chart. I liked the 'context',
and the SMH began to react right off the grouping. This is a simple, basic
setup, using the guidelines I lay out in the books. I see things like this
every day, in one form or another.
Let's see what happened from here. I really
should move to a 13-minute chart to show all of what I want to show, but I will
stick with the 3-minute chart for consistency. The data is going to be a bit
compressed, though.
The SMH really dropped off the grouping.
Depending on the trader's plan, and what he or she was trying to capture, there
was plenty of opportunity for just about any approach that I use. I also
highlighted with an arrow a second ABCD pattern that formed, and gave an
outstanding pullback entry, which triggered nicely. Two ABCD setups for this
one trend move, and that's not unusual.
Let's look at the ES from Thursday.
The ES was trending down, and formed this
nice ABCD pattern. This is right out of Kane Trading on: Trading ABCD
Patterns. The 'context' was analyzed using the techniques that I laid
out in Kane Trading on: Multiple
Timeframe and 'Context'. What I look for on a daily basis, and how I
filter it, is all in the books.
I'll finish by showing what the ES did off
the pattern.
The ES reacted quite nicely to the
pattern/grouping, dropping off and yielding plenty of opportunity for me. Not
every trade is a 'home run', in fact most aren't. As I've said, and
demonstrated many, many times before, I'm happy with a lot of singles and
'checks' and 'folds', to use my poker analogy again. Once my entire methodology
is understood, I feel it is quite straightforward and simple.
The key is to
not try to understand all the nuances just from looking at a few charts in this
commentary. It's a complete methodology, worked out over many years of hard
work, and although it is 'simple' once 'mastered', it is chock full of details,
parameters, guidelines, observations, and thoughts about its application. Not
only that, its my methodology.
It has to be adapted and adjusted for each
trader's own 'Trading Plan', and incorporated into what the trader already
knows. And that would be done only if the trader felt it would be of
some benefit to do so. Trust me, you can't get all this from looking at a few
charts. I say all this not to 'sell more books', but because I don't want the
reader to try to use anything that I present without a full, detailed
understanding of the concepts.
The next commentary will be the mid-week
edition, posted by Wednesday evening.
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