Trading What I See

Last night I was actually discussing how long it had been since the last TREND DAY. Not that I expected one today — I just realized that, at an average of three per month, we were probably overdue. Did it help? Not at all. The first half of trend days always give me trouble.

For years, I could count on losing money on trend days. I would spend the morning trying counter-trend trades, and by afternoon I was afraid to enter because we were “too high” or “too low” and sure to reverse. Finally some kind soul explained to me that many trend days have a characteristic shape. I’ve mentioned this several times over the last few months. For example on September 12th I said:

For me, a Trend Day starts and finishes at the opposite ends of a wide range day. And they often have a nice consolidation pattern right in the middle. There’s a secret in that definition. If the consolidation pattern comes in the middle, you can make a profit even if you miss the first half.

Today’s morning drop was 12.2 points, and although it started a bit later than normal, the pause in the middle was still there. Win or lose during the morning session, if you finally recognized the trend day by the end of the pause, there were still 11 points before the bottom. It’s unlikely you could catch it all, but over 8 points came after the breakdown, and there wasn’t a retracement to take you out. The market was even nice enough to give a little pullback for an entry.

It seems to me as though trend days have fewer channels and fewer good Fibonacci retracements, but I’ve never tried to quantify that. But when you are aware of the typical trend day pattern, an entry in the afternoon can make the day profitable.