Evidently the market decided it wanted to spend some more time working inside the daily rectangle. In fact, today we dropped back almost to the center of the pattern. With a gap down opening, price built a floor just under the 850 level and went sideways until after the lunch hour.
When there was no trade in the first hour, I marked off the range and waited for a breakout (A) and a possible pullback (B.) Then I passed the trade that turned into a Measured Move.
On pullback trades I want to see a decrease in volume before I’m comfortable with a trade. Sometimes volume doesn’t make a difference, but over time I get better consistency when I insist on either correct volume or multiple reasons to take a trade. At least I got a lot of paperwork done today.
Hi Lowell,
I’m really enjoying your site. Thank you for sharing your trading experiences so generously.
My question is this: On pullback trades, am I to understand that you do NOT bracket the first hour’s range with stop entry orders, but rather you wait for the break out of the range and then you enter on a retest of the first hour’s range as support/resistance?
Thank you,
David
Hi David,
If I find an early trade, I ignore the first hour range and take any setups I find all day. If I can’t find one in the first hour I assume we may have a sideways day, and if so I try not to trade.
That’s when I mark off the high and low of the first hour and start looking for strong setups that might break out of that range. Otherwise I wait until we get a breakout and then look for a setup — which might be a pullback. This keeps me out of a lot of bad trades.
Lowell