Trading What I See

Once again we got through the first hour without a setup that fit the trading style I show on this blog. Unfortunately, during summer trading that happens much more often than I would like.

It’s not that there are no possible trades on today’s chart. It’s just that when trading in congestion I’ve found that I have many more losing trades that tend to wipe out all the gains from the winners. So I’ve developed several methods to help me define congestion, and learned to live with missing the occasional strong move that sometimes occurs on a breakout.

I define congestion as times when the ranges of a long series of bars overlap that of a single bar. Often I’ll use a longer time frame to watch for this situation. Here’s a post from last year called Overlapping bars equal congestion that shows what I mean.

Back in February in a commentary called Non-Trading Tips I showed a two-day period where, on a fifteen minute chart, almost every bar in the trading day fell inside the range of the first bar. That’s extreme sideways action, and my avoiding trading yesterday and today are just extensions of that method.

Where there is no tradable action in the first hour, unless there is a runaway move, I assume we may be starting a period of congestion. When I mark off that first hour range, I’m just simulating a longer chart on top of my trading chart.

If you’ve followed the earlier links and understand the general concept, take a look at a 45 minute (or hourly) chart from today and you’ll see that EVERY bar today touched the range of the first bar.

You need to decide whether breakeven trading during congestion is worth catching the occasional good move. Personally, I’d rather wait for the stronger setups during intraday trends.