One-Timeframing

Been a while since I put a post up, so to make up for it today's post will have several concepts you can use in future sessions.  Today mainly focused on one-timeframing and awareness of references.  What the market does at a reference is a huge component of any intraday analysis and decision making.

The most important references coming into today were:

• previous pit session high/low
• 2115.50 - 7/17 prominent PoC
• 2110.75 - 7/16 poor low (that held extra significance because it was made on an upgap!)
• 2107.75 - 7/16 gap fill

The most important market/inventory conditions coming into today were:

• awareness that the entire uppush from the greek crisis lows was made with weak money, poor volume, no conviction/momentum, and little interest;
• yesterday's high matched a previous session high - with the only high above it being the life high;
• yesterday was the first sign of selling since the greek crisis left the headlines;
• thus, we can deduce the market is 1) very very long, on 2) weak buying that 3) just hit a resistance reference, and could 4) tumble further down very easily

Let's look at the profiles and half hr chart:

The market opens with overnight inventory net short - a quick rally corrects some of that/sees some profit taking.  Then in B period we trade within 1 tick of settlement before mechanically selling off.  Selling continues on, with the market one-timeframing for four more periods.  The length of time in which it one-timeframes, combined with it doing so off of the high tells me it is significant and likely to continue on.  How to trade it?

Simple: the market will usually stop one-timeframing for one 1/2hr period, sometimes to allow inventory to come into balance (with the whole market short for so long at some point some of those shorts will lock in profit, causing an upmove).

Selling as it looks above the previous 1/2hr bar high (or multiple highs if they're close together) allows you to "sell high" while reducing risk and not chase the market.  I actually did attempt to trade the G period one-timeframing stop, but had my offer just a tick too high to be filled.

Which is ok - because that's not the only trade that's possible on a one-timeframing day.  I know that if the market stops one-timeframing again, there exists the chance that it is done with that and will now either reverse or balance, creating another trading opportunity.

And that is exactly the trading opportunity I captured today:

After seeing it stop one-timeframing after rallying off the gap fill reference, I now had the following scenario:

-the market has moved off of a structural reference
-the market has taken out multiple 1/2hr bar highs, leaving no doubt that one-timeframing is over
-considering how short the market is and how low the price is, the odds are better that we will rally up instead of simply balance sideways. Too much inventory is stuck short!

Which means, I need to find a place to buy.  Having my stop at a structural location (the low) that is a legitimate point of failure keeps me from reaching up too high in buying the market - I want to trade with tighter risk.  I didn't really have a concrete price at which to enter at, just a price area.  Putting my bid in 2 points from the low is a high enough price to likely catch any downmove and low enough price to not be burned too bad if the market disagrees with my trade's hypothesis.

After being filled I ride it out, steady and confident that my careful planning, analysis, and entry are correct, and all those shorting are less likely to be rewarded for it here at the lows after "sell mode" stopped being in effect.  Psychologically, I will admit that it was difficult to be filled on such a hard momentum downpush (the market ripped right through the bids), and then watching it come so close to my stop, gyrating up and down, seemingly taking off and then getting knocked back down just as quick.  Plus, I was carrying a pretty decent lot size on this trade, which only added to the stress - your stomach isn't the only one twisting and turning with each tick up/down.  One thing that helped keep me in the trade was watching the profile continue to develop, where I could observe that the market was starting to one-timeframe again, but now in an upward direction!

So, why did I exit the trade where I did? Two reasons: I didn't want to push my luck going into the close (exited 10 minutes before 3:00), and I needed to be rewarded to taking on financial risk and mental agony for over an hour.  Better to lock it in a point or two ahead of my best-case scenario target than let the risk of what can happen during the close be stacked on top of my existing risk load.  I've scratched enough trades for a lifetime, after all.