Your first trade of the day will probably lose

1-25-12

Hi all, I’m going to discuss some trades I made a few days ago, I’m just now getting time to discuss them. As I said yesterday, I will be transitioning from posting about multiple trades to one high probability trade a day. It’s just easier and I can go in more depth with one trade. I will go ahead and discuss these last couple of trades.

My first trade I placed finished ATM, which was my first trade of the day. In Brian’s trading videos he mentions that your first trade probably will be lost, and it does seem to be true to a certain extent, maybe its because when we first enter the market, you have to get in the groove of things. Anyways, after price was in a strong downtrend, I was waiting for a pullback in price, because after a strong and fast move the market many times goes into a range. I was looking for a trend continuation signal (ex: 2 leg pullback) and I waited for price to retrace back and I entered on the next candle as price dropped below the low of the previous bar. I should have waited for a 2 leg pullback at least, but I entered on a so called “1 leg pullback”.  After I entered price dropped ITM for a while but on the open of the next candle came back up. Once this happened I knew price was entering a range.

My second trade was OTM, and after I entered I immediately knew what I did wrong, and I hate it when I do that. On the 1 minute chart I was waiting for a breakout since price was respecting a clear resistance line. I entered because I was impatient and I didn’t wait for the candle to close before I placed the trade, and sure enough price respected the level again and dropped back down.

My third trade I placed after I waited for price to break out of the range. Since price had a very defined level of resistance that was not broken, I had belief that price would continue south, which also agrees with the previous sharp bear trend. As price broke through the range to the south side, I placed a put, ITM. One thing I must address is the value chart not being at ideal levels, the value chart doesn’t always work and especially during strong trends it doesn’t help much. That’s why I use PA and many other forms of confluence to place trades because not every piece of information will agree all the time. I had faith in price going further south because once the market trends, it tends to stay that way until the balance of bears and bulls changes, and that is reflected on your chart.

My fourth and final trade was also a put, simply because the market was not showing much interest in changing direction. I entered my trade after price had a small pullback, and on the 1 min chart it hit the 20 EMA line and bounced back down. Also I waited for price to move below the low of the prior bar pullback, ITM. This is another example of market inertia. The Value Chart was of no help with this trade either.