SIMPLE PATTERN ENTRIES:

These are some of the basic patterns that will form in the intraday 5 minute bars. These patterns will give you a specific entry level to place orders in advance.

You can use these patterns in conjunction with your 5 minute TWS indicator acting as your directional filter.

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If the TWS is moving in an upward direction you take the BUY signals. If the TWS is moving in a downward direction you take the SELL signals.

Identifying the patterns:

During the trading day you should be watching a 5 minute ES day session chart and either a 15 or 60 minute (Day or Globex chart). You can set up screens to switch between the various time frames. You can easily identify the patterns and the likelihood of them being successful just with the Wavetrader III running in your eSignal on each time frame.

Below your charts you can set up window panes to monitor indicators such as the slow stochastic, DMI (directional movement index), volume bars and OBV (on balance volume).

If you really want to cover all possible contingencies I would suggest you have the Wavetrader III and the WT-ES Assistant.

If you don’t have the WT-ES Assistant you should also run charts for the OEX and the SPX in 5 minute and up to daily in increments of 5, 15, 60 and daily time frames for confirmations of the direction you will be trading in. A lot of the time the OEX will lead the futures by breaking out or reversing in advance.

I would also recommend you watch Bloomberg to keep you informed, as often some news event will change the market mood and direction and it is better to know the reason why rather than to just see it happen on your charts.

Bloomberg often has interviews with the pit and these guys are standing on the front line. They can see who is buying or selling from the major trading houses.

They become a sort of a psychological indicator as the day unfolds.

If you start off with the simple issues to first gain your confidence, then as the weeks and months pass by the sheer fact of your screen time and observations will develop your knowledge of the repetitions that continue to repeat time and time again.

The recipe for success is patience and only taking trades when everything is in your favor. When things are not clear it is better to be sidelined.

Overtrading is the greatest threat to your eventual success using my methods.

When everything stacks up the right way take the trade, when it is not clear stand aside.

Over time you will understand that restraint is better even if you miss something.

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TO START THE DAY for ES trading:

Before the day session begins you need to have all your charts prepared with the MOB levels (MAKE or BREAK) marked clearly on them. You don’t want to be playing catch up all day.

You need to have observed the Globex trading hours as any new high or low in Globex may have reversed on a geometric level that the market will take into account when the day session begins.

Always bear in mind that on any new day the opening price has the potential 50% of the time to be the high or low for the day within a couple of points. On any day following a KEY reversal day, an OUTSIDE reversal day or a DOJI day the odds are magnified considerably.

If the market opens with a small GAP from yesterday’s close the chances it will fill the gap in the first hour is always better than 50% unless the prior day was a V day and the market is coming off a major GEOMETRIC support or resistance, one that is obvious to the medium or longer term players; in which case you could have a breakaway gap and just head off in the same direction the market was going in at the prior days close. If the market sentiment is lopsided the market may never look back. Usually after a V day the previous session finish will contain a correction and this will be your benchmark 1:1 to work with in the earlier part of the day.

Generally speaking at the beginning of the day the market is more likely to follow the same path it was going in the last hour of trading the day before.

When the market opens and breaks a technical support pretty much straight away that would set a bearish tone for the morning session. Similarly if the market opens and breaks up through a technical resistance it would set a bullish tone for the morning session.

Always bear in mind that the trend is your best friend and it is not a good idea to take positions in a direction that is not obvious to the majority unless you have some major technical evidence that the market would attract the “big boys” to reverse the other way.

Once the market has established a direction in the first half hour, use the 1:1 correction rule to monitor its strength.

If the market is not RANGE BOUND each trading day should offer you trading opportunities on 3 or more occasions.

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Getting off to a good start is always helpful for your confidence levels. And when you have a good profit you can go away for the day and leave them do whatever they want to do.

The point of trading is to make money, once you have made money human nature takes over and you will have a tendency to begin gambling, thinking that you can do no wrong; Its a big mistake made by the best of us.

Market days generally conform to 4 different swing patterns in the larger daily pattern.

The chances of getting a TYPE 1 day; either up or down all day is about 5 to 1 against.

TYPE 2 days; are V days and they are about 5 to 1 against and will mostly follow type 1 days. The majority of days will be TYPE 3 days, where the swings take on the form of a W or M which can be flat or stretched in a bias of either up or down.

TYPE 4 days; are N days these can be as common as TYPE 3 days. You should have a good idea what type of day you are in by 2:30pm ET with an hour and a half to go. The 3^rd swing could also be a very strong impulse move.

The thing to remember always is that a new swing of larger degree will be confirmed in progress once the previous swing begins to overbalance its smaller degree 1:1’s. Swings in type 3 and 4 days could terminate on 50, 61.8 and double tops or double bottoms of prior swings in similar degree.

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If you are in a type 3 day the 4^th swing usually comes in the last hour of trading.

There are also other days where the market goes up and down in a three legged pattern and closes back where it started the day. Usually a day like this will move downwards or upwards from its opening price, make some extreme level and then move in a trend for the better part of the day to exactly the same distance above or below its opening level in the opposite direction. It will then move backwards after 3pm to finish back at the opening price level by 4pm. If you can grasp all the possibilities it will make your trading life a lot easier.

For traders who wish to take time into account it is wise to consider the “on the hour” time slots as potential reversal zones as you have a lot of program traders in the market that come together at these times based on the patterns I have shown you and they think they can swing the market just on what they do acting in concert together. These guys work for the big trading houses so don’t take what I am saying lightly.

The biggest advantage you can gain as a trader is to “nail” the exact high or low for the day and then you know what you should be doing there after.

You will need to understand the geometric rules traders use to “nail” the exact highs and lows for the day but it is not an impossible task if you understand the market flow.

Everyday has its own peculiar high and low – does not even matter whether it is a type 1 day from morning to end. As the market moves along it tells you a story by the way it handles the implied resistance and support levels it has to negotiate along the way.

If you get a daily high or low form early in the day – say by 11am – you can plan a little better as you move forward. If you identify a daily low or high before 10am it will often produce a good move and you maybe able to milk it for a few hours or even all day.

Whichever way the day is going you should have a good idea by midday whether it is worth hanging around or just going down the pub for the afternoon. If there is going to be any action it should be obvious by then.

The longer you are in this business watching what is going on, on a regular basis, you will get a feel for it. Some people will never get a feel for it granted because they will never understand what motivates the buyers and the sellers.

So your main objective with trading is to understand the types of things which motivate these guys to risk their money on a trade. If you can do this it becomes easier to trade. Always ask yourself the question? What would I do here?

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