Written by:
Patrick Mikula CTA
Mikula Forecasting Company
www.MikulaForecasting.com
patrick@MikulaForecasting.com
Copyright © 2007 by Patrick Mikula All Rights Reserved.
Here is a 5 minute bar chart for the Dow mini symbol YM H8. This chart shows the MarketWarrior stop and reverse indicator. The letter “A” on the chart below marks where the NYSE opened and the volume on this mini futures contract becomes large enough to trade. A few bars after the open the indication is still for a Short position so we would go ahead and enter a Short trade. At point “B” the Moving Average Oscillator in the subgraph made a peak below zero. When this happens it is a strong indication of market weakness and the market should move lower. This occurred again at point “C” which again indicated the market was still very weak and should move lower. Before I start trading in the morning one thing I do is look for planetary aspects that are going to occur during the trading day. On the chart below the letter “D” marks the aspect Sun Semisquare Neptune. Notice the market declined into this aspect and then the decline stopped and the market moved sideways for about 3 hours. At point “E” the stop and reverse indicator is triggered and my Short trade is reversed. Next we see a series of small losing trades labeled 1, 2, 3. At point “F” the MarketWarrior stop and reverse indicator is hit again and a Short trade is started. This Short trade moved into the close of the NYSE at 15:00 (3:00pm) local time where I close all positions. I do not trade the mini contracts after the much larger NYSE closes. That is how trading went for Dec 27, 2007, 5 trades with 3 small losses, 2 larger win.
Written by:
Patrick Mikula CTA
Mikula Forecasting Company
www.MikulaForecasting.com
patrick@MikulaForecasting.com
Copyright © 2007 by Patrick Mikula All Rights Reserved.
Here is a 5 minute bar chart for the Dow mini symbol YM H8. This chart shows a stop and reverse indicator set to trigger on the “close” not the “high low”. Using the close to trigger the stop and reverse seems to remove a lot of the false signals. On this first chart the letter “X” and the arrow mark where the NYSE opened and the volume became active enough for me to trade. Some traders trade this market before and after the main trading session for the NYSE but I don’t due to low volume. When the NYSE opened the stop and reverse indicator were already signalling a Long position. One or two bars after the open when the stop and reverse indicator still indicated Long position I would enter this market Long. In the subgraph I have added the MarketWarrior indicator Smoothed Stochastic. When this Long position was still open this indicator showed Bearish Divergence with the market. This is represented by the tops labeled “A” and “B”. The market made a higher top and “B” and the indicator made a lower top at “B”. This is an early warning that the stop and reverse may be hit soon. At point “C” the stop and reverse was hit reversing the position to a Short position. This market then went through a series of 3 quick small losing reversal trades. Unfortunately this is how a successful stop and reverse method works, they will have a large win then a series of small losses then a large win and so on.
The next chart below is a continuation of the chart above. After the three small losing trades labeled 1, 2 and 3 the stop and reverse indicated a Long trade at point “D”. Now notice that we had a very similar situation where a Bearish Divergence again gives us a warning that the stop and reverse may be triggered soon. This occurred at points “E” and “F”. The price made a higher top and point “F” and the MarketWarrior indicator Smoothed Stochastic made a lower top at point “F”. This Bearish Divergence was a warning the stop and reverse would be hit soon and this occurred at point “G”. Point “G” occurred as the larger NYSE was closing at 3:00pm (15:00) local time so this would have been used to exit all positions for the day not a trade reversal.
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The chart below shows the 5 minute chart for the Dow mini symbol YM H8 and the MarketWarrior stop and reverse indicator. The Dow mini trades almost 24 hours a day but I only trade during the main trading session when the NYSE is open and the volume is high. The arrow labeled “A” marks the start of the main trading day in New York. The letter “B” marks the first trigger on the stop and reverse indicator. This opened a Short position at 8:55am. The Short position held a little more than 3 hours until letter “C” when the stop and reverse was hit again. At point “C” the indicator reversed to a Long trade. The Long trade held until point “D”. At point “D” the market had a large range bar that covered the full range between the long and short stop and reverse position. When this occurs it is not a reversal signal it is an indication of abnormally high market volatility. So at point “D” the position would be exited not reversed.
We have a further discussion of trading for Dec 20 that discusses trading the mini Gold symbol YG G8. This is available on the MarketWarrior owner’s web page.
Since adding the stop and reverse indicators to MarketWarrior I have been using them when trading the Dow mini contract YM. The first chart below shows a stop and reverse indicator. The Dow mini trades almost 24 hours a day but I only trade in the main trading session when the NYSE is open and the volume is high. The NYSE opens at 8:30am local time. All my charts are set to local time which is a setting made in the eSignal program. When the NYSE market opened at 8:30am the stop and reverse indicator was in a Short position. After the initial market opening burst of volatility which usually takes 5 to 10 minutes to work through, the indicator still indicates a Short position so the YM would be sold short. The market open is marked by the letter A. The first important correction upward against this Short position occurred at letter B. In the subgraph I have added the Moving Average Oscillator. Notice the Moving Average Oscillator held below the zero-line. This indicates market weakness and that the market will move lower. The next major event occurred when the market hit the stop and reverse line at 12:20pm and the trade reversed from Short to Long. After the trade turned Long there was a downward correction against the Long trade at point C. At point C notice the Moving Average Oscillator held above the zero line. This indicates market strength and that the market is going higher. The final event today occurred near the end of the day as the market hit the stop and reverse value again. Because I do not trade the Dow mini after the NYSE closes at 15:00 (3:00pm) local time, this stop and reverse would be used to neutralize all contracts and exit the market.
The largest pivot to occur today, was the bottom that occurred at 11:00am local time. When this occurred there was a very good indication this was going to be a major pivot. The warning was the very high volume. In the subgraph I have added the indicator MA Volume. You can see this was the highest volume up to that point in the day. This very high volume is a warning sign the market may be making a pivot, in this case a bottom pivot. This high volume is labeled E. This high volume gave us an early warning the stop and reverse may be hit soon.
