Teach Talk Trade Day Trading & Technical Analysis

T8 Retracement Trading: A series on technical trading with moving averages in the futures markets. (Part 4)

For the next few weeks, we will examine opportunities in the futures markets that are dictated by price movement and an exponential moving average: the T8. In each example, we will be reviewing previous opportunities and speculating on how to become involved in the near future. All charts will be presented in the form of weekly candlesticks and will feature three moving averages and one momentum oscillator. As you will see, these simple tools can unlock the door to profits.

Part 4 features a chart of the Emini Japanese Yen (an electronic contract) using weekly time frames. We define “trend” as the direction of the T8. As we can see, the trend of Yen is definitely up. Our rules are simple. We only want to initiate trades in the direction of the trend. Therefore, rule #1: Initiate trades in the direction of the trend. Secondly, we want to buy weeks that open below the T8 when it is in an uptrend and sell weekly openings that are above the T8, providing the T8 is negative. Rule #2: Buy opening retracements to the moving average in the direction of the trend. That’s it. A simple approach to trading the futures markets.

Using this strategy, you could have bought the opening price during the following weeks at the prices stated: 10/13/07 @ .86100 and 12/22/075 @ .88480.  At the time of this writing, the Yen was trading at .93990. These two opportunities have turned out to be big winners in the last few weeks.  The Yen is not unique to this situation.  Currently, over fifteen commodity futures contracts have demostrated similar patterns.

During the next three weeks, we sill see over two dozen examples of the same trading set up. THIS IS NOT A MAGIC TRICK. These specific circumstances happen again and again. We will examine precious metals, interest rates, grains, currencies and other interesting commodity futures for exactly the same set up.

Please take advantage of the FREE 7 DAY TRIAL to The Morning Call ( we discuss 21 futures, ETF’s, E-minis, NASDAQ & Solar & Alternative Engergy issues ) & The Mechanical Monkey where we discuss our mechanical trades.

The Drive to Succeed would be considered to be the trait I see as most important in being a successful online trader. You also need skill and talent. Skill can be gained by knowledge and practice. Talent is an inborn ability for an activity. You must have risk tolerance and have the ability to make decisions under conditions of uncertainty. All you decisions will have uncertainty built into them, you will be in a business of probabilities. You will have to get your head around this idea. Professional gamblers know they are in the business of probabilities, they try to play with the odds in their favor and you must do the same. Amateur gamblers are just throwing their money at something and hoping for luck and chance. Sure they will win some but more often than not, they will be losers in the long run. Online trading can be similar to gambling if you have the amateur mindset. You must develop the professional mindset and try to stack the odds in your favor on each trade. This is where education and practice come in. You need to develop a trading system that fits your personality, fits you risk and money management model and exploits your talents, then and only then, will hard work and discipline work in your favor. You need to be willing to accept losses, it is not a personal failure, it is a normal course of business. Would you consider Ted Williams or Cal Ripken a failure in baseball, of course not, they did not get a hit every time at bat. You will not a win each time you go to bat with an online trade.

Please take advantage of the FREE 7 DAY TRIAL to The Morning Call ( we discuss 21 futures, ETF’s, E-minis, NASDAQ & Solar & Alternative Energy issues ) & The Mechanical Monkey where we discuss our mechanical trades.

Wednesday, 19-Dec-2007

Using and Understanding Trailing Stops

Once you get in a trade you hope the price immediately starts moving in your favor.  If so, you need to execute your plan, and if this includes trailing stops, then put your plan into action.  there are a couple of ways to do this.  With online trading it is easy to use a trailing stop that is continually modified according to the price action.  Lets say your trading plan calls for a $.50 trailing stop.  When you enter the order you will initiate the trailing stop which will be $0.50 below the entry price, As the price moves up your trailing stop will also move up.  In the purest sense, you would just leave this stop in until you get stopped out.

If your trading plan includes moving a stop up to a breakeven level after a certain profit level, then you would put in an initial stop and move it up manually following the price action.  You will never be hurt taking a profit or breaking even.  You have to be careful since taking small profits will not make up for the losing trades with larger stop losses.  If you place your stops too tight then you will be stopped out will very little profit.  The overall  game plan is to cut your losses and let your profits run.

If I am day trading in my online account, one of my plans is to lock in a breakeven level as quick as possible and then watch and trade off the candle formations in different short time frames like the five, ten, 30 and 69  minute time frames.  If I see that the trend is breaking down I will lock in a profit or smaller loss.
There are many ways to use trailing stops and there are ways to reduce risk with multiple contracts and using trailing stops.  Teach Talk Trade will educate you in these type of trading methods and philosophies.

Please take advantage of the FREE 7 DAY TRIAL to The Morning Call (we discuss 21 futures, ETF’s, E-minis, NASDAQ & Solar & Alternative Energy issues with analysis)  &  The Mechanical Monkey  where we discuss our mechanical trades & give you entries and exits.

Emini Directions 11-30-07 (Friday): A Technical Analytical View of Eminis for online and day traders.

NQZ (December Emini NASDAQ 100): Spinning top and 50% percent retracement could mark the end of the current climb in the NASDAQ.

Friday’s pattern of supply and demand delivered a long legged spinning top candle for the December Emini NASDAQ.  Highs of the day carried above 2124.00, the 50% retracement level. This 50% level is the difference of the high posted on 11/1/07 and the low established on 11/13/07.  After strong upside action for the last three days, the spinning top could curtail further upside movement.  Spinning tops are candles that have lsmall bodies, but can have long upper and lower wicks.  The longer the wicks, the more indecision is in the market.  This candle should slow the advance down for a few days.

The CMO3, our momentum oscillator has smacked its trigger level, on Wednesday and last Friday.  As the CMO curls over from the top of its range at +100. This is a extremely overbought condition that started a correction today.  This usually means that upside action will be difficult to come by during early next week.

The direction of the T8, our exponential moving average and trend definer, continues to point up.  After three weeks of negative direction, the T8 turned up this week and now looks to continue its posture of strength.  Monitor price and the T8 closely for opportunities to buy near the T8 exponential moving average.  Any retracements to the T8 should be considered as buying opportunities.

Friday’s black candle, a spinning top, can stop movement quite abruptly.    Candles don’t give signals everyday and when they do, the signals don’t last forever.  Friday’s “spinning top” is a sign that shouts ”indecision”.  Unfortunately, this is seldom helpful.  Just be careful, for all the above reasons.   Spinning tops are sure signs that the market is not confident further advances (and not really sure about the downside)…at least for the near term.

Futures 11-28-07 (Wednesday):  A Daily Technical Analytical View of Commodity Futures for online and day traders.

March Copper (HGH):  Copper continues its 90-point slide.

March Copper closed down -7.75 on Tuesday and allowed traders the ability to short this market at the T8.  Price smacked the T8 and moved down after the contact on both Monday and Tuesday.   We always see retracements to the T8 as opportunities to buy or sell.  Wednesday should offer an opportunity to sell against the T8.  The StoRSI, our momentum oscillator has come straight down over the last two sessions its approaching the oversold trigger area.

The direction of the T8, our exponential moving average and trend definer, continues to point down and continues to act as resistance to price (both Monday and Tuesday).  The trend has continued down for the past 35 trading days.   Rallies back to the T8, as we saw on Monday and Tuesday, are opportunities to sell the market once again.  The steeper the decline of the T8, the further this market can fall.  We continue to doubt if the market can rally for any length of time above the T8. 

Tuesday’s candle is not significant, but notice the wick above the T8.  Markets move in opposite directions of wicks.    
Please take advantage of the FREE 7 DAY TRIAL to The Morning Call ( we discuss 21 futures, ETF’s, E-minis, NASDAQ & Solar & Alternative Engergy issues ) & The Mechanical Monkey where we discuss our mechanical trades.

Energy 11-28-07 (Wednesday):  A Daily Technical View of Solar and Alternative Energy Stocks for online and day traders.

Energy Conversion Devices, Inc. (ENER): Possible rally off of quad-tip bottom.

ENER rally Tuesday creating a piercing line candle on its chart.  The previous four days of trading marked four days of wick extensions below 25.15.  This action begs for higher prices.  Look for resistance in the 25.85 area.

Please take advantage of the FREE 7 DAY TRIAL to The Morning Call ( we discuss 21 futures, ETF’s, E-minis, NASDAQ & Solar & Alternative Engergy issues ) & The Mechanical Monkey where we discuss our mechanical trades.

E-minis 11-28-07 (Wednesday):  A Daily Technical Analytical View of Eminis for online and day traders.

Emini S&P 500 (ESZ):  Volatility rules:  Eminis continue to rock and roll.

The ESZ closed up +19.75 and the S&P 500 closed up +21.01 points on Tuesday.  Price smacked the T8 and moved down after the contact on Monday and then couldn’t gather enough strength to touch it on Tuesday.      We always see retracements to the T8 as opportunities to buy or sell.  Wednesday should offer an opportunity to sell against the T8.  The StoRSI, our momentum oscillator, has swung positive again with the last six sessions changing directions of the indicator.  This is an uncommon supply and demand occurance.

The direction of the T8, our exponential moving average and trend definer, continues to point down and continues to act as resistance to price (most recently on Monday).  The trend has continued down for the past 29 trading days.   Rallies back to the T8, as we saw on Monday and Tuesday, are opportunities to sell the market once again.  The steeper the decline of the T8, the further this market can fall.  We continue to doubt if the market can rally for any length of time above the T8. 

Tuesday’s white candle is a “harami”.  The body of Tuesday’s candle is inside the body of Monday’s candle.  This supply and demand pattern can suggest a change in direction.  We have a classic battle of “trend vs. candle formation”…usually, trend wins.    

***Volatility Alert:
During the third week in July, volatility returned to the major stock indices.  For approximately four years, the markets have had low to very low volatility.  This significant change has ushered in swings of 100, 200 & 300+ points in the DJIA (DOW), sometimes on a day-to-day basis.  Stock indices tend to be either volatile, or not, for three to five years at a time.  Expect continued volatility.  This volatility cycle is in its early stages and we continue to believe it is here to stay. (***9/15/07).

 Please take advantage of the FREE 7 DAY TRIAL to The Morning Call ( we discuss 21 futures, ETF’s, E-minis, NASDAQ & Solar & Alternative Engergy issues ) & The Mechanical Monkey where we discuss our mechanical trades.
 

Dow Directions 12-03-07 (Monday):  A Daily Technical Analytical View of Stocks, Furtures, Eminis and Forex for online and day traders.

DIA (Dow ETF):  Hanging man candle swings from the 50% retracement level.

The Dow closed up +59.99 points on Friday.   After the strong move on Wednesday and a little follow through on Thursday, the market continued up on Friday.  The StoRSI, our momentum oscillator, has finally crossed over its trigger level is currently at the top of its range near +100.  This is a extremely overbought condition and we could see the market fall back to it’s near support at the positive trending T8.     

The direction of the T8, our exponential moving average and trend definer, has turned up for the first time in five weeks.  This is a significant change in trend.  Retracements to the T8 should be considered for long positions.

Friday’s candle is a hanging man and usually stops markets from going higher.  Expect the market to retrace to the uptrending T8.  Hanging man candles are sure signs that the market is not going to continue in the same direction.   So, the good thing is that trend is now up and the bad thing is that we have become overbought while turning the trend up.  Be patient and let the market come back to the averages.    

***Volatility Alert:
During the third week in July, volatility returned to the major stock indices.  For approximately four years, the markets have had low to very low volatility.  This significant change has ushered in swings of 100, 200 & 300+ points, sometimes on a day-to-day basis.  Stock indices tend to be either volatile, or not, for three to five years at a time.  Expect continued volatility.  This volatility cycle is in its early stages and we continue to believe it is here to stay.

Please take advantage of the FREE 7 DAY TRIAL to The Morning Call ( we discuss 21 futures, ETF’s, E-minis, NASDAQ & Solar & Alternative Engergy issues ) & The Mechanical Monkey where we discuss our mechanical trades.