When he tried to describe how he approached day trading. He said:
“When I trade at home, I often watch the sparrows in my garden. When I feed them bread, they take just a little piece at a time and fly away. They keep on flying back and forth, taking small bits of bread. They may have to make a hundred stabs at a piece of bread to get what a pigeon gets at one time, but that is why a pigeon is a pigeon. You will never be able to shoot a sparrow, it is just too fast. That is the way I day trade. For example, there are times during the day when I am sure that the S&P is going up, but I don’t try to pick the bottom, and I am out before it tops. I just take the mid-range where the momentum is greatest. That, to me, is trading like a sparrow eats.”
It was with those comments in mind that I tried to design the trade protocols around the intraday CIT cycles. The object of the game was to use the Cycles with the selected indicators (see article 1) to navigate the waves that the CITs indicated were coming. That’s a large part behind why I seem to have so many trades every day. I am just looking to take little bites out of the market and not stick around too long in any one position. They may not seem like a lot but, with the right tools to guide you, they tend to add up by the time the day is over.
Today they added up to a total of +10 handles.
Here’s what happened today:
Today we started off with a sell signal at the close of the first bar of the day when momentum turned negative. This short was at 1880.00 and took just around 12 minutes to hit our profit target at the 100 period average at 1877.75 for a quick +2.25 handle gain.
Next when momentum turned negative again at the close of the 9:21 bar we sold short again at 1874.75. We were targeting the lower band on this trade and we were concerned when we first entered it that we could run into some trouble when the 9:28 and 9:30 CIT clusters hit just a few minutes later. And, as it turned out, those concerns were well founded as prices double bottomed at 1874.00 and then started to turn higher. We quickly used this as an opportunity to pivot and reverse by covering our short position at 1876.50 for a -1.75 handle loss and go long at that same price with a target at the 20 period average. Approximately 13 minutes later our profit target was hit at 1877.75 for a gain of +1.25 handles and we were up +1.75 for the day.
We next ran into some turbulents when the CIT cluster at 10:24 and 10:55 sent prices ping ponging above and below their 20 period average.
First we had a short sale triggered that we were knocked out of for a -2.75 handle loss. Then, after we reversed back long, we were whipsawed again, this time for a -2.50 handle loss. In less than 20 minutes we had been hit with losses of -5.25 handles and were now down -3.50 for the day. The CITs had been largely on the money but our indicators were too slow for this kind of chop.
But focus and discipline is always the key to success in situations like this and our next short sale at the 10:55 CIT was the one that got us back in the black. We sold short at 1877.25 at the close of the 10:54 bar and in less than 20 minutes our profit target at the lower band was hit for a gain of +6.00 handles and we were now back up for the day by +2.50 handles.
We got another chance to sell short at the close of the 11:27 bar at 1872.00 after momentum turned lower again after prices could muster only a meager rally up to their 7 period average. 12 minutes later our profit target was hit again at 1870.25 for a +1.75 handle gain. Now our little sparrow bites had put us up +4.25 for the day.
At the close of the 11:48 bar, just after a CIT at 11:35, price momentum turned higher again after prices had held above the lower band. This is usually an indication that we have a good shot at trading up to the 20 period average. So we tried going long at 1871.75. But again prices could only muster a rally to their 7 period average before starting to turn momentum lower again. So we exited our long at 1870.25 for a -1.50 handle loss and reversed back to a short position. And approximately 3 minutes later our profit target at the lower band was filled at 1869.00 for a gain of +1.25 handles. We were still up by +4.00.
At 12:45 we had another CIT coming up and when prices traded down into it and then momentum turned higher at the close of the 13:00 bar we saw an opportunity to catch a rally up to the 20 period average. We went long at 1866.50 and around 18 minutes later our target was filled at 1869.00 for a +2.50 gain and now we were up +6.50 for the day.
When our profit target was being hit on the previous trade we also had a CIT come due at 13:20 that peaked that rally. When momentum next turned negative at the close of the 13:36 bar we tried going short again at 1866.00.
We were in sort of a bad position with this short sale as it was triggered just before another CIT at 13:40 that stabilized prices just above the lower band and sent them higher again. When they closed back above the 20 period average we had to exit and reverse as it now looked like the market was poised to make a run on the 100 period average. So we covered our short position at 1868.50 at the close of the 14:15 bar and went long. But we had another CIT occurring at 14:15 and prices HAD to maintain upward momentum at the very least or we would have to reverse back to a short position.
Fortunately, upward momentum held and prices then began to trend higher, hitting our profit target just over 20 minutes later at 1872.75 for a gain of +4.25 handles that more than doubled our net profit for the day to +8.25 handles.
We had one more trade triggered at the close of the 14:45 bar when prices peaked at the 14:40 CIT and momentum turned lower. This was another one of those instances where a quick move down to the 20 period average is a high probability, so we went short at 1871.25. Just a little over 12 minutes later, just before the close, our target was hit at 1869.50 for a +1.75 handle gain which put us up +10 handles for the day.
As you can see, sparrow bites add up over the course of a day when you combine some very simple trading rules with CIT cycles.