Well troops, once again we find a great example of what most members are keenly aware of by now. The good news being that market structures are almost always very predictable magnets for crowds on both sides, allowing for tight lines and risk overlay benefits that can be ground into edges over groups of trades. The bad news is just like any other indicator, price action and orderflow only tell you what IS happening right now and cannot foretell the future X minutes or hours from now event by event. The reason of course should be obvious, but has been the topic of many recent discussions on the forum related to finite vs infinite outcome games of chance (yes, trading is a game of chance folks, embrace that or be gone. lol). So here we see the action on the break above the 54-55’s structure (which had extended to include a new Globex high in the 56’s) and into the then current all time high 60’s structure. As would be expected, plenty were thinking enough is enough with this rally already and wanted to fade there, and likewise plenty wanted to stalk a shallow pullback to the 54-56’s from above to reload long there. And that brings us to the main message in support of the aforementioned realities of trading. Whether a bull or bear from these structures today as an intraday swinger, timing may have been a b*^ch…
First, let’s consider the initial test of the then current all time high 60’s. Shortly after the cash open we saw the case 60 even reject to the tick after strong buyer absorption and seller response in purple. Also note in the stats the largest size finishing net sellers into that push up. Obviously the bears who were strong in conviction not waiting for so called ‘confirmation’ sold into that push and made a score trading structure to structure. The next structure below the 60’s was framed by the Globex high 56’s and into the 54-55’s as marked to stalk a first scale or all out (the next below that was the one starting with the YH 51’s but we never got that far). For members reading significance in volume I’m sure many of you who were bears from the purple would have had a hard time holding through the buyers stepping up and absorbing new sellers in light blue at the high side of that first zone. They did eventually break through and hard reject prices below the low side of that same zone though so for those who held on to the bottom zone reject in dark blue, good for you. But the key takeaway here is there is no right or wrong in this stuff, just whatever your process specifics are seeking. If we consider that same action in light blue there is no doubt many bulls were looking for just that same action that bears from above were looking for to scale into, as is usually the case. Were the bulls that bought into that seller absorption on the first pullback into the YH in light blue after break above “wrong”? No such thing is the answer. We never know what the aggregate of market participants are going to do and what effect that will have on price in the future, even when reading orderflow. Intraday swinger bears who sold the first test of the 60’s got to win, but intraday swingers who bought the first pullback from it had to puke for a loss. So like I said, timing can be a b*^ch…
But what about the action on the second test of that same all time high zone? As you can see this time the case 60 even was tested to the tick the second time around. But note on that first push in pink the buyers really exhausted into the high. That can often be a great signal for faders but in this case only was for the scalpers. Why? Almost immediately into that first pullback in light green passive buyers swarmed in and absorbed continuation sellers in a big way. From there we saw a second push double top failure in red, though again on thin volume with generally disinterested aggressive buyers. Were intraday swinger bears “wrong” to frame trades on either of those pushes looking for a move back into the 54-56’s or beyond? Obviously those who were short from there who read the super thin hard rejection of the VWAP in dark green were able to scale for a few ticks profit or a scratch at worst. But those who didn’t may have booked a full loss wishing they wouldn’t have waited and instead traded the earlier test in purple. Likewise, any bulls who didn’t catch that seller exhaustion hard reject in dark green may have missed getting in on the biggest move of the day as we saw the case high break and another big rip higher. Again, timing can be a b*^ch, but of course I say this in jest really. Only to continue to illustrate that you shouldn’t keep trying to build a trading process that evaluates itself on its ability to read whatever indicator and predict the future, one trade at a time. All you can do is execute your process in concert with your adaptable risk/reward overlay and see what unfolds event by event. Any edge that you are able to develop won’t really be able to be seen trade by trade without variance and will only be found over groups of occurrences. In our experience this seems to be the hardest fact for newer traders to accept – that they need not be able to predict the future in order to be successful. .02
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Discovery Trading Group is a unique dojo focused on mentoring aspiring futures traders since 2010. It’s emphasis is on guidance in building bespoke processes and risk overlays rooted in market structure, price action and orderflow, with sound adaptable risk management as a priority.
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