Wednesday, March 4, 2009

Wed. 03/04/09 - Must be aware of News

Today's lesson is to be aware of news and economic reports. I always check Econoday the night before to make note of news/economic reports but I forget about them by the time I get to work. I think it's because I boot up and immediately have to focus on my day job, and trading is secondary. I need to get in the habit of checking the Econoday calendar in the morning when I get to the office. Today was the second day where I started the morning with a 12 pt loss. That fired me up a bit, and I was able to turn it around to a +5.50 pt gain (17.5 pt reversal) by shorting the 710 area late in the morning. The earlier loss was also because I got called into several impromptu meetings and was unable to manage the position taking full 6-8 tick stop-outs. Usually my max loss is 6-8 ticks, but I assess the market conditions and usually exit with a smaller loss (3-4 ticks).

I was busy in the afternoon so couldn't even watch the market, but I want to share this TICK divergence setup which presented itself around 2:30 PM (central). I'll let the charts below do most of the talking, but here's why I would have shorted this:
1. TICK Divergence: Price made a double-top, and the TICK MAs made a lower high
2. Price was stretched out and over-extended at 2x 1st Hr High Range, and per my Rules, a mean reversion trade can be taken in those extended areas.
3. The red bars on the TICK indicate TICK extremes of over 1150, and the yellow bars indicate TICK extremes of 1000-1149. As you can see, on the first push up to 723 area, we see a lot of red bars fire, but on the 2nd push up, we see only a couple of yellow bars fire. It's just a visual confirmation of the TICK divergence; price is pushing higher on less momentum/strength on the TICK.
4. On-Balance Volume MA turned negative on 610 tick-bar chart
5. Vol Osc turned negative on 610 tick-bar chart

ES/TICK (1-min)

ES 610 Tick-Bar Chart

Open/Unfilled Gap at 689.50
We now have open/unfilled gaps above (733) and below (689.50) today's closing price

ES/TICK (3-min) Price stayed above Mid-Point indicating strength/bullishness

ES Market Balance (5-min Day Session)

Note how the DMI Ratio stayed Green almost all day indicating strength/bullishness during most of the day.


  1. Very nice setup! I was looking at the same thing but it signal after 14:30 so I had to pass on it. Glad someone made some money off it!

  2. Actually, I wasn't around (death by meeting) to take the setup, but I wanted to share the setup on the Blog. And I'm sticking with Sim for now, so no real $ is being made in the markets. On the plus side, no real $ is being lost either.

  3. have you read "death by meeting"? It is actually a pretty good book, fyi.

    Interesting set-up. I'm still trying to figure out how to trade with the $TICK. Any good references to share? Thanks.

  4. Hi Stan,

    I've heard of that book but haven't had a chance to read it yet. I'll order it and add to my reading list.

    Regarding the $TICK, I didn't really find a lot of information online or in books regarding it's use. It's something that I just put together while tinkering with it one evening a couple of months ago. So the only reference I can point you to are posts on my blog going over the $TICK. I've written some very detailed posts with a lot of screen shots to explain my method. Just go through the posts labeled with tick.


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