My ES Trading Beliefs

1 March, 2010

System Beliefs

These are my beliefs that inform the design of my ES System and how I trade it each day
Markets Trend
Markets seek equilibrium
Markets Reverse
Markets Cycle
ES cycles or pauses approximately every 5 points
Market price movement is fractal
Past price reversal points are points in price that may be support or resistance in the near future
Indices reflect the average market price for the underlying stocks they represent
$TICK reflects the cumulative tick count of the NYSE stocks
$TICK all above zero bullish
$TICK all below zero bearish
$TICK and ES charts are highly correlated
Divergence of Price with $TICK could signal a reversal in price
TICK / Index strategies are uncommon amongst amateur traders and common amongst professional traders
Price is fluctuating constantly through the trading day
A bar chart places a constraint on the market that is not reality
30 second bar charts are a snapshot in time of price movement
Bar charts are useful to compare price action between markets
Targets are useful in short term systems
HOLP – High of the Low Period – A close above the High can confirm a reversal long opportunity
LOHP – Low of the High Period – A close below the Low can confirm a reversal short opportunity
Higher High and Higher Lows can define an up trend
Lower Highs and Lower Lows can define a down trend
Retracements are a useful point to add to a trade and move stop
Swing High and Swing Lows define resistance and support.
If Swing High and Swing Lows are violated then the trend may be changing
Price may probe above a swing by one tick (on the ES) and a trend may still be in place
If price probes 2 ticks above a swing then the trend is probably over
News is a 50:50 opportunity best avoided with this strategy
If price has moved 2 pts from a reversal point it may continue
Daily, Weekly and Monthly pivot points are leading indicator areas of support and resistance
Reversal candles, doji, hanging man, shooting star, spinning top at pivot points are a confirming

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