Nat’s ‘system trades’ on Tuesday illustrated one of the issues that still needs to solved: how to trade the price around the “control line.”
After the chart is printed, its easy to see that the whipsawing around the “control line” (sort of a sentiment reversal line) was temporary, and the direction for the day was down.
It might even have been possible to reach that decision from the decline in the pre-market, after a big ramp overnight on light volume.
But the whipsaws were pretty substantial, about 10 points above and below the 1885 line, and nobody wants to be stuck in a position swinging through 20 points, especially if you’re trading multiple contracts.
Of course the safest trade was to wait for the price to reach the buy level and enter long. The price reversed at that point almost to the tick, and the bounce was good for about 25 points.
The people monitoring the live trade room did well, because Nat was calling the turns quite accurately. But obviously some kind of filter is to smooth out the entry when the price is moving back and forth across the control line.
However the best trade Tuesday was in the oil futures. We’ve been concentrating on the ES because that’s the most popular trade, but the outcomes in the oil futures are equally consistent.
Yesterday the CL missed the Sell line by five cents, then marched right down to the buy level. The whole move was worth about $2000 per contract.
We need to find ways to make these calls more actionable.
Got any ideas? Put them in the comment box below.
Comments here please..