These are ideal trading conditions for swing traders. I had four trades today that averaged at least $200/contract each. I also could have had a fifth, but didn't take it. This includes the last closing trade that occurred in the last 15 minutes of the trading session. Prices closed today down about 16 cents from the high around $12.46 yesterday.
I don't know how anyone could trade using anything but tick charts in these conditions, although the short-term (less than 5 min) charts are also good. Tick charts are so responsive that they demonstrate a shift in market sentiment within 2-5 minutes -- literally! When a fundamentals-related news event occurs, as in today's assassination in Pakistan, the ticks charts will manifest this change to me within seconds, or at most, within minutes. This helps me to nullify the advantage that some traders have who get this news sooner or faster than I do.
Tip:Click on the chart and open it in a separate window to view it in larger and greater detail. I like to open the chart in a separate window and then resize both the blog window and the chart so that I can read the commentary in one window and view the chart in a different window along side of the commentary.
The left chart shown is a 3 minute chart. Note how well the Klinger+ATR indicator gave me advance knowledge of a change in direction. However, the tick chart (shown on the right) is still the best one to trade with. Even with an up and down day, excellent profits can be made with consistency, using short-term and tick charts.
The Klinger volume indicator alone, however, is insufficient to trade with. I use 3 moving averages to help me confirm a change in market direction. The combination of both (Klinger + at least one MA) is necessary to achieve the consistency necessary to trade successfully day after day. The 3 moving averages are shown in the charts as follows:
- This top chart, where the candlesticks appear, has a red and blue 8-period Exponential Moving Average. It also includes Bollinger Bands, which I use primarily as dynamic support and resistance.
- The 1st subgraph shows the Klinger+ATR indicator, but it also shows a Hull Moving Average, which is a smoothed EMA. It is appears in magenta and blue.
- The 2nd subgraph shows the Bollinger Squeeze indicator as a red and green histogram. This subgraph also shows the slow stochastic and the Gaussian filter, which is also another smoothed EMA, but with very different settings than the Hull MA above. Interestingly, the two behave very similarly, which I take as a confirmation.
In addition to the Klinger and moving averages, I also require confirmation by a crossover of the Bollinger MA (yellow dotted line in top graph), which is a 20-period Simple Moving Average, and a crossover of the EMA in the 3 minute chart also. The movements on trading days like today are superb for day-trading swing traders like me.
In this last chart, we see 15 minute candles. If I had been trading this chart, I almost certainly would have lost money, since it is so erratic. I trade shorter-term charts because I simply don't have the patience to wait for longer-term trades to become profitable. (Contrast this chart at right with the top right chart at the beginning of this post. The other one is much smoother and easy to follow because it is based upon trades coming into the exchange rather than time intervals. I also can sleep better at night by day trading and closing out my trades before markets close each day.) I am also unwilling to accept the risk necessary to place wider stop losses. I rarely have a stop loss of more than 5-6 ticks.
