I had a question on timing into a trade. After you’ve done your daily habits and have a directional bias, how are you looking for entry? And does the time of day play a role ….the three different sessions? And do you use price action setups at all like pin bars, etc. or any other chart based entires? Or are you just looking to enter at the stops or some other means?
Well, sometimes I do the daily habits on a real time basis throughout the day. So, lets say I wake up at 5AM or 6 AM EST, then I would start doing the daily habits and see what is going on. Recording the news, seeing what scenarios are potentially moving the market, setting and re setting price alerts, etc. Writing into the mastery currency files my little notes on what is going on and explanation for the price movements, etc.
So I would say most of my trading is confined within the 5AM – Noon EST time period. And then occasionally, there can be some good opportunities towards the rest of the trading session Noon – 4pm/5pm. I would say, try to confine your trading session so you can get in some good amount of sleep.
Bruce Kovner said in Market Wizards:
I generally try to keep my trading confined between 8 AM and 6 or 7 pm.
Unless you are really trying to push your account really hard and doing so using all sorts of tiny stop hunts and news trades, for which you may need to get up in the middle of the night, etc.
If I have a bias, I ask myself a few different questions. I say, how big of a movement can I expect? Is it only a 30 pip intraday trade? Is it a ODVE for 100+ pips or so? Or does the trade have the potential to be a MDMM movements of several hundred pips, etc? Establishing how much you expect the market to move is important because it also influences how big of a stop loss you want to use, which effects position sizing. Because if I only expect a 30 pip move, then I need to nail the high/low for the day very accurately and don’t want to accept a 100 pip drawdown on the trade. If on the other hand, you are expecting a MDMM or GM move, then you don’t have to catch the high/low for the day and may feel fine if the market moves 50 pips or 150 pips against you.
Then, I ask myself, given all the information I have up until this point – the information flow, news impacts, scenarios, sensitivity, etc, what is the proper macro model (news/sent/fund/macro model) to use at this very moment in time?
For example, if I expect a market to go higher over the next 48 hours, should I buy when it breaks the topside stops? Should I wait for an intraday dip? Should I wait for the market to trip light downside stops first? Should I wait for the market to trip more sizable downside stops first?
It is my version of what Paul Tudor says he does from More Money Than God:
I put myself in the mental position of being short the market, and I think how I would react emotionally to different events and see what it would take to get me to take my position off. And I write that down and that will be high for the day. Because the high for the day will be the point at which the shorts capitulate. I close my eyes and imagine myself long. I say, ‘Okay, where is the point I get nervous? Where would I say, “Oh my God, I have to get out?” ‘And that would be my projected low for the day. That preparation is important to try to determine great entry point to buy and to sell.
I just have my own version for doing it. I collect my own specific information sorted in the way I like with the daily habits. The news impacts, the battle of scenarios, the sensitivity research, the news/sent/fund/macro concept and macro model that I use. Paul Tudor Jones seems to place a lot more emphasis on the short and longs capitulating, while I like to place much more emphasis on the “macro exhaustion.” In other words to figure out the proper extent of the news/sent/fund/macro scenario that is moving the market and when that scenario will be exhausted. Sometimes macro exhaustion for a particular scenario occurs after just 50 pips. Other times it lasts 100 pips, other times 300 pips, other times 3,000 pips, etc. Typically, it is the cleaner type of volatility moves.
So I try to find the proper macro model for each market that I am studying at the current moment in time.
For example, if you were bullish on Silver over the past week, and bought the breakout above $20.75 above the July 22 highs, then that was the proper macro model at that moment in time. It worked.
If you were bullish on the Nasdaq lets say, and bought it @ 3,145 this week, after it made fresh highs and broke topside stops, then that was a poor trade because the bullish macro forces were a bit exhausted and the market fell back.
Or if you were bearish on the Nasdaq, you would know to wait for a fresh high before shorting it and not to short on the lows of the day or when it trips downside stops.
If you were bullish on Apple, and bought it after it broke out of $475 highs, it was a good trade because you got the news/sent/fund/macro model correct as there was sufficient pent up news/sent/fund/macro model and money waiting to come into the market on the proper scenario.
So when you see in the weekly habits that I post, where I write in “DO NOT BUY THE HIGHS” or “DO NOT SHORT THE LOWS”, I am referring to the rough highs and lows of that day or over the past previous days. I am attempting to identify the proper timing macro model to use at that moment in time. Sometimes the proper macro model stays fairly constant over a long period of time if the market is trending. If you see a nice trending market with minor retracements, then you can see the proper macro model stayed fairly constant over a period of time as the proper entry was to get in a minor retracement.
Of course, the proper macro model can change at any point as new information comes into play.
There will be times I am doing my intraday research and the information and scenario and macro model click in my mind and I place the trade – market order right there and then. I don’t particularly care about the time. I care more about getting the correct battle of scenarios right and extent of the news/sent/fund/macro movement. If I think the trade is good and volatility will be in my favor and the price is right, then I just place it. That being said, I have found some interesting times in the futures markets, primarily the 9:30 AM open and 10:30 AM times, which could be potential reversal points. But I am unsure if they will last. Again, I try to place more emphasis on the macro forces.
Other times I am uncertain and wait until I finish all my daily habits. Sometimes at the end of the day, after finishing all the habits, I have some more information, properly sorted to work with and it clicks in my mind and place a trade during the later NY session or Sydney/Asian session.
Other times I do a whole bunch of habits and research and I am still confused and just have to sleep on it and wait for clarity during the next trading day.
It just depends… upon conditions and the macro forces as I interpret them.