El mercado de la EMQT

In the middle of the last decade, I went to a trading conference in the Bahamas (well, it was February and the thought of lazing about on Paradise Island was a temptation not to be resisted!) and it proved most rewarding because I met the legendary trader Larry Williams. By luck, one of the speakers booked failed to turn up and Larry came along instead. What a character, and I was so pleased to get his book How I Made $1 Million Last Year Trading Commodities. Based on his record year in 1973 – when computers were not exactly at their present level of sophistication – there are still some marvelous truisms in it.

Well, this Oops Trade which we are going to look at, is all as a result of his personal observation that if Today’s market opened below YL and traded back to YL, then you should buy YL. A really simple formula. A really simple opportunity. And a really good track record. (And for those of you whose minds race ahead when they hear a good thing, no it doesn’t seem to work ‘ if the market opens above YH and trades back to YH…’) Anyway, take a look at these examples.

As soon as the market closes very near the lows you know there is a chance of starting the next day with an Oops Trade possibility. How far it gaps will, of course, be a factor as will the strength and whereabouts of the support and resistance.

1. With the FTSE (at least on E-Signal) there is this phenomenon of the pre-opening trading activity, which gives a clue as to where the open will be and what might happen directly afterwards. On this day, the market did, indeed, gap down to very near some strong res/sup lines, which it soon gave up trying to go through, providing the opportunity to go long with excellent cover for one’s stop.

2. After a couple of hours of a broad band of congestion, the market started to put in a series of higher lows in a wedge-like pattern, producing a clear entry point for the more aggressive trader.

3. The market then ran up in close order to YL and went through in a single bar – with no follow- up retracement or test. The market then went on up to the Pivot and 1DBYH, where it put in a 2-bar reversal pattern, which would have been the place to take profits and watch the

retracement.

4. If you were still long, this Doji Sandwich against res/sup would have had you out and the Picking Up Stragglers would have been just the ticket for the southerly trip – allowing for a weather-eye on the time for the opening of the bonds, if the logical target of YL was not achieved.

5. The exit for the bonds opening would have meant also standing aside for the 7.30 Retail Sales Report and seeing exactly what effect it had. The two large bars down would have dictated any further trade to be around YL for entry and stop placement.

Price Action Trading

75

Formations, First Fridays and other phenomena

The chart opposite is an interesting example of an Oops Trade, not least because it took a long time to trade back to YL. Most of these trades take off pretty quickly and then the market either goes through YL or backs off pretty quickly. As has been repeatedly said before, with all patterns, every aspect of time and place has to be taken into account – and you have to trade what you see, not what you think the market ought to be doing.

1. The gap opening has immediately given rise to the possibility of an Oops trade, but the market is just above solid support and is looking to make a wedge to go ‘the wrong way’ according to expectation. In fact, the 9.00 am Consumer Confidence Report has provided the opportunity to break through with a mini-TTT.

2. Without any clear pattern, the market decided to return and then put in yet another wedge to break south. The determination to break through the res/sup lines again may well have got you into a trade – particularly on the test with the small 2-bar reversal – although the proximity of the return of the Big Boys may well have stayed your hand. The day certainly seemed to be becoming choppy and the report did not seem to put direction into the market.

3. When the Big Boys returned they put the market on a northerly course and you would have had a losing trade if you had waited to have your stop taken out. But, if you then joined in the fray in the res/sup area of where the wedges to your left had been formed, a mini TTT presented itself on the line to aim for YL.

4. If you had got into a trade north to YL, you would have simply waited to see if it was going to break through or offer a clear reversal off the line. The sort of bull flag would have held your attention, but the chances are you would have lost patience with the upthrust and come out. But in the next three bars the market was knocking on the door again and this time there was the possibility of an (imperfect?) TTT to buy. At that hour, you might well be out of it, sipping a drink – if not, it was a nice little trade to MOC.

The Oops Trade was certainly a well spotted concept by Larry Williams and he would be the first to tell you – as indeed he did me! – that they don’t work all the time. But the potential of the trade, as you start the day always brings a certain sense of excitement – even if it has to be tempered by the actual price action working against you and appearing to dash your hopes.

Price Action Trading

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Formations, First Fridays and other phenomena