Not All Conventional Trading Wisdom is Correct - Conclusion

---

...Continued From Part Four

My Final S&P 500 and E-Mini Futures Contract Observations:

Observation: "Donít get used to big swings or chops, bear or bull trends. Expect anything, anytime."

Yes, keep a clear, open mind every day you trade. Come into the new day with no biases or expectations. Your mind should be a clean slate. Otherwise you are peering through colored glasses based on old information. In addition, all of us have a tendency to expect what happened previously.

We love to fit the world into rigid, repeating patterns. That's how the brain is wired. Expectations can put us in a rut if the e-mini futures market has been in a long, repetitive chop that weíve been trading successfully. The first time the market breaks out and starts trending, many of us will keep bucking the trend and give back much of our profits. Be flexible and expect nothing at all.

Thereís nothing like studying whatís happening right now to get an edge on the futures traders who trade "remotely." By remotely I mean the day-traders who figure out their buy and sell pivot points the night before - where to enter and exit, etc. without regard to current action. They calculate e-mini retracements, support and resistance points from the past and then put in resting orders based on an end-of-day system. But I feel getting current, live and changing information "RIGHT NOW" can greatly enhance this EOD method. (end-of-day price data)


Observation: "Once e-mini futures break above an important point, consider it strong and a buy on a test back down to this point. The market might take its time and make a double bottom to scare the sheep. But usually expect a fast turn-around spike and rally scenario. This is likely if the A-D line is neutral or slightly bullish. Sometimes a "too-bullish" A-D line with a big run-up signals exhaustion and an impending turn in the market. It's the same thing for big negative A-D line openings with a gap. Look for a big rally after a series of e-mini bottoms and heavy futures contracts buying."

ëNuff said.

Observation:  "Use the line tool to check the A-D line histogram to see if A-D is improving while the price is lower than yesterday, etc. This is a non-confirmation."

Since the general stock advance-decline line is an important trend indicator, you might as well use trend lines and other tools to look for confirmations and non-confirmations. An A-D line that has drastically changed from one day to the next is usually a major indication of a turning point lasting at least for the full trading day, and possibly longer.

Good Trading!"

---

View Thomas Cathey's post archive >