I've had a few questions on the prior blog on dax setups.

I didn't explain the entry criteria for the setup I showed on the previous blog exhaustion trade.
I was trying to get across the structure of the market needed before the trade setup.
The higher low area is the entry area on the long side trades.
I need to see a failed retracement at this point.
This is where sellers are forced to cover with the previous price structure exhausting selling strength.
My entry is 2 bar high then an entry on the next higher tick.
I find my risk is small compared to potential reward.
This is a setup on the Dax I traded today.

Dax extrade.jpg (138.38 kb)

Monday trading on the Dax and I have had a whopping 4 contracts traded for the morning session.

One important area to watch is the stock market opening one hour after the futures open.

This is where we often get fast moves and shakeouts as occurred today.

I took an initial position on a retracement of price to 5720. (Minor support)

Then I anticipated a shakeout as the underlying stock market opened and took a 2nd position after price pushed up from its lows.

The shakeout pushed price just below the first pullback setting up a pump fake with trend.

I scalped out the first and let the second position move to initial resistance at 5745.

I left some on the table and should of had an extra contract on but was happy with the 20+ pt move.

I also managed a larger position long on the evening session of the Aussie SPI which helped my equity return.

(sometimes the SPI price movement can lag trending moves which provides opportunity)

Dax shake.jpg (95.03 kb)

I find the best trading setups are where traps catch out one side of the market forcing covering of positions.

One setup that I find very useful is best shown on a one minute chart with volume setting up conditions.

I am looking for a low on an expansion bar and with high volume. I have marked it - Exhaustion 1.

The second exhaustion has slightly less volume and forms after a retracement.

This exhaustion bar is usually at new lows but can be at a slightly higher low.

The theory is that these exhaustion bars get rid of the majority of sellers leaving the potential for a reversal to the upside.

The entry is based on a failed move to the downside which traps sellers forcing them to cover.

I expect a fast move to the upside, so if price doesn't move quickly I will close out.

There is a few potential entry areas that I have marked.

The reverse is applicable for downside trades. (The entry area for the short should read Lower High)

Dax setup.jpg (180.34 kb)

Today's early trade on the Dax was almost a mirror image of yesterday.

My first trade was a long at a possible support (demand) area at 5660-5655 area.

I was stopped out at the low tick at 5652.5 when on review was the prime area for demand.

If we look at the first hour of trade a nice support formed at the 5652 area.

The re-entry average was 5556 and I managed to scale out for a total $ 1400 US profit.

My exit style can still be improved but the profits are starting to add up.

The key to profits so far today came from panicked retail traders selling into support!

Dax 3 minb.jpg (85.71 kb)