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)

Let's look today at what separates professional traders from amateur traders.

To make money from buying and selling requires a mismatch in supply and demand.

Professional traders are those that consistently derive income from exploiting this mismatch.

To do this the probable areas of supply and demand need to be known and the distance between these areas becomes the profit opportunity.

The skill is therefore to look for areas where amateur traders are taking positions in high risk zones and taking the other side.

Buying when panicked retail selling is moving to a demand area.

Selling when excited retail buying is moving up into a supply area.

Have a look at the Euro charts and see if you can identify where supply / demand mismatches are possible.

Euro-SR.jpg (220.22 kb)

The link below has Supply Demand areas marked and how price reacted.

Euro-SR1.jpg (247.28 kb)

One rule for trading that I use is never be on the wrong side of an engulfing bar.

They are hazardous to your account.

On the other side of the coin, they can be very effective for entry criteria.

The importance of engulfing bars gains if it comes after a directional move.

For this bar to occur it must reverse the previous move from a new high and close below the low of the previous candle.

This requires a significant change in value perspective.

Engulfing bars.jpg (165.02 kb)

I've been a little slow in getting blogs done.

The late nights staying up trading the Dax then trading the Aus market have kept me busy.

I've also just had a small chunk cut off the top of my head to get rid of the beginnings of a skin cancer.

Must be the early morning sun out surfing. Not that there has been many waves lately.

When trading the Dax it is important to know key levels not just on the Dax but also on the S&P 500.

The advantage that it can give when positioning trades is huge.

The Dax today had key areas in 25 point ranges.

When the ES pushed down to a support area at 1056-1058 I had a perfect area to close shorts and enter long on the Dax at the 5600 matching support area.

Earlier I also was able to take a short trade on the Dax at 5675 as the ES bounced off resistance at 1069.

Alexander at tradewithpride.com is very skilled at putting these areas in context and basing a trading approach on these zone scenarios.

We keep in regular contact since my time trading at his firm in Atlanta and his morning prep is a great start for trading on the ES futures.

We have a project we are working on which I will give details on as we move closer to the end of the year.

Dax prep.jpg (258.40 kb)

ES prep.jpg (198.13 kb)