Here is a little play that I trade with good risk/reward parameters.

This trade is looking for a base to fail.

Often when the trade is successful there is substantial follow through.

On a failure of the pattern there is the possibility of a reversal trade.

I am looking for a base to form that is easily identified.

I then want to see price spike through support and quickly retrace back up.

In this example we can see a nice reversal bar with a tail.

This is where the range bars give great visual clues for trade setups.

Daxshoulder.jpg (107.39 kb)

Just back from a camping trip at Lennox Heads in North NSW.

We met Philippe and his son Sebastian who our boys had a great time with.

Philippe was camped next to us and is a trader who has been to a couple of my talks and a reader of the blog.

It is amazing where traders pop up, it almost feels like some sort of religious sect. (we may need a secret handshake or something)

Although the surf was non existent, the beers were cold and the beaches and lake were great for the kids.

It's funny how our boys enjoy camping much more then hotels, I'll just have to get better at the 6.00 am mornings when the birds start squawking.

TRADING/INVESTMENT COSTS

I read this article recently that shows the difference that fees have on investment returns over longer term time frames.

It also has implications for traders and their brokerage costs over time.

The blog is from the UK but with the exorbitant fees Australia's wrap funds charge all the more important for super funds.

http://davesbrain.blogs.com/mindmoneymarkets/2010/01/costs.html

I'd like to thank everyone who reads the blog for their support over the last year and those with blogs that have recommended my site.

Today the site had it's 15000th visit over the past 12 months with over 40000 page views which I find quite remarkable as I am quite low key.

One of the comments in the previous blog asked about structure.

As I developed my trading skills I picked up on support and resistance areas and how to trade some setups from these areas depending on price action.

I began to get a feel for when selling strength moved to equilibrium and then to buying strength through hours spent in front of the computer.

Anticipating these areas is pretty much what is required to make profits through trading.

The importance of structure in market trading really became apparent to me when I worked with Alexander at Pride Trading.

His trades are primarily based on structure with zones of support/resistance providing targets with a high degree of accuracy.

I learned about inside bid and ask zones and how they skew odds for directional moves.

I have marked up the current Euro fx futures showing basic structure areas.

Structure EUR.jpg (182.43 kb)

Once the structure is clear, entries can be based on a successful test or failure of these zones.

We can ascertain if the market is trending or range bound and adjust targets accordingly.

On the euro at present if the inside bid zone holds my potential trades are biased to trading the long side.

If we break through the inside bid to the down side I can look for a retest fail of the zone to give me a high probability low risk trade down.

Understanding structure in the market alows us to trade a plan that fits changing odds in real time.

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)