Thursday, February 10, 2011

Lunch money

Often during lunch session, the pullbacks can be complex and protracted. Trend breakouts during lunch sessions do happen, but they are comparatively scarce. The simplest way to trade lunch is to stay out and is the recommended practice for beginners. Lunch hour also is rife with traps and breakouts that look bold but go nowhere, so limit traders are especially vulnerable. It may seem that they stop you out to the tick and then reverse the move. Even the reliable A2s can fail as we did today at the A2 off b34. This is because lunch hour bars are badly formed and signals are not good enough for many traders to enter.

Even fading every breakout is dangerous since breakouts sometime do succeed especially if accompanied by some unexpected news. If the AM session had a trend move, as long as there was no overshoot, you should assume the entire lunch move is likely to be a pullback or trend break at the worst and it should at least test the previous swing extreme.

The correct way to enter the market at the end of the lunch hour is after a trend bar breakout and enter in the direction of its likely failure. Today, the comparatively large trend bar at b48 failed and gave an long entry. which could be held till HOD is tested or end of day with a stop below the entry bar b52


  1. Cad. why B12 isn't a nice signal bar for H1 buy? is it because its too close to HOD? or no FT on B13?

    and why b15 isn't an A2 buy? too close to the TR forcing me to buy near top of the range?

    thank you.

  2. Yes Cad, you can end up giving up more than lunch money trading at lunch time. Bars 4 & 7 made a DB with b7 being a reversal bar (hammer). Would not a buy above b7 have been a good R/R trade? If you would have considered this trade where would you have placed your stop?

  3. Furthermore, as the entry at b51 was a G2 wouldn't it have been an A22, although at the time of entry there was little discernible trend? It was not surprising that the 1st leg of the entry did not reach the HOD.

  4. @Victoria, b12,13 is a BP of ema and also a kind of A2 since two inside bars are two small pullbacks. On a large overlapping signal bar the stop needs to be below the signal bar, which was 11t -- a bit too much for me.

    @RF, buying above b7 would have made an excellent trade and the stop would have to be below b7 due to the overlap.

    A22 is an A2 entry that goes sideways and gives another entry at almost the same price. I dont think this fits the description