Monday, August 6, 2012

The hard road to consistency V - Poor price action days

In the post Off days, I spoke about the trader not being upto his game despite the price action being conducive to his type of trading. The flip side is when the trader is focused and ready but the price action is extremely poor. Today was such a day on ES.

Of course what constitutes poor price action varies based on trading strategy. For someone who takes very few trades and swings them to the max, a small range day with overlapped TTR action on most of the day is probably the worst kind of price action. On the other hand, a tick scalper would probably love a day like this.

There was no clear signal that worked the entire day and the biggest moves on b1 and b74 arguably were not off clear signals. New traders may get chopped up losing entire weeks worth of earnings on a day like this. This is mainly due to focusing on patterns and ignoring market context.

The risk management strategy to deal with such a day is exactly the same as the off day. You need to stop trading after two losses. Occasionally, you could look for an additional PM setup if a good one sets up (it did not today).

Expert and agile traders (I'm not one) may be able to switch context and switch to fading entry bars to get 10t on quite a few trades (for example, fading the second push down by selling close of b23 or buying close of b31 with 4t risk and 8t target)

Remember that every day does not have to be a winning day. Some days are simply not meant for swinging style trading. Since I choose to not trade unless my potential reward is 2x the risk, I prefer to stay out and reduce my exposure than to take smaller rewards (There were a few 1:1 setups).


  1. Cad iam impressed by your ability just to place only two high probability trades in the AM on most days. What do you do/watch for which helps you rule out most poor signals which everyone else is taking? Thanks

    1. The strongest indicator of a poor trade is an overlapped signal bar. The second strongest indicator is multiple setups near the same price in opposite directions like most of this day.