One reason I love the ES is because it is consistent with my basic sleep schedule. And since the markets close at 1:00 Pacific time Im forced to quite, win lose or draw. Even though you can still over trade the damage would have to be very hard and fast.
This comparison of markets is simply to point out the fact that you must choose the vehicle and TIME that is consistent with YOUR daily life and provides the highest probability for success. With that being said i want to share a simplification technique that I believe will help prevent over trading, provide high probability trades and increase focus at the most opportune times.
I Call This Technique THE 7 & 9, The 7 referring to activity just prior to (6:45) and just after (7:15) 7:00am Local time on tradestation, GMT pacific standard time. The 9 referring to activity just prior to 9:00am and just after 9:15am Local time on tradestation, GMT pst.
What I have observed through experience and back testing is that the markets can be broken down into sections, these sections can help me to focus and concentrate more intensely at specific intervals.
Ideally, if I can execute 1 trade per section/quarter that would match my 3-4 trade limit per day. Understanding there is NO real perfection or Exact timing, this helps my awareness of what may be expected during each quarter. The 7&9 peak activity marks potential turning points for the Day. Preparing for these times and analysing the reaction AROUND these times provide clues that link the sections of the day together. Again this is not exact and i don't just trade the bars, neither am I changing my basic rules and signals that trigger an entry. Im still using tick charts for signals and triggers. However I use the 15 minute chart as a clear reference point for confirming exact times. I am simply organizing my thinking around specific times in an effort to limit unnecessary market exposure.
The Sections are as Follows:
The Open - 1st 15-30 (1-2,15M bars) minutes after the open. I'm looking for an Open Ice Breaker trade here to get the ball rolling and taking advantage of the early volatility.
7Bar positioning - 5:45 - 6:45. Next 30-45 after Open Ice breaker (2nd, 3rd, & 4th 15M bars After Opening bar). This is where I probe for double bottoms, Gap Test, Cycle Support/Resistance bounces and Trend clues (Not necessarily for the Day but at least until the 7:00 O'clock bar). This part is the key, if i can ID the probable Range, Trend or S/R at this point I can look for entries and or position myself to Ride into the 7 bar where I may expect to exit positions. Again we know there is NO guarantee of exact occurrences but to have a generally clear idea about potential is the point here. 7Bars rule - If profitable 3+ points after the 7bar, then STOP for the day.
The chart below shows the activity on the 7bar as it peaks with Blocks Size. This is a Reversal day that features The Ideal Sequence: Opening Bar, positioning opportunities for 7bar, Dead Zone consolidation & Peaks at 8:30, then 9bar confirmation of trend for the duration of the day. 9bar breaks below trend line to confirm down side pressure. (The arrows point to the bars and sequence).
This is the ES 15 over the past 2 days in a very strong up trend, I Have placed arrows point to the 7&9 time zones and with Open and Dead zones and Peaks. Also note the Blocks Size that steps in on or around these times.
The peaks 7:30-8:30 refer to the potential to reverse or pull back at these points as well as positioning for the 9 bar. We are not looking for entry's per say, here we are probing for direction. If Trend remains strong from the 7bars, we look for the 9bars to confirm this and we roll with the trend. If a reversal has shown itself we Need to enter on the Qualified BB Reversal and consider a hold till the close.
The 9Bar Confirmation - 9:00-9:15. This is the last stop for a Real reversal, If we don't see a reversal by this time the odds drop substantially that we will get a reversal for the day. Thus we use the 9 bar and 9:15 bar as a clue to confirm trend potential for the remainder of the day. Reversals usually SETUP and Peak between 8-8:30, if this is true then the 9bars will offer confirmation clues.
Why the 9bar is telling. At 12:00 noon in New York many traders on the floors of the stock exchanges break for lunch. This exodus to fulfill a natural need substantially reduces trading volume. This allows a number of reduced volume strategies to be played out in the markets by specialists and market makers.
There is one rule about the lunch hour: trust nothing you see. However, if a strong trend is in effect, a new impulse for this trend can begin at this hour. In the event that the day’s trend is not clear, counter-trend moves are more likely to occur here! Traders Bulletin.
Range Day showing 7&9 Bars at key points
AFTER THE SECTIONS:
potential to lose focus rises and volatility may become unpredictable. I don't have a hard rule NOT to trade during these times but if I can execute during the first 1-1/2 hours of the day I should have NO interest in trading into the close.
Noted characteristics and Observations about The 7&9 action
- 7&9 shows very strong consistency on TREND days.
- 7&9 appears on Range Days but the moves are Not as Prominant. On days when the 7bar is inactive we may expect ranges for a while.
- From 8:00 to 8:30 look for reversal peak or continuation clues regardless of direction.
- 9Bars must confirm with Background Strength or Weakness.
- Look for 9bars to confirm trend of the day.
- Prior to 7Bars confirm Background S/W and scount for S/R, Gap Test, Double tops/Bottoms or trends from, Globex or prior day.
- @ 7bars if market finds no S/R or bounces then look for continuation of current trend.
- @ 7Bar if No peaks tops or Probars then look for continuation of behaviors.
- After 7Bar market may consolidate for a few bars then peak at 8:00-8:30 prior to 9bars.
1500 tick 7&9 highlighted with red arrows
Same day on 15 minute chart with 8:00 peak down at Yellow arrow
