c04 JWBT016-Busby September 30, 2008 13:48 Printer: Yet to come
54 A FOUNDATION FOR SUCCESS
computers will do the work for you, and I let mine gather numbers for me.
With my RoadMapTMsoftware I track prices every 30 minutes. The prices
are recorded and I am able to refer back to them as the need arises. There
are other software packages that may be purchased that can track and an-
alyze data for you. Find one and use it.
Once the numbers are obtained, I record the high and the low of trad-
ing during these 30-minute time spans. I refer to these 30-minute bars as
reference bars because I use these prices as reference points for my trad-
ing. I refer back to them throughout my trading day for guidance.
I selected these times based on the global financial markets and impor-
tant events that occur at various times. At 3:30PMthe Globex or after-hours
electronic system comes online and traders from around the world begin
making their after-hours plays. For that reason, I deem the first 30 minutes
of trading to be important. The second price bar that I use for reference
is formed between 3:30 and 4:00AM. At that time, Asian exchanges have
closed and European exchanges are going full speed. By taking a slice of
that price action, I am able to get an idea about how Europe views the
markets. A short time later, New York and Chicago come to life and the
NYSE, CME, and other large exchanges open their trading floors. The eyes
of the world focus on the United States, and our financial markets lead the
way in world trading. As the sun moves westward, traders across the na-
tion take a break from trading and enjoy a midday meal. After returning to
their trading platforms, they rethink the morning’s action. Do they agree
with the day’s move or do they want to shift gears and join the other side
of the action? In the afternoon, prices may reverse or accelerate a move
begun in the morning. For that reason, I use the 12:30 to 1:00PMprice bar
for orientation for afternoon trading.
In Chapter 2, I explained how I divide my analysis into time segments.
Asia dominates the first time segment that extends from 3:30PMuntil
3:30AM. During this time segment, I rely heavily on the price bar that is
formed between 3:30 and 4:00PMand the action in Asia. If prices move
above the high of that Globex opening price bar or reference bar and the
move is confirmed by rising prices in Japan and China, I look to go long.
If prices move below the low of that bar, with confirmation from the East,
I look to the short side. I may also consider some other factors, but the
reference bar and the mood across the Pacific are a big part of my analysis.
Likewise in time segment 3, I use the first 30 minutes of trading be-
tween 8:30 and 9:00AMto guide me. In the United States, the open outcry
pits have opened and traders are positioning themselves in the markets. As
trading continues throughout the day, I constantly refer back to both the
opening price and the opening price bar to gain a perspective and deter-
mine how I want to play. Are the bulls or the bears leading the daily game?
I want to play on the winning team. Figure 4.1 is a reference bar chart for