c06 JWBT016-Busby October 10, 2008 20:38 Printer: TBD
80 STRATEGIES TO WIN
The “Fast Dance” is an afternoon trade. When traders return from
lunch, they tend to evaluate the morning action and either reverse it or
accelerate it. Therefore, this trade is based on trading just after 1:00PM.I
use my software, the RoadMapTMand StockBoxTM, to gauge the sentiment
of the market, but it is possible to execute the trade without these aids. It
is just a little harder to do so.
First, evaluate the major futures indexes. Look at the S&P, the Nasdaq,
the Dax, and the Dow. Are they all moving in the same direction? If so, how
pronounced is that movement? In other words, is there an ascertainable
bullish or bearish sentiment expressed in the futures indexes? Measure this
mood by looking at the 12:30PMprices and compare those prices to the
1:00PMprices. Are prices higher or lower at 1:00PMthan at 12:30? If they
are higher, I look to buy the mini Dow futures or the S&P futures. If they
are lower, I will sell. As the trade name indicates, this is a fast trade and
I get into and out of it quickly. In fact, I may be in this trade for only a
few minutes. “Grim Reaper,” a very volatile and unpredictable time in the
financial markets, begins at 1:30PM, and I generally want to be out of the
position and on the sidelines by that time. If I am in a trade and making
money, I may stay with it and watch prices carefully, but I will not add new
positions.
In the S&P Fast Dance on April 25, 2008, the high of the range between
12:30PMand 1:00PMwas 1390.75. I bought some positions at 1391.75 with
a 3.5 point profit target. With this trade on the S&P, we use a 3.5 point
initial stop. On this date the initial target was reached and surpassed. It
was possible to make 10 points on the trade. However, because the trade
continued to pay, it was not until 2:00PMthat the full potential of the move
was realized. Figure 6.10 tells the story.
On this date the dance was a waltz rather than a jitterbug. Figure 6.10
is a 30-minute chart of the E-mini on April 25, 2008. The lower horizontal
arrow shows our entry point and the slanting upward arrow highlights the
nice move up. This was a trade that paid.The Squeaky Wheel
In addition to trading equity index futures, I also trade other futures con-
tracts like gold and crude oil. Like the trades above, the “Squeaky Wheel”
is a breakout trade, a day trade, and a futures trade. Crude oil is traded
at the New York Mercantile Exchange (NYMEX). Other products traded
at this exchange include a variety of fuels like gasoline, electricity, heat-
ing oil, and coal. Metals are also traded here including gold, silver, and
copper. Those who want to buy a bulk of crude can do so and delivery of