The Euro, 20/80 Rule, Gold Futures (GC) and the NASDAQ (NQ)

A Little on the Euro and the 20/80 Rule

Welcome back gang. Good evening everyone. As we take a look at the Thursday session and what we’re looking at going into Friday there are a couple of key things to keep in mind.

First of all with the EURO. You know I’ve been talking about it the past couple of days and looking for it to break through this 13620 level (on my charts at 0:34). That was very important to me and we had multiple attempts at that overall area but every day we kept getting killed underneath the 13600 (on my charts at 0:39) which of course is a key strategy that I’ve shared with you in the past. Typically during the regular US session we don’t actually get above and stay above the round number resistance levels. So, we were getting killed off those last several days which just strengthened that need to get above that 13620. We have what we call the 20/80 rule, which is a break strategy we’ve done videos for in the past. The key was to get above that 13620 and then that could lead to a much nicer move. Now, it did fall short of the overall target that I’m looking for as far as an initial target but it did push up at least 50 ticks there which at $12.50 a tick does start to add up very fast.

With that being said, we are going to continue to watch it now for the next couple of days and see if we can hold at or above this 13650 level and make a little push for the 13700’s. See if we can get all the way to that initial target.

Reviewing Why Trailing Your Trades is a Must

As far as the British Pound it was something that I’ve been being asked about. We did a follow up about it in last night’s video. We said the key here was one of two things:  look to break down below the speed lines or push above the accumulation bar here (on my charts at 1:57). We know that we’re going to have a tough time in this distribution area. We did go ahead and get below the accumulation bar for a little while this morning and then we went and pushed up to close at the accumulation. So there was an opportunity to trail a trade down below there. That’s another reminder of something I want to share with you. When you are doing these things on a daily chart and you’re taking breakout/breakdown trades in situations like that think about this. In this case, this move down a little over 25 ticks to the downside. It’s your responsibility to go ahead and make sure that if you’re going to take those trades where you’re breaking out, breaking down, that you’re trailing your trade and trailing that stop. Why? Because while some of these trades are just going to go and go and go and lead to really huge moves very profitably, very fast. Others are going to push through your key area and then turn around to come around right back up again. They may go 20, 30, 40, 50 ticks and then reverse but the whole point is: why are you turning that winner into a loser? Why not go ahead and trail behind that?

The biggest loss I’ve ever had in my trading career resulted in a profit where I had thousands of dollars on the board prior to it rolling over on me while getting caught in some news. It is much easier and much better to trail that trade. So at least if you pushed off into your direction, putting protective stops in there to avoid that is good. Most platforms not only allow you to set that initial stop but then trail it mechanically as it goes and comes down. If you’re going to trade these when you’re absent from the market, you’re not sitting there watching, then having that automated trailing system in place makes a lot of sense. You don’t wake up the next morning to see you’ve broken through your level and that you had a nice profit on the board only to give it back and make it a loss.

Another great example was from the gold futures (GC) here the other day. We got down below a key area in GC that I was looking to break through. We ended up pushing down very nicely about 35 ticks but only then to go and have it snap right back up on the same day. Once again, why would you give back all 35 ticks of profit in your direction ($350 your way)? It’s great to hope that it goes down another several hundred points but why not at least have a protective stop in there just in case it does reverse. It is one of the better ways, in my opinion, to trade these overnight breaks where you’re looking at these key daily charts.

So GC did break down a little bit and then it pushed back up there. So there was a profit there if you trailed that trade.

The Stock Index Futures Were Brutal Today

As we look today at the stock index futures they were brutal if they were your only focus in life. That’s one of the reasons why we focus on multiple instruments here because you get your head handed to you very fast if you’re not paying attention. We walked in the door and saw what we refer to as the ‘kill zone’ here (on my charts at 5:13). We had the falling resistance. You had rising support. You were getting pinched in there. You also had an inside day as well. The high from yesterday and the low from yesterday completely engulfed today’s trading. You were just very pinched and you can see the speed lines and the 20-period MA were holding this thing with a death grip today. All it did was whip back and forth.

Bobby was recently brought on board to our team as a Success Coach to take really good care of you guys. He’s been a broker for seven years and so he’s had a lot of experience and even he said, “Yes, this is where a lot of these traders used to get killed”. So, this is a constant reminder and that is why I call it the ‘kill zone’ because it’s more likely you’re going to give back money if you’re whipping back and forth as we were in very tight ranges today in the stock index futures. So, unlike the last three days, where we had a three-peat (Monday, Tuesday, and Wednesday were fantastic trading), today we just basically avoided it like the plague. Instead we’ll continue to do so going into tomorrow until such time as we see the NQ get going. The issue with the NQ is that we walked in the door this morning knowing that the NQ was going to be a problem because of the accumulation bar. We knew it was going to be really hard to push to the downside into that accumulation. Sure enough, that ended up being the case. We had an inside day on the NQ as well.

Going into tomorrow’s session I’m very curious to see if we break yesterday’s high or do we start pushing back towards yesterday’s low. If we push towards the low I’ll start looking for some aggressive shorts. If it goes towards the high we’ll have to see if it does it slowly or does it near the news. How does it break through there and are all four of the instruments in alignment? I’m going to need all four instruments to be in alignment to look for long side trades going into tomorrow. I certainly prefer the downside. I always love the downside because it makes me more money quicker usually. That’s what I’m looking at.

Students! Pay Attention and Take Notes

One other thing to note is to make sure when you’re watching these different videos to go back and take snapshots and make notes for yourself. Just like from last night’s video. Of course, in the Premium Day Trading Video we had a 13 minute video that we put together of numerous tips and strategies we’ve been using the past few days. One that we highlighted from yesterday is part of the many from the 13 minute video, where this one here was crude oil. This is where the market was pushing down (on my charts at 7:53). A lot of people were looking at the opportunity to short. Some of our newer traders thought that would be a good idea. We showed them why they wouldn’t want to do that and why we were expecting the market to pop back up. That was shown here (on my charts at 8:08) in these different time frames all being buried. Plus, the way that the stochastic was coming back up on the 2 minute chart was the tell-tale sign. We went through that on last night’s Premium Video. If you missed it make sure that you go back and watch that video because after we did all that you see from this screen shot today (on my charts at 8:33) we used that exact same tool, that exact same strategy right into today’s session. You’ll notice that GC was the one big thing that was really moving. We had the exact same things taking place as what I just showed you so we were looking for this market to go up and go up big. I’ll spare you all the details and we’ll just get right to the chase. It ended up going ahead and pushing up (on my charts at 8:57) very nicely off those areas that we identified earlier.

There were some people that were looking to go short at these areas (on my charts at 9:05) and we explained why that would not be a good short. To short under normal circumstances we look for shorts there but we explained why in depth why we weren’t today. In part, that was because of this set up that you see down below here (on my charts at 9:21). So we said ‘no short’. People did short out in the regular retail world and realized they were wrong (and about 12-20 ticks is the average retail traders stop). So when they went short they realized that it was going to go back anyways against them the whole thing exploded to the upside. It popped up there 40+ ticks in one single bar. It just handed the head to people that weren’t aware of that information.

So take that information, when you watch these different videos, and write them down, print them out. This way, when you see the same thing happening the next day or in the days to come you’re armed with that information to make much better trading decisions.

With that being said, you guys have a fantastic night and we look forward to seeing you in the Live Trading Room tomorrow morning and in this weekend’s videos. Take care everyone.

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