Friday, May 30, 2008

Day After a Wide Range Day

Yesterday, based on the Open Pit Hours Statistics, the True Range was 18.75 points, which was larger than the 10 average of the True Range of 17.9. So yesterday was a wide range day, and wider than the average. It is not a rule anchored in cement, but the following day of a wide range day is typically a more narrow range day, which can lead to whipsaw type of action. In other words, no clear trend, and continuous tests of the highs and lows of the day.

So far, today is a very narrow range day and an inside day - no clear trend and tests of the highs and lows. I do not know if it will end up that way, but that is the way the market is shaping up so far today.

Always remember that today will probably not be anything like the day before. Do not fall into the mental trap of thinking that today's market will be a carbon copy of yesterday. Always look for today's market to be different than the day before.

Charles
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3 comments:

  1. AnonymousMay 30, 2008 at 9:27 PM

    Charles, first time on your Blog...

    I am new to trading and working on a SIM for the ES contract. I use HH, HL / LH, LL for trend confirmation and had a hard time today 5/30. Just wanted your take - was this just a very tight trading day appx 7 point range. Were you able to make your entries/exits today.

    Appreciate any thoughts you can share..

    RJS

    ReplyDelete
  2. Charles A PennisonMay 31, 2008 at 6:28 AM

    Hi Anonymous,

    Welcome to the world of trading.

    I have been keeping data on the ESM08 contract since 2/26/08. Friday, 5/30/08, was the smallest true range day of that period, and an inside day relative to Thursday. This also means that Friday was a Narrow Range 4 and 7 day (NR4 & NR7). Look for the range to greatly expand either Monday or Tuesday.

    Admittedly, I do not do as well on these narrow range days. This is especially true since lately, the daily range has been extremely large. So, you start to mentally count on being able to ride a short term trend for 4 to 6 points or more during the day.

    I will be looking at the statistics of this contract this weekend and publish a post on this subject. I learned from Linda Raschke years ago to pay attention to and understand the nature of the short term ES cycles, which typically last 2-5 days. It varies from time to time. I will talk more about this in the new post.

    Thanks for asking.

    Charles

    ReplyDelete
  3. AnonymousMay 31, 2008 at 9:21 AM

    Thanks Charles, look forward to your findings. Your feedback helps put 5/30 trading day in proper context.

    RJS

    ReplyDelete

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