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Warrior Trading Blog

Fake Break Thursday in Mini Dow | Steve’s Futures Pulse 137

Steve Recap 4.18

Well, you’re probably wondering why I have such a sad face when trading’s been so good over recent weeks. Well, today, to match my shirt, it ended up being a red fake break Thursday in the mini Dow. That was my first trade of the day in the futures trading chat room. I’m going to show you why I took the trade, but also why I got out to preserve capital. There’s another trade that’s still in play at the time of this recording, and the Canadian dollar, we’re going to look at how that one’s doing as well. Look over my shoulder in today’s Futures Pulse.

(singing) All right. I’m going to draw your attention over to the chart over on the far left of the screen here. That’s going to be our YM, the mini Dow contract. We’re in June contract. We’re looking at the 10-minute time horizon this morning. What we saw was this breakdown right here. You notice how the market started to break down below that key 487 mark. That’s 26,487 in the case of this mini Dow. It ticks at $5 a point. We initiated a short position down here. You can see, boom, boom, boom, boom. 473 was our entry point on the short side. Actually, early on in the trade, as you see, the market started to make some penetration to the downside. We felt good about the trade initially. It was important that we placed our stop and we put that up here at 541 because we always want to have a stop-loss in order in these volatile futures markets.

Now, our original target on this one, preliminary, was going to be just before we got down to this supply area. That was going to be our tier one target. Our second target was going to come down here. Then, our goal was to leave a runner in play if we were able to make some segues down below that second tier congestion zone. Guess what? It wasn’t meant to be. You can see the market came up, up, up, up. As you can see now, the market took out our stop at 541. We took $340 a contract on the chin. Now, that wasn’t our only trade of the day. We also made a trade in the Canadian dollar, which I’m going to bring up for you here as well. I’m going to make this chart real nice and big so you can understand why we enter the trade, how we’re still in it, and where is our risk management now. Okay?

So this was a long entry that we took earlier this morning. We took it at a price of 7485, which I’m going to do my best to draw a little line right there, okay? Our initial stop on this one, we worked a wide stop because we saw all this space up here as our opportunity to go after a couple of these. So we worked our stop down at 69. The risk is really not all that much, just 16 points, and at $10 a point that’s $160 per contract. So I’m going to write stop down here. Okay. That was going to be our worst case scenario. Market actually did start to move in our favor. We got all the way up there around the 7492 area at one point. So we took our stop and we trailed it up right here. It’s sitting currently right now at 7477. So we trim 16 points all the way down to just 8 points from our entry, reducing the risk from 160 to just $80 a contract, a nominal risk.

So we’re still in play on this one here. The market is in a sideways market. We’re in this what we call value area between the red supply area and that green bottom line demand area, that’s the TAS Boxes value area. So we’re kind of holding on in there right now. Key area that we want to watch is this re-break potentially above 7484. If we reassert ourself to the upside, which I’m not so sure if it’s going to do here, as the market has slowed down a bit, we’ll be in a good space. But we’re ready to accept our fate. Again, at $80 a contract, we’ll take what the market’s willing to give.

Sometimes as a trader, the best move you can make is on the risk management side and stay out of the way of the upside because these markets can and will surprise you in a good way if you give it a chance. So I’m going to be hanging in there the rest of the way today. We’ll see where it goes. I’ll be watching and I hope you do too. I’ll meet you back at the markets soon. Until then, trade well.

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