Market Clues

What to look for when creating your trading narrative.

Trading is extremely difficult. Our job is to make it less difficult. How do we do that? We must look for clues as they are presented by market generated information. But what does that mean? It means we must be detectives in our daily routine of information gathering. Collect the data, throw out the useless shit, annotate the important shit and keep it in our memories. There is so much data thrown our way everyday, so how do we decipher the good from the bad? Let me outline a few ideas and take you through my process, so that maybe it can help in your daily routine.

What should we be looking for in our daily analysis to form a narrative about where price is going?

Clue Checklist

1.First and foremost get rid of any distractions during times that you are trading or preparing to trade. i.e. looking over charts, data etc. No twitter, discord, instagram, news.

2.Dont pay attention to 99% of news. Know your events that will cause volatility like FOMC, but tune out everything else. This will hinder decision making and cause apprehension when it comes to putting on a trade.

3.Create a plan in your mind and on paper all possible scenarios that may play out, and write down your plan of action when those scenarios come to fruition.

4.Check your gamma levels. Download the CME group app or go on their website and look at the heat map which displays the number of contracts traded at specific prices. Huge call volume will be resistance and huge put volume will be support. Dealers sell at specific levels knowing that price is likely not to violate before expiration. Annotate those levels.

5.What price levels have increased volatility? i.e. lots of buying and selling. Write these levels down, watch the reaction and continue to monitor into the future. These levels will be most likely defended in the future.

6.Use your method of analysis and don’t keep changing based on others opinions. Form your own analysis method, stick to it and refine it over time. Make it yours.

7.Watch the VIX at key levels. This gives good indications of upcoming fades or rallies if VIX is at key support/resistance levels.

8.What is the ATR of your product. Determine daily ATR and mark on chart. Look for confluence at this area.

9.Always mark daily high/low/open and closes from previous day. Look for confluence at this area.

10.Is your weekly bias long/short or chop? Trade accordingly.