A nice short trade…

A day trader does not need to have a "view" on market direction. All (s)he needs to do is follow the price action and be guided by market reality.

Today was a case in point in the wheat market. Price opened with a downward bias, and I was sitting waiting for a confirmed break to the downside. Instead the chart made what is often a pretty good bottoming pattern and turned back up to challenge the session highs. At that point I was almost certain that any trade taken today would be a long.

However, price suddenly broke downwards again and, somewhat reluctantly, I entered orders for a short trade. These were triggered and fortunately I caught a sharp downward spike making 7 points on each of 3 contracts. Money was at risk in the market for just 2 minutes.

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The moral to this is that the day trader cannot know or predict market direction, but can hope to hop aboard momentum moves and capture a portion of those moves. Of course, this is only worthwhile in markets with sufficient volatility to make these short term trades worthwhile.

I suffered two full points of slippage on the entry to this trade. I aimed to enter with a sell stop order at 928,  but was filled at 926. This can be annoying, although it often indicates the momentum is very strong.

 

 

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