Monday, September 22, 2008

Day type in trading plan

Here's todays profile. Notice the sharp downturn in IB both in the profile and in volume of the dominant flow as well in the direction. The PNF chart also had a down sloping angle through the morning. It was profitable day turned into a loser. I write this blog to bring up the point of incorporating the day type into the trading plan. And outside of value analysis, one needs to set aside days like the sessions we have had - then have a playbook for it. Did you notice the financial's steep down trend. I dont remember it turning around. So you can call it - special exception session - open below value etc. Price never closed above VWAP or the volume weighted moving average. The important sectors to watch were the commodities, the financials, the uncertainty of the bail out program. And how that played in the traders minds. The big contracts actually were buying below VWAP and net positive. The day intended to balance today - but capitulated in the L period. The mistakes in trading are made when one fails to recognize that the opposite flow has won out. It does seem like an excess low, however. An inevitable rotation down when price spends so much time below the POC at the bottom. Tommorows open and the price behavior at the settlement will determine the type of day. Look for long term players to be responsive at the settlement or todays (as well as overnight) LOD.

Clearly, financials and the bailout program needs to be watched intently.

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