Quick video today about Running Stops and the magic 2 point zone. Use this knowledge to place your profit targets and get out on some exhaustion activity.
In the Emini market you will always find a cluster of Stops sitting 2 points above a previous pivot high and 2 points below a previous pivot low. The Professionals know this and will push the market to “trigger” these stops – and shake out the Amateurs.
The activity around a previous pivot high (or pivot low) usually goes like this:
- The previous high (or low) is hit and the market pulls back from this extreme. This is profit taking and maybe some traders trying to play a double top (bottom).
- Then the market makes another advance at the previous high (or low) and the Stops start to get triggered. It’s almost like a firecracker going off and the market suddenly accelerates. The activity usually stops after another 1.5 to 2 points.
- Lastly, the market usually “completes” with a Pull Back to End of Trend pattern on Better Sine Wave on the 500 tick chart – and the trend move is temporarily over.
I prefer to get out on the extreme activity (running stops), effectively on the left shoulder. So I will place a profit target at the extreme of this 2 point zone. Some traders are willing to sit through a little more volatility and will wait for the “End of Trend” warning signal on Better Sine Wave before taking profits.
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