Trade of The Week: Market Timing and Triangles

An aspect of intraday trading that can be a source of frustration for many is that trades appear at different times of the day. Some traders will have trouble avoiding making poor trading decisions due to idle time. My method of dealing with  this is to strictly define valid setups and patiently wait for them to appear. If they don’t appear then I won’t make a trade for the entire day.

Fortunately non-trading days are rare. Most of my trades are between 8.30am and 10.30am. I seldom trade at the open due to the way I identify trades (waiting for a pattern to form) so there’s no rush to be at the screen when the market opens. This helps me to avoid the panic moves, volatility and the inevitable slippage.

Sometimes my first trade of the day may not be until the afternoon. It can be a real test of patience sometimes to wait for trades and this week’s “Trade of The Week” shows how being patient and waiting for the market to give a clear pattern can be worth it:

DAX-Sym-Tri

The market opened with a gap down of around 80pts at 9948.49. It immediately dropped to 9900 before rising to 9960. It wasn’t until 9.40am when the market stalled at 9920 and failed to break it that I became more interested as a trendline could be forming and a pattern may be emerging. The market consolidated over the following half an hour and it was clear that a symmetrical triangle was on the way. By 10:30am I was ready to put orders into the market and at 10:48am my buy order was triggered.

dax-sym-tri-history

The DAX pushed beyond the upper trendline and hit 9945 before retesting the breakout area and subsequently hitting my target.

If you missed the symmetrical triangle and needed further indication that the market was going to head upwards and try to fill it’s overnight gap,  another bullish pattern formed – an ascending triangle breakout:

dax-larger-asc-tri-14-10

This pattern was very clear and as it tightened around 9960, it was apparent that another larger move was on the cards. The market broke above 9960 and headed up to over 10000. As I was already in a trade in the same direction, I continued to hold my trade knowing that there was another confluent pattern which gave me more confidence. My target was hit very shortly and I exited based on the original pattern for a +36pt gain.

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