Tuesday May 2nd, 2023
I’m publishing this blog a day late, as yesterday was quite hectic. The trading environment was far from friendly. I took the morning off due to the intensity of Monday, waking up at 07:00 and working non-stop until 01:00 – not the healthiest way to work, I admit. However, it was efficient! I decided to go to the sauna around 12:00, returned home a few hours later, and once again began my ritual. I sat at my desk, looked at my charts, and instantly realized, “this market is terrible!”. From the moment the Opening Bell rang, the market plummeted and continued to drop. Sometimes this provides easy shorting opportunities, but other times it results in uncertainty and leaves numerous gaps. A strategy I personally love is entering the market when a significant down close candle is followed by an “inside body” candle (an ‘ib candle’). The ib candle is usually a small candle in the opposite direction, ranging within the body of the previous candle, with a preferably small range. The theory is that when you see consolidation like that after a substantial displacement, it could indicate that large players, such as financial institutions, are accumulating orders. Price is likely to continue dropping after such an event. This is also referred to as a drop-base-drop structure or a rally-base-rally structure. Now, let’s get back to what I did.
Initially, I didn’t want to take any action because I couldn’t discern where the price was heading. After observing a few drop-base-drop structures, I decided to participate and attempt an easy in-and-out continuation move. The problem was that no gaps were being filled, and the price just moved before I had a chance to secure a proper entry. Then suddenly, at 10:49 New York Time, two consecutive 1-minute up-close candles appeared, forming a bearish order block. They were followed by a displacement leg, which left a sell-side imbalance, buy-side inefficiency (sibi), or a Fair Value Gap. This presented an opportunity for me to enter a short position with a limit order and a 1:1 risk-reward trade. I needed only five handles, nothing more. I waited two minutes for my order to be filled and entered the short position. After five minutes of consolidation, the chart began moving in my favor, ultimately reaching my take-profit level. It took eight minutes to secure my five-handle trade of the day. Take note of that: eight minutes for five handles. The day before yesterday, it took seven minutes. I see a pattern, as this was more or less the same last week.
That’s all for today. See you all in the next post!
I always trade the S&P CME E-mini or micro contracts by the way^
