The Value Of Time
Intrabar Execution Tools
by Suri Duddella
These two intrabar indicators can help discretionary traders make the right trading decisions.
One of the most misunderstood or ignored concept in trading is time. Most traders concentrate on price- or volume-based indicators, but in discretionary trading, execution time (that is, entry/exits) is the single most important factor for the success or failure of a trader. Discretionary traders can use very good momentum and pattern-based techniques with intrabar setups, but intrabar execution always seems to be a problem because the time factor is ignored.
Trading intrabar volatility is why many traders lose money but why many seasoned traders make money. Here are two intraday indicators, one that shows the current bar strength with its reliance on current elapsed time (inside bar), and one that shows the bar time indicator and its mechanics. These tools will help discretionary traders make the right decisions.
CHARTING TIME FRAMES
Most scalp/daytraders use either tick charts (89, 233, or 610 ticks) or minute charts (five, 15, or 30 minutes). I know some claim to be trading 15 seconds, 30 seconds, or two-, 10-, or 50-tick charts. More power to them, but I know I can't trade anything below five-minute charts or 610-tick charts on emini Russell 2000 (ER2) contracts or a 233-tick chart on Dow mini (YM).
Let's say you are trading an ER2 five-minute chart. You are seeing a potential trade setup or a reliable long signal generated on the chart, and you want to go long at previous bar high + 1 tick. You are watching the next bar and your finger is on the buy trigger. You see your five-minute bar starting to paint (after the signal bar), and soon you see your trigger point one tick above the high or ask price.
...Continued in the July issue of Technical Analysis of STOCKS & COMMODITIES
Excerpted from an article originally published in the July 2008 issue of Technical Analysis of STOCKS & COMMODITIES magazine. All rights reserved. © Copyright 2008, Technical Analysis, Inc.
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