When executing a trade it must always follow a pre-defined trading plan. Trades must be clearly measurable in order to reasonably determine a trade’s result – it is not the profit or loss that determines a good trade but the objective implementation of a trading strategy. Through a trade journal and respective trade reviews that trading strategy is further formed and improved.
Before a trade is executed, a comprehensive market analysis needs to be done covering both the big picture and the smaller time frames. A combination of the two perspectives reveals clear levels to focus on when looking for a trade and potential ways to manage it. Tools utilised may be the market profile, larger time frame candle stick chart and volume profile to get a better view of the broader perspective as well as the smaller time candle stick chart and order flow charts to receive more detailed insights.
ES FUTURES SAMPLE TRADE
This trade example focuses on smaller time frame only respectively the M1 candle stick in combination with the order flow chart and has been executed in the ES futures market during the pre-opening of the US session; time in the charts is CEST.
The market illustrated a balanced chart picture in the M1 candle stick chart while forming a range (1) between price level 4275.50 and 4279.50. After moving sideways, the price broke the range bottom level indicating seller dominance. After a stronger push the market built a bottom level (2) at 4267 and went into a pullback. Reaching the price level around 4273 the market started moving sideways creating a second range (3) while indicating weakening long momentum and a potential end of the pullback.