Algorithm Builder - INDICES - DOW JONES - Review Oct 18th, 2019

20 באוק׳ 2019

Hello traders

I. Daily tutorial publishing challenge officially begins

Starting today, I'll be publishing every night what were the setups given by the Algorithm Builder Indices.
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You'll find more information about that script in this script signature.
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II. Wisdom of the day

Last Friday was the Triple witching hour day. That is the day where the US contracts come to expiration on the US market - this event happens once a month.
Hopefully, only once a month, because this day is often particularly hard for traders to trade.

Those days are the expiration of three kinds of securities:
1. Stock market index futures;
2. Stock market index options;
3. Stock options.
The simultaneous expirations generally increases the trading volume of options, futures and the underlying stocks, and occasionally increases volatility of prices of related securities.

III. Signals of the day

2.1 Morning trade

We had a difficult move to take because in front of multi-timeframes resistances. What I usually do, is to wait for a pullback near the EMA 20 which has a few huge benefits:
- generally gets me a better entry price (lower for a long, higher for a short)
- reduce the distance between my entry price and stop-loss - hence reducing the risk of the trade
The Algorithm Builder - INDICES calculates the stop-loss internally, based on the price where the signal appears



2.2 Afternoon trades

1. 8:45 am
The first SHORT was given against the leading trend. Around 2:45 pm the background is green, meaning the leading trend is still bullish but as we got a short trade, we had to take it.
Plus we were just below a ton of supports which tells us that a pullback near the EMA 20 is really required.
Before getting invalidated by the brown vertical bar, we had an 84 pips opportunity.

It's usually a good practice to set the stop-loss to breakeven or exit completely a position before the opening at 9:30 am.
We often see violent and unpredictable wicks a few minutes before and after the US stocks open.

2. 4:05 pm (UTC+2)

The IDEAL scenario for the Algorithm Builder. Leading trend is red, short signal, no supports near, a great setup with a decent risk-to-reward ratio.
When we're in the same direction as the leading trend and the next algorithmic SMAs are a bit far, those are the moments where I know that my reward is far greater than my risk.
Would I overleverage or increase my position size drastically anyway knowing this is the Triple witching hour day? Maybe not :)
Maybe I should have (kidding) :( ... it was a 162 pips move :)



All the best,
Dave