Value Zone Trading

How to Improve Your 2011 Results

2011-02-06T17:38:00.000-05:00

2010 was a good year of trading. In trading however, it is your next trade that counts not your last one. As traders we look at our trade data, and consciously or subconsciously analyze it. Depending upon how objectively you analyze your data can have a major positive effect on your trading.

Humans, especially traders are driven by their current P/L. If we’re green we become happy, sometimes cocky. When we’re red, depression lurks in the background. Did you know that we take losses 2.5 times harder than gains? If we lose $1,000 our brain reacts as if we lost $2,500. Yet, when we gain it’s not the same.

We have analyzed our 2010 data, and then outlined some ideas to improve your P/L
To read more sign up for our free white paper. http://www.valuezonetrading.com/traderesults.html

Look Left Before You Enter

2011-02-02T17:17:00.001-05:00

Matt Damon the poker playing hero in the move The Rounder said it best, “Here’s the thing, if you can’t spot the sucker in your first half hour at the table then you’re the sucker.”

Most of the time, I hate the comparison of trading to gambling. But this case is the exception. Every time you enter a trade you must look left. Think like the other guys in the trade. If you were short from the highs would you be getting out? Or would you be licking your chops waiting for the next leg down and a really great move?

If the other guy is in a great trade, you better be more certain you’re not the sucker taking the other side of his partial profits.

The Value Zone Trading Course will teach you trade setups that include 8 different solid criteria that you can use day in and day out to make certain you are not the sucker. Take a class this month.

Change Is In The Wind

2011-01-25T23:05:00.000-05:00

As we have started a new year Value Zone Trading will be moving toward focusing our attention on an even more rigorous systematic approach to trading. Over time this will include:

Expanding our blog to include more weekly and monthly profile charts.
Expanding classes, to include advanced trade management, and specialty lectures for our past and current clients.
Expanding our markets to include the Euro, Dax and Russell.
Expanding our trade time frame horizons to overnight and globex markets.
Introducing new auto strategies and new managed futures products.
Expanding into signal generation for discretionary traders.

As Value Zone moves into its third year, I am looking forward to working with all of you in the future. If you have any questions please feel free to contact us.

A Traders LIfe

2010-06-24T10:41:00.000-04:00

What happens in Vegas…can’t happen if you don’t have internet service.

One of the beautiful benefits of the trading profession is that you can perform your work anywhere in the world. I’ve traded as far as Shanghai with complete transparency except for the size of my platform screens. Of course, all you need is a solid internet connection but in a country whose residents include Microsoft and other leading tech companies, you would think this would be a mere afterthought, right? Welcome to the Las Vegas’ hotel internet network known as Lodgenet.

I was on the U.S. west coast for a speaking engagement at the Trader’s Expo in LA. My wife and I decided to stop in Las Vegas a few days earlier to relax before the big event. I still had to do some work in my futures trading room where I am co-moderator, so I set the alarm at 4:00am and started to subscribe to the dreaded hotel internet service. In a town where luck is a standard, nothing is a riskier bet than assuming this service will work to a reasonable satisfaction. Needless to say, after 45 minutes on the phone with the hotel’s internet service provider, it was concluded that my room was not going to have internet service anytime soon. After the hotel agreed to waive any charges, they suggested I come down to the lobby or convention area where I should have better success. Unfortunately, the lobby floor of the major hotel-casino at 4:00am is not a place to conduct trading mentorships. And the convention area – all packed with World Series of Poker tournament players -the ultimate display of risk management I must say.

I found a Starbucks and had intermittent service for about 45 minutes before a complete cutoff so I just called it a day to the disappointment of my business partner and me. I guess I can only worry about what I can control. Later that day, after arriving at the conference, the corporate hotel internet services were fabulous. A great lesson learned when traveling for work in the future. Of course, getting a wireless card is given as well. The presentation and the promotional work was a great success and we headed back to Vegas for a few more days of work/play before heading back home.

Staying at the same hotel, I feared going thru the internet fiasco and with the expected result as was 6 days prior, I trekked out at 4am to find a strong signal to start my work in the trading room. First destination: Starbucks – nada. Next, McDonalds, where two of the three patrons were asking me for money, and with a super laptop case in hand, I made the conclusion that my problems weren’t so bad after all. Next, Denny’s. The ‘wi-fi service inside’ sign read as if it said, ‘we pay you blackjack on any busted hand!’ I asked for a table in the corner near an outlet and they told me there should be one opening up soon. It was strange since the place was 90% empty, and the hostess practically called security when I walked over into the open area. I remind you, all I wanted was an internet connection.

Frustrated and embarrassed that our country can’t provide something as simple as an internet connection, let along clog an oil hole in the gulf, I walked out, leaned against the beer-sticky Denny’s entrance door and pondered my next move. At that moment, I was encountered by one of Las Vegas’ finest. No…not a man in blue.

Her name was (allegedly) Sheri. She asked me what happened and I said, “well, all I’m looking for tonight is a wi-fi connection, that’s it. Would you know where I can get a hot zone around here?”

“I think I know a few places.”

Exactly what I wanted to hear. So I said, ‘We’ll, this may sound crazy but coffee is on me if you need a break and you can find me one”. Realizing I just made the most ridiculous offer to a working girl in Las Vegas, she replied, “Sure, come with me. I could check my facebook too if that’s ok?”

Of course I obliged and we headed to our first stop – Starbucks at The Mirage Hotel & Casino. Status: closed, but that didn’t stop Sheri. “Mike, come here”. She grabbed my arm and we hopped over the rope into a dark and closed Starbucks.

I started to calculate the odds of the following scenarios in typical risk manager fashion. “No officer, seriously, I was just looking for a wi-fi signal”. Or even worse, “No honey, sweetheart, wife of mine, seriously, I was just looking for a wi-fi signal. Oh, by the way, Sheri….Nancy….Nancy….Sheri”.

In the end, there was no signal, and thankfully no security, so we headed to her 100% guarantee, - Oshea’s Casino food court. Coffee and internet – not a problem. She told me she’s goes there often after work and noticed people online all the time. So, without hesitation, destination: O’Shea’s.

We had the opportunity to talk a little trading en route to the wi-fi promised land know for their $3 craps and apparently strong wi-fi. Sheri mentioned her dabbling in the market and we actually had an interesting conversation about trading and the keys to success. Ya know, typical banter heard every night at 4:30am on the Vegas strip. As we crossed the strip into O’Sheas we noticed a packed house with a lot of screaming; assuming someone hit their point or nailed a backdoor twenty-one. Continuing towards the food court area, the screams got louder and louder. It didn’t look good.

We turned the corner and I could not believe what I was witnessing. It’s nearly 5:00am on a Wednesday morning and somebody decided that this is a great place to have a beer-pong tournament. Not just two drunk guys who were bored and broke, but over 30 tables all laid out like a billiards hall. It looked like the World Series of Beer-Pong, if there is such a thing, with loud music ringing throughout the place that was earlier in the night home of Subway, Panda Express and a few others eateries. While obviously frustrated, I couldn’t help but notice the excitement and the intensity of each attempt to get this little ping pong ball into one of four tightly connected cups filled with beer.

‘Oooh’, when a rim shot occurred. ‘YES…whoo-hoo’, when one sank. Multiply that by 30 times the volume or so when all the games were on. Sheri was laughing at the failed attempt to get online so we just watched the event for a bit. My second most memorable moment was when the entire tournament stopped on a heartbeat, to the music started by that famous keyboard intro to Journey’s ‘Don’t Stop Believin’. The place went nuts with many of the female participants jumping on the pong tables in Glee-esque fashion. I only imagined that beer was spilling out onto the very same tables where I had eaten Subway cold cut combo’s some time in my past visits to Sin City.

When the music break stopped and the competition started to resume, we watched the transition focus on a ball and beer cup. After a miss, the ball would sometimes bounce to me standing behind one of the tables. I would use my computer bag to keep it in play. One time I avoided the requested two hands out across the table signaling to toss it to the next competitor and gave the arm gesture that I wanted to give it a shot. With computer bag in one hand and a ball in the other, I flexed my knees and got into position to make history, just like Jordan did for years. My toss had incredible arch and felt good after my release. Twelve feet doesn’t sound like long distance but for me it felt like a half-court shot that wins the Mercedes. As it headed back down, I could feel the crowd intensity including my number one fan to my right with her hands clutched together.

I rimmed it right off the middle beer cup, then off the right one and into the muck. A big ‘OOHHHHH’ from the crowd was nothing compared to my own frustration and desire to sink it. I would have given up the best $ES runner of the week to get another shot at beer-pong fame. Sheri leaned over and said “Do you know how hard that is to do?” I replied, “Try doing it holding a laptop!”

As we headed out of the failed wi-fi promised land’, we made our way to our last stop. Harrah’s Starbucks. I knew it wouldn’t fly since I tried it alone earlier but just went along with my new tour guide’s recommendation. I knew then that my journey was over and at that point I really didn’t care. That rim shot was more important at that point than any trading I could tap into; not to mention a facebook note from Sheri’s ‘boss’.

I said my goodbyes, telling my friend that I think that’s enough excitement for one night. I offered her a cab and she kindly refused, telling me laughingly that it was the best hour she spent all night. I walked into the casino towards my elevator but couldn’t help notice a blackjack table calling my name, or at least calling the bills in my pocket. I placed the laptop bag down, bought in, and performed my risk management program as if I would be doing the very same thing in my trading room. I ended up winning the equivalent of four $ES points, similar to my first trade target on most days. I even managed to coach my fellow ‘trader’ next to me who, according to his chip stack, seemed to never use blackjack stops, if there is such a thing.

I took the chips, cashed out, and headed towards the elevator. I kept thinking how all I wanted from this town was a wi-fi connection. That’s it. It’s sad that some of the simplest technological things cannot be solved but if I wanted to compete in a beer-pong contest with a call girl as my fan club…. we’ll get you set up in no time!

I laid my bag down and hopped into bed. Gave my sleeping wife a small kiss and closed my eyes. The last thing I heard was, ‘Honey, you’re done already?’

I love Vegas.

Michael Toma, CRM is a professional risk manager and co-moderator and futures trading education consultant for Value Zone Trading, LLC.

To Be or Not To Be……Responsive

2010-05-25T07:28:00.000-04:00

The recent market volatility has allowed many traders to re-evaluate their risk parameters and trade entry processes in their trading plan. Should I adjust my default-two point risk on an ES futures contract? What about my targets or scaling out process? Should I reduce size? These are all good questions and one should consider these variables in a high volatility market arena.

An often-overlooked trading component is regarding the trade entry process. Many new traders follow a confirmation/pullback entry process. That is, they wait for a reversal in trend to be confirmed and then attempt to buy a pullback in price. This style can be very effective should one have the required patience and discipline.

There are challenges, benefits and risks with any entry strategy. The most conservative of strategies such as the confirmation/pullback method usually have an opportunity cost component to them. The inability to participate in price movement due to price not pulling back to meet your entry order is common with this strategy.

We have encountered many ‘V’ pivot price occurrences in these highly volatile markets. Many of these setups that do not pullback are formed at the eventual high or low price of the day. One can be right on market direction, price level, and yet still miss a major move. The markets can be cruel in this regard. As traders, we cannot control market dynamics but we can control execution and risk – two critical components to consistently successful trading. Responsively entering a position rather than confirmation has proven extremely beneficial and should be considered in your trading arsenal.

So why are so many traders non-responsive? One reason is simple: fear. Most traders were initially taught using typical candlestick charts. Green bars signifying strength and red showing a weakening and declining price. All the books we read told us to follow the trend, buy pullbacks, wait for confirmation and ‘never try to catch a falling knife’.

Simply put, many traders find it more comfortable to enter after a confirmation signal. Of course, defining ‘confirmation’ may be the first consideration. A responsive trader who enters at a key inflection or pivot point because price has reached that level is confirmation in their eyes. There is no need to wait for a traditionally defined confirmation because their confirmation parameters have already been met at the inflection point.

The most difficult thing to teach traders is to trade without fear. The human condition is designed to avoid perceptually dangerous situations. Fear is merely our human protective reaction to avoid danger. A responsive entry approach at times can be much more advantageous than confirmation trading and those results in itself can sometimes reduce the fear in using this approach. Being selectively responsive will help increase your success probability and profitability.

So how can we be more selective? I become a responsive trader when three conditions are met.

1. Indicator confluence to support the responsive entry.

2. Price is approaching a key pivot or reference area for the first time.

3. Evidence of divergence especially in the market internals.

It is common for prices to pivot, sometimes sharply, at the initial test of a key reference area. Perhaps a self-fulfilling prophecy, responsive traders will enter with the notion that others slightly late to the party will join as price confirms. Did you ever enter late on a confirming price bar only to have the trade pull back and hit your stop price? It’s happened to all traders. Most responsive traders become responsive after learning that confirmation candles can be comforting but costly.

In addition to being responsively selective initially at key price levels, once should also add an internal filter to help improve the risk and success potential of the trade. Two effective supporting filters I have in my plan are volume exhaustion and tick extremes.

High volume spikes are commonly used to show exhaustion of the current movement and potential reversal in price. Using a volume spike filter at key pivot areas is a solid premise to consider using a responsive entry strategy, particularly in a downward move. Using an extreme tick-reading filter is also a powerful tool in my responsive trading arsenal. Tick extremes can be effective, specifically when the extreme readings are not continuous. Price divergences are also effective but like any indicator, can stay divergent for long periods. Combining the use of exhaustion volume, tick extremes, and divergences at key reference areas is my confluence-filled recipe to play the responsive entry. Nothing ever works perfectly and solid exit strategies will protect you when it doesn’t.

Still have some fears about trying to catch the bounce? Try entering the world of responsive trading in simulation. Add a column in your trade journal to show the result if it met the above criteria and you had entered responsively. Another option is to take half of your intended position using a responsive entry and then add one confirmation style. As with any data-driven plan, let the results dictate your decision to modify your strategy. After entering a responsive trade and then start to see price action reverse in my favor, I know I’m in a favorable position. In fact, sometimes I’ll take a break on my soft-cushioned wicker chair in my office while giving my trade a chance to work. Ah…now that’s comfortable.

Hedgers and Speculators

2010-05-21T09:23:00.001-04:00

The German Deputy finance minister was interviewed on CNBC today. In that interview he stated that the two reason that Germany had enacted the ban on some naked short selling was 1- calm down volitility caused in part by speculators his mesage was that Germany wanted to " fight against speculaton" and 2- show Germany’s willingness to act now on financial reform. When asked if he cared if stopping speculation might lead to decreased hedging and therefore a lack of liquidity he essentially said he did not care.

From a financial perspective Germany is missing the boat here, making number two the real reason totally political. The Financial Reform bill that passed the Senate last night now goes to a committee with the House of Representatives which will end up getting the United States to get an even more draconian bill is not good for speculators or hedgers.

Yet, hedging and speculation are two of the most important financial mechanisms we have. And as day traders speculation is how we make our living. The CME was founded to hedge agricultural products. The essence of how the system works is that there are two parties, hedgers (those who want to protect them selves from price movement) and speculators (those who want to gain from price movement and provide liquidity). They buy and sell derivatives to provide the liquidity and the insurance market participants needed for a vast variety of reasons. Hedgers need speculators to make the system work. Yes, some times speculators lose money when they are on the wrong side of the trade.This is the risk embedded in trading. In fact, the reason you get paid well for winning is that you take bigger risks just for participation.

As intraday traders we are speculators. One way to judge our risk of participating in the markets is the Vix.

The Vix is both a measure of fear and a method for speculators to hedge. The Vix at 45 says that all speculators are nervous and afraid of the outcomes of current market unrest. They are willing to pay a very high premium for their insurance.

Given these facts what are we, the small intraday screen trader going to do today. In this economic and political climate, we need to understand the politically speaking we speculators are akin to piranhas. We need to understand that as screen traders we operate with a handicap. The large speculators can and do hedge their intrday risk and exposure. We can’t do that easily so we, we just take risk.

Today you have to ask yourself. Do you want to be a naked speculator? Without any risk protection. If so then trade today. If not then sit on the sidelines. Make no mistake there is money to be made today. But it is high risk money. With the Vix at 45 many small account traders are better off sitting on the side lines.

New Profile For ES Futures contract

2010-05-17T09:33:00.002-04:00

Welcome Michael Toma the new co-moderator of the Value Zone Trading Room

2010-05-17T09:27:00.000-04:00

Value Zone Trading is stepping out of the educational pack, into new area with the addition of a certified risk manager to our staff. To achieve this mix Value Zone Trading is excited to announce our new partnership with Michael Toma of TWC Futures.

Among his many new duties starting today Michael will become the new co-moderator of the Value Zone Trading and Training Room. Michael will also provide coaching services and new risk management courses to new and existing clients. The style of trading that Value Zone teaches is based on market profile. The addition of even more stringent risk management will make this one of the most powerful trading strategies available today.

Before beginning his trading career he spent five years as a certified risk manager in the insurance industry. The combination of trading and genuine risk management is an area that has been overlooked in the individual trading and trader education arena, said Lydia Langston, co –founder of Value Zone. We all understand the need for risk management, with Michael joining Value Zone, we did now have a risk management programs and expertise that are miles above any other trader education company.

For more information go to http://www.valuezonetrading.com/

Weekly Value Area

2010-05-11T08:10:00.000-04:00

It has been a wild two weeks. Monday was a small range after the worlds largest gap up.

The chart below is a sixty min. chart with the weekly value areas. The key area is the 1160 to 1170 area that's where we stopped yesterday. As of Tuesday this weeks value area is sitting just below 1160 and the longer we stay here, the harder it will be to get past this area. The trends on the 60 min and even the daily have changed and are now in a down trend, and in order to change that trend on the daily we need to get through this area.

With the vix at these highs all futures traders should proceed carefully. It could be another wild week.

Why We Stopped

2010-05-11T07:57:00.000-04:00

The areas are well known, and many market technicians and talking heads discuss them daily. We stop in these areas because supply and demand changes in the system. These areas form because of past supply and demand, and once formed are called support and resistance.

Support and resistance only work when the market has the same belief about future value, that it had the last time price was in an area. Given that, what is the markets belief today about future value?

While it is great that the EU is adding a trillion dollars, some of it indirectly from the US, it remains to be seen if the markets really believe that this has changed the future value of the markets.

There is a finite amount of stimulus( very large but still finite) that can be added to the system world wide. At some point in time, fiscal responsibility will have to take over. From the individual, all the way through to government; we will have to spend less, have less debt, and make more. When that is the case, then the markets will roar.

Lesson From Yesterday For Today

2010-05-07T07:35:00.004-04:00

What happened yesterday afternoon will be the subject of news stories, speculation, and yet more congressional hearings for quite a while. It was nothing less than heart stopping. However, let’s look at three simple insight from yesterday that can help us with our own individual trading today.

First, this morning CNBC interviewed Kevin Ferry from the CME. As the market crashed yesterday, his group went flat. They didn’t know or understand what was happening and therefore they took their risk to zero. This is even more confirmation, that not trading is a valid intraday trading decision. Everyone who trades should remember that waiting for the right entry may keep you out of crisis.

Second, he accurately pointed out in his interview that during that heart stopping death spiral there was no liquidity. Liquidity is the ability to sell easily, you have plenty of buyers and sellers at each price. Fast violent movement, like yesterday, is not liquid trade. There may be plenty of volume associated with the fall, but no liquidity. As small futures traders we want to trade when we have good liquidity.

Third, I noticed today that several brokerage houses have increased there intraday margins on futures trading. One went from $400.00 per contract to $1,000 per contract. Clearly, they had some issues with liquidity and order fill yesterday. I feel that this change could and should become mandatory. In the long run it would force new and smaller traders into trading fewer contracts which would be good for most individuals and force them into better risk management. For prudent smaller traders take fewer lots in times of higher volatility.

The Big Picture

2010-05-05T08:59:00.000-04:00

It's Not About Greece!

2010-05-04T19:12:00.001-04:00

Every headline I read tonight said something like, “The Greek Bailout Flop” or “Stocks Tumble on Greek Bailout”. Today’s global market sell off was not about Greece. Today’s sell off was not about Spain, Portugal, Ireland or Italy. Today’s sell off was about the future success or failure of the Euro Zone, and even more importantly the impact on the rest of the world.

Let’s look at a few simple facts. Total Greek debt is 113 % of GDP, and the annual deficit is roughly 12.7% of GDP. They are in imminent threat of default with notes due on May 19th. How does Greece stack up against other countries?

                                       Total Debt % of GDP               Annual Deficit % of GDP

Spain                                   50%                                   9%

Italy                                     115%                                10%

Ireland                                 64%                                  13%

Portugal                               77%                                  9.3%

UK                                      68%                                  11%

Germany                              65%                                  3.2%

France                                 70%                                   8.2%

Greece                                113%                                  12.7%

When you look at this table it is pretty easy to see that the EU idea of 3% maximum annual deficit and 60% debt to GDP has effectively been thrown out the window. If you need to down grade Spain, why not France, Ireland, Italy and the UK also.

But this is still not what the sell off was about. What would you think of a country that had a total debt of 98% of GDP, a deficit that was 11% and rising? These numbers look very close to Italy and Greece and far worse than Spain.

Well the country with total debt of 98% and a deficit of 11% and rising is US. That is what today’s sell off was all about? And could some one tell me again, why we are still flocking to US Treasuries as a “flight to safety”? Oh, that’s right, we have one thing that the other countries mentioned above don’t have. That would be a printing press and a Chairman that knows how to use it.

Key Areas for This Week

2010-05-03T08:47:00.000-04:00

It is a new week, with new areas to focus on and new, news to come out about the economy. While we can not predict where the markets will end the week, we can look at the areas that were accepted as value last week, and pre plan our trading ideas based on these key area.

For the ES last week

The Value Area High, VAH was 1202.75

The Point of Control, the highest volume node was 1187.75

The Value Area Low, VAL was 1178.50

Be Careful What You Wish For

2010-04-20T17:59:00.000-04:00

Apple did more than knock it out of the park, it is in the next county. As of this post, 6PM EST I am now dreaming of an entry on the NQ at 2025. Of course, the markets can be fickle, so when you dream or wish be careful what you wish for.

A Tale of Two Trades

2010-04-20T10:46:00.004-04:00

Friday and Monday were both exciting and profitable trading days in the Value Zone Trading Room. Friday we had a 1% + crash with the Goldman news and while we saw price action moving into our key reference areas many waited to catch the falling knife. The first 60 minute wide range bar took us down to the previous weeks areas. Then we fell all the way to the current weekly value area low and the finally to the previous weeks POC. Some traders did take the long trade at the previous weekly POC. This was a responsive trade and our internals did not confirm, even though the delta and ratio suggested that selling was not as bad as expected.

The Friday trade late in the day was a short on a retracement. (Figure 1) Our entry based on our Value Zone Indicators was 1193.00 with a stop at 1195 and a first target of 1188 and a second target of 1184.50. Remembering, a trend day down often closes at the lows of the day. Our first target of 1188 was achieved, and the runner was taken off at 1190. A nice safe late day trade that ending a good week on a good note.

Monday, the street had the weekend to absorb the Goldman news. Sunday we saw selling overseas a reaction to our markets actions on Friday. Early Monday morning we preplanned two trades. One was a short at 1193, the other a long at 1183. Some days just work out the way you planned, other do not. The first trade was the short at 1193 with a stop at 1195, with two targets, 1188 and 1184. Does this sound familiar? It was the same trade that we took on Friday afternoon. (Figure 2) shows that it worked perfectly, giving us a nice 10 point move to start the week.

We then flipped the trade and took the trade long a from the 1183 area into the close, for another 10 points. That was a great way to start the week. For the rest of the week we need to trade safe and wait for our good entries.

Weekly Value Areas for the ES Futures Contract

2010-04-20T08:55:00.000-04:00

Are the Goldman Issues Contagious?

2010-04-19T15:58:00.000-04:00

On Friday the news that Goldman is being charged by the SEC for fraud rocked the financial markets. We advised our room to wait and see what came out over the weekend to see if the markets could find some fundamental clarity over the weekend. With time we may have gotten more questions than answers.

Goldman could be a tempest in a tea pot. They actively deny the allegations, and they very well may be correct. At the present time it is a civil suit, and assuming the SEC is wrong (not an unreasonable assumption) in the end this will be a blip in the big picture. Ironically, coincidentally, or deliberately the SEC chose to release the information during trading hours on the same day that the SEC admitted they knew about Alan Stanford in 1997! By Monday afternoon the market was reacting well to the tempest. Yet some large questions remain.

Will there be more indictments and investigations of other banks and brokerage houses? The SEC says yes. Yet, Citi Bank and Morgan Stanley have said not us.

Will earnings have any impact going forward in this earnings season? Well that depends. Last weeks earnings were good, except that Alcoa showed less strength. Commodities are a bellwether for a growing global economy so we need to watch other commodity stocks. They are lagging the other markets. Yet JP Morgan, Bank of America and today Citi Bank as well as Intel and Google were strong. IBM is reporting tomorrow.

Will the Goldman charges go from civil to criminal? This is a big one that is at present very unclear. Public sentiment for Goldman is not good, and the political climate is even worse. However, this is a case of be careful what you wish for. Goldman is a very large company. We can not afford to have Goldman fail. The question is does the government, or the politicians know this? If you hear that the Justice Department is moving on Goldman clear the deck, it will be contagious! The most frightening question I have heard from the media, is “Is this a Drexel moment?” That would not just be contagious, it could be lethal.

Remember, as technical traders we should understand the issues in the news; however WE DO NOT TRADE THE NEWS. When we get to our key areas we buy the lows and sell or short at the highs keeping our risk management consistent and vigilant.

Rick Live with Jack Buroudjian

2010-04-19T11:12:00.001-04:00

Rick on live with Jack Bouroudjian CNBC commentary -

http://www.theclosingrange.com/podcasts/CRAPRIL152010.mp3

NQ Weekly Value Areas

2010-04-19T07:36:00.000-04:00

Posted below are the NQ value areas. The fallout from the Goldman SEC battle appears to be continuing into today so traders are advised to tread carefully. Today is a day to rely on our internals and sector charts. Our next major KRA is 1992.75 on the NASDAQ emini market.

A Gathering at the Parthenon

2010-04-15T09:01:00.000-04:00

The financial reporting world has gathered at the Parthenon. As you listen to the reporters speaking about the Greek debit crisis they were all mention the beauty of the place the history. No one asked was history being made this week?

A look at the Greek problems is interesting. Last weekend the EU and the IMF decided to bail out Greece with $30 billion Euros at 5% interest. Credit default spreads for Greece were saying default on their debit was imminent, and action was needed. Imminent in this case should be defined as needing $16 Billion Euros for bonds that come due in April and May.

Did you know, Greece reportedly did not asked for a bail out last weekend? The bail out was supposedly agreed to but….

Then came Monday, The EU press said that all that was needed for the bail out, was the EU finance ministers to approve the forthcoming request. Not so fast said Germany. What we need is a meeting of all EU heads to make this agreement. The Finance Ministers may be able to meet on a teleconference, but no so the heads of state. They will need to do that in person, and a meeting like that takes time to set up.

Timing in life is everything, it turns out Angel Merkel’s party is fighting for results in local elections on May 15th.. Her party needs to win those elections to keep her coalition government together.

Tuesday morning the Greeks took a step by floating 1 Billion Euros in six month treasury bills. They had a great bid to cover ratio of over 6 to 1 however the interest rate was above 4%. They are planning to have another auction this week, of the one year treasury.

The problem seems to be out of the headlines for today, with earnings from Intel and JP Morgan taking the lead story in the business press. You just have to wonder. If they have to borrow 1 Billion at 4 plus percent, not 30 billion at 5 % how much is Greece going to have to pay for the money? About that debit that is due in April and May, maybe default is imminent? What we know for certain is the last headline has not been written.

Intel Drives the NQ Up and Outside of Value

2010-04-14T09:32:00.000-04:00

The Intel earning yesterday afternoon? Well, the company hit it out of the perverbial park? The result is this morning we have a gap up outside of every value area from here to 2008. This weeks developing numbers are the VAH at 1997.50, POC, 1993, VAL 1987.50. I am waiting for these areas ( maybe plus or minus a point or two) and looking for long entries. More agressive traders can take the shorts back into these areas, yet do so with some care.

A Little Bit of Trading History

2010-04-10T14:22:00.000-04:00

This week when the markets made new highs, a collective media cheer was heard all over the world from the NYSE. What does it mean? Because, history can hold clues to the future I thought it would be interesting to go back and look at where we have come from. No, not from the lows, rather what did the chart say the last time we were in this price range.

The chart below does look a little cluttered, (you can click on it and expand it) but it is still very instructive. The green and blue histogram is the monthly volume profiles on the ES futures contract going all the way back to 2004. The upper red line is the POC or high volume node from September 2008, and the next set of blue and red lines are the Value Area and the POC from the current month, April 2010. We have come a long way, but we are still only equal to the areas from 2004, ouch!

The first interesting thing to note is where we pivoted off of in July of 2008. That was the high volume node from 2004. The next area of importance is where we have traded so far this month. The current monthly value area is between to previous high volume areas from September of 2008. The close on Friday at 1192.50 was at the next high volume area again September 2008. Keep looking and you will see the next area of interest on the way up is 1204 to 1211 again from 2008. That is only 8 to 18 points away from our Friday close.

I expanded the chart above, to take a closer look at the volume development, or maybe lack thereof from September 2008. Pretty interesting! There was in fact some volume development that September, unlike the month of October from that year.

And now that we are back here again, what next? When we look left, this is what the next area of price is on our charts. We need to treat these areas with respect. While nothing in trading is automatic, these areas are the current key reference areas above us. Another telling lesson from these charts is that if you look further left you are looking at 2004. And that was a long, long time ago, in a world far away. Blogging was not even a word in our vocabulary back then.

All charts use Value Zone Trading Indicator Package.

So What Did Happen At The Forum

2010-04-10T14:09:00.000-04:00

On Friday we saw a very jittery market that reacted with a powerful momentum bar down at the news that Fitch’s rating service had downgraded Greece. Let’s think and dissect this sentence for a minute.

First, I think the rating agencies, as usual are a little late to the party. These are the same rating agencies that told us sub prime debit if bundled with good debit was safe, and completely missed the last credit crisis. What makes us think that 2 years later they understand the intricacies of sovereign debit issues any better than they did sub prime?

I would surmise that most large brokerage houses and funds had mentally downgraded Greece long before yesterday. Especially, in light of the large credit default spreads. The markets reaction to the news of the downgrade provided two insights into what traders were thinking. First, there were a large number of responsive buyers waiting for the pull back. Our indicators even gave us a pre warning of where those responsive buyers might step in. Then after the news, on light volume, the market went on to make new highs. This price action showed the bigger market participants had already baked the Greece news into their price targets. Market Profile traders should take note that the big momentum bar down probed the IB which had formed at the weekly POC, high volume area, by one point, and barely broke outside of the daily value area to the down side.

We now know that at least for last week, Greece did not rock the markets down so what will? First, what is rock down? A pull back even one of 10% magnitude will be just that, a pull back. We would need a 157 point or a 13 % pullback on the weekly ES chart to even break a weekly pivot.

Given this week’s price action, here is a thought for traders to ponder. What may rock the markets down, is something we don’t yet know. Some major economic event, such as a down grade of the US debit, or an economic failure in China, maybe a down grade of the UK, but we are watching that so it become less likely as the catalyst. It could be any or none of these events, but we have learned from 2008 that we still need to be tuned in for that big “something.”

Having said this, price is a little extended today. Most of our technical indicators do not point to a great overbought condition, yet, the economy in general is lagging behind the markets, maybe a little too much for sustainability. We are cautious about being a buyer at these lofty levels. Even on an intraday basis we are keeping our stops tight and looking for signs of a meaningful pullback.

Some Thing Happened On The Way To The Forum

2010-04-10T08:30:00.000-04:00

We started Friday morning, in the Value Zone Trading Room ready to trade. Posted the key reference areas for this week, and had the trades planned. When the market opened at 9:30 we were looking for 1182.75, the weekly point of control and high volume node to go long. The something happened on the way to the forum. Specifically, Greece happened, or in fact did not happen.

Then as things do something happened. First, oil crashed down, then the phone rang, then a V pivot. Whoosh, the entry was gone. I had missed the carefully preplanned trade. The only thing I can say about that is that it is not the first missed trade and it won’t be the last.

One member of the Value Zone Trading room caught the long in the ES contract at 1183 before the IB was in place. He took half the position off at 1188, and was holding with a stop at 1185 final target was 1190 when then ratings downgrade of Greece took him out. It was a good trade taken at the right area with good risk management.

For the rest of the day, was spent waiting through sloppy P and jittery traders. I finally tried a short in the NQ near the end of the day. However, the late day breakout or maybe it was media hype, the endless Dow 11,000 chatter, took us out, and I was stopped out for a two point loss. That was my only trade of the day. I only had a half lot size, so no harm no foul but still a loss.

Later I was asked if it bothered me to only take one trade and have it be a loss. In thinking about the answer I realized that I was much more irritated in missing the second long after the Greek news. Notice where the markets came back to after Greece was downgraded before turning again with another V pivot. If you were a responsive trader you took that trade. I am not a responsive trader, so while the long at 10:30 looks good on the chart Saturday morning, the reality of the price action at that point in time, did not make me want to take the second long trade or the day. Given the fact that it was news driven, it looked more like a falling knife to me than a controlled pull back into an area.

The small loss was just part of trading. When we enter our trades we only risk a set percent on every trade, based on our reading of where the stop and the entry should be. At that I was only a half lot. Therefore, I did not feel bad about the loss it was to me an inevitable part of the risk that you take trading.

What I am confident of, is that Monday is another trading day, and we can have a slew of trades preplanned and ready to execute if conditions warrant.

Weekly Value Areas for the ES Futures Contract

2010-04-09T07:56:00.000-04:00

Below are the weekly areas for the ES Futures contract.

Value Area High is 1185
Point of Control or high volume area is 1182.75
Value Area Low is 1178

Two Traders One Market. Trades from the Value Zone Trading Room

2010-04-09T07:43:00.000-04:00

Today’s’ trades in the Value Zone Trading Room show two different ways of looking at the same market.

The one hour highs and lows were in place, Trader 1, Lydia, called a short trade in the ES at the one hour high, with a stop over the HOD. The market internals were weak, confirming the short; however they had improved from the open. While waiting for the trade to work, the markets went into a stage 3 P formation. The entry for this trade was 1175.50 at 11:)) AM. As the P formation continued developing we exited the trade on a time stop at 11:35 AM. Internals had changed just enough that while the theoretical risk reward was there, the perception of value had moved up and price was trying to move outside the IB high. The POC had moved up and price failed to hold under the POC. This trade depending up which trader in our room took it was either break even or a 2 tick loss.

The other trade taken in the room was by Trader 2 a member of the room. This trade was taken in the NQ a long at the bottom of a big P formation taken at 1966 with a stop under the P. The one hour high on the NQ was also the developing value area low for the week. This trade went on for an 11 point gain. Depending upon how it was managed that trade could have gone on longer for a gain of 15 points, so no matter how it is viewed it was a great trade. The room member showed a great deal of holding power, and waited patiently to maximize his gains.

Later in the afternoon, we took another long in the NQ at the bottom of the P formation at 1977 again in the NQ. The first half of the position was taken off at 1082.50 for 5.5 points and the runner was left at break even and a target of the 52 week highs. Alas, the final target for the runner was not to be, and the runner stopped out. still a good trade and a good day of trading.

Now what is the lesson to be learned from these trades? The desired result in trading is to have a gain at the end of the day. Yet, given market conditions and traders actions there are multiple ways to achieve the desired results. Both traders waited until the first hour of trade was in place, both traders took only trades with good risk to reward and practiced good risk management. Yet, by missing the short in the ES that Trader 1 took, Trader 2 waited and saw the setup for a long on the NQ. Trader 2 was the bigger winner for the day yet in then end both were winners.

Preplan Your Trades

2010-04-08T14:07:00.000-04:00

It is Thursday morning; you come to your screen to see the markets are down. Immediately, you think of shorting the markets, “here we go” racing through your head.

But wait! Have you preplanned your trade? I am fond of saying that the most objective trade you will ever make is on Sunday afternoon. Why? Because the markets are closed. You do not have the noise of the five minute market movements biasing your thoughts. As the week progresses it is all downhill on the objectivity.

So back to Thursday morning, again, have your preplanned your trade? While we can never predict what the markets are going to give us, a simple exercise is to decide where you want to buy and where you want to short tomorrow.

We use the Value Zone Indicators to look at our Key Reference Areas, and write out the trades in advance. They are depended upon several factors including where we open and where we are in relationship to yesterday’s value areas and our developing weekly value areas. Then at the open we can watch our internals to finalize the decisions on entering the trade at those areas.

The chart below shows the daily price and the monthly value areas. Where do you want to buy the markets?

Succeeding As A Trader

2010-04-05T22:33:00.000-04:00

Many trading practitioners suggest that to become a good trader you need to control your emotions. On the other hand Dr. Denise Shull suggests that you can not control your emotions, rather you can control your actions. We agree, wholeheartedly with this theory. To that end our current newsletter has an article on Trading Success which gives traders some ideas that they can put into actions to improve there trading.

Here is the link to our April News letter Enjoy! Lydia http://archive.constantcontact.com/fs088/1102498752891/archive/1103261384843.html

Trading with Market Profile

2010-03-30T11:05:00.000-04:00

Last Friday during our afternoon webinar, Rick and I were asked an interesting question. The question was, “Does Market Profile work better in trending or rotational markets?”The answer appears to be worth writing about.

Market Profile sets up areas of value, based on volume at price. The area is defined by the Value Area Low and the Value Area High. Because you have two stages of markets, balanced (rotational, constrained, channeling) and imbalanced, (trending, breaking out or breaking down) some people are thinking that market profile works better in one market than the other. Let’s start with a couple of definitions here. Balanced trading is where you have relatively equal highs and equal lows. Imbalanced trading is where you have trends. This holds true for every time frame. For more information on this please go to our video on our web site.
The answer to the question is that Market Profile works great in both types of markets. In a balanced market, we learn to buy the lows and sell at the highs and or short the highs. A great example of a blanced or rotational market was yesterday (figure 1).

However, we always want to be mindful that markets go from balanced to imbalanced and back to balanced again. When that happens you have already shorted the highs or bought the lows and you are in a perfect position to capitalize on the new imbalance by holding on and waiting for the next move up or down. A perfect example of this was trading on Tuesday March 23 (figure 2)

Later this week we will start looking at stop placement, to help your rate of return improve.

2010-03-26T15:40:00.000-04:00

As we end the week it was a great week in the Value Zone Trading Room, however, I want to go back to my first post of the week about rate of return. This week, if you had an account greater than $6,000 so you could take 2 contracts on the NQ you had a rate of return around 10%. However that does not happen all the time.

The only way you can get a consistant good rate of return is to keep your losses small and your winners bigger. This week the markets gave us that. But a prudent trader will always remember, that their losses need to stay small so that when you have a losing week, you are still a winning trader.

Only after weeks of trading can you look at your rate of return, you just can not do it in a single day. Imagine, what would have happened if the trader who only wanted to make $100.00 a day had taken off his positions when that goal was reached.

Let us know what you all think, next week we will be looking at stops and stop areas.

NQ Trading

2010-03-26T10:01:00.000-04:00

Thursday was another great trading day, which clearly helped the rate of return for this week. Rick called two intraday trades on the NQ one long at 1963.50 out 1/2 at 1972.50 stopped out runners 1968.50.The second trade was long at 1955 out 1962. For those of you who have taken our Market Profile courses you will see that the first trade was a POC trade, and the second one was a countertrend trade with a target of the POC. Took one long at the lows and was stopped out for two points. Still a great day.

Stopped out on runner

2010-03-24T13:07:00.001-04:00

Stopped out on the runner. Will look for new trade this afternoon.

First Trade of the Day

2010-03-24T11:36:00.000-04:00

Waited unitl after 11 AM for our first trade. Started the day with a short bias, but no good entry to take a short. Finally, went long at 1947 on the NQ with a stop in the 1943.50. At 12.44 we took half of the position off at 1953.00 and left the runners with a stop at 1948. Looking for new highs.

Balanced Trade Goes to Imbalanced Trade

2010-03-23T19:41:00.000-04:00

Having gotten a great entry everyone had a great trade. Trading today started off very balanced with several value trades, however at the end of the day we went to imbalanced trade a state most traders dream of being on the right side of. Many traders in our room took the last lot off at the IB high of 1952.50. And then some of us, got very very lucky, I went to lunch with a break even stop, see last post.

Now we need to plan tomorrows trades.

Value Trades Abound

2010-03-23T12:54:00.000-04:00

Today's Value Zone Trading was full of Value Trades before lunch. A Value Trade is one that goes between the Value Area Low and the Value Area High and occurs on rotational days in the markets. Entry at 1941.50, first target at 1945.25, second target 1950.00, runner at break even.

Reasonable returns on the mini futures contract

2010-03-22T12:06:00.000-04:00

Last week we had some very good trades, and here we are on Monday morning. We are waiting for the one hour highs and lows before a trade, and while waiting, I am thinking about lasts weeks good trades, in the perspective of rate of return. Last Thursday we had a nine point ES trade in our trading room, and were short from the open on Friday. A great week right? Yes, but….. the art of trading is to do that consistently without having too many losing days.

Last week during a seminar I was an interesting question, “I just want to make $200 a day, can’t I do that?” On the surface, that seems like such a simple achievable goal yet it really is not. Let’s examine what $200 a day represents. If your account is small, say $5,000. That $200 a day is 4%. If your account is 10K that 200 is 2%. But wait, if we compound that over a month or 20 trading days that $200 per day can be 40% to 80% of your account. Even if your account size is $20,000 then if you made $200 a day consistently is 20% per month.

Now let us move away from trading for a minute. Pretend that someone comes to you with a business deal. You give me your money and in one month I will make you 20 – 40% on your money the deal says, and I will do it month after month. Right you say, is your name Madoff? It is unrealistic to assume that you will make consistent outsized returns from a limited account.

I would actually suggest that trading for a goal, especially at daily dollar amount goal is the quickest way to not make the goal. Rather trade for safety, working at not taking second rate trades so you can get the great ones some of the time.

So far on Monday at noon the best trade was the NQ at 1919.50 and we did not take it. We were following our plan waiting for the one hour highs and lows. So, since we did not take the great trade, let’s not take second best, we can wait for another great one.

Trade safely.

Lydia

Nine ES Points in One Value Trade.

2010-03-18T09:03:00.000-04:00

Yesterday was another great day of Value Trades using our market profile based indicators. At the end of the day we had two trades, one was a short before lunch that we covered at break even. The second was trade 2 taken around 2:12 in the afternoon. With the NQ leading the way down this was a great and easy value trade. Entry on trade 2 was 1164.75 ( some got the 1165 number). The stop was 1166.25. The first target was the POC at 1161.75 and the second target was 1159 the Value Area Low.

We managed the trade with a loose stop placement, bring it down as the market finally moved. Our final exit was 1158, Netting a total of 9.75 ES points in one trade.

Now lets see what today will bring. After all every day is different in the markets

A Great Day of Value Trades

2010-03-16T19:06:00.000-04:00

Our second trade of the day was after the FOMC and was another great value trades. Check back on the blog soon for more trades that will be posted on You Tube.

FOMC Days

2010-03-16T13:42:00.000-04:00

FOMC Day are always a little rough to trade. Usually the morning gives you a good initial trade, however, in the afternoon we tend to go into a quite time. While the most recent FOMC days have not had the radical whip that they had last year, traders are a wary bunch in general.

After a successful long trade off the lows and yesterdays initial balance high at 1145, we flipped the trade and went short at 1152. Our target was at 1148.50 some traders went off flat before FOMC while others held for their first target. The stop was then set at break even on the runners.

The same trade was taken in the NASDAQ and the YM depending upon the traders individual trading plan.

To see live trades in our trading room for free join us for a 3 day free trial at http://www.valuezonetrading.com/

Enjoy the Roller Coaster Carefully

2010-01-31T19:03:00.000-05:00

Keep your arms and hands inside the car at all times and enjoy the ride. Many of us seek a thrill from a roller coaster ride. The ride last week was one of those new rides that teach us how unrest in the global economy can give us a ride that starts at a slow pace and by the end of the ride it comes to screeching halt because of time.

Presidential speeches, fed treasury appointment vote, FOMC announcements, GDP, Unemployment, Greece bond defaults, geo political unrest. The list went on and on last week and market was one up and down ride.

When the ride ended Friday at 4:15 we had made new lows for the week and the first time we had 3 consecutive weeks down in a very long time. Daily trends had been violated and surely the bears had come out of early winter hibernation. Earnings that were beating expectations were not enough to spin the ride around and give us even more of a thrill back to the upside.

As a trader our job is to be ready and act on the markets subtle changes that may or may not be occurring. When a market has broke a balance and is seeking new value it can be a tedious process even when the major trend has been broken. Trading intraday those gyrations of supply and demand remind us to be nimble and always be ready to act aggressively with taking profits and moving stop placements. Imbalance states in the market will produce some of the best rollercoaster rides one has ever been on.

Therefore, act accordingly on this ride. Be diligent in watching for the market action in response to all of the unrest in the economy, geopolitical events, and company reports. Remember that at some point we will in fact find a value area and the market will begin to trade in the area value once again making our job as MP trained traders less like a roller coaster ride.

Rick

3 Traits of " The Big Boys"

2010-01-28T08:15:00.000-05:00

Welcome to the Value Zone Trading Blog.

It has been one year since Rick Vinecki and Lydia Langston formed Value Zone Trading. What an exciting year it has been. Our goal was to teach and coach traders, helping them get to profitablity or greater profitablity which ever case applies. We are, trader by trader, achieving that goal.

Yesterday in our trading room I was asked, " how do I get to be a big boy"? the answer to that question in part is within you.

First, you need an education. No one would dream of trying to become a pilot or a doctor without education, yet everyday traders feel that they can jump into the markets without training and make an instant living. Yes, new traders can get lucky and have there first trade double, but that is what it usually is, luck.

Just like any other business you have to take the time to learn. so the first step in become a "big boy", or a professional trader is training? However, one course does not make you a professional. Once you have taken courses in trading you will find that education and learning about markets is a life long journey with out a real end point.

Being a professional trader is also an attitude. There are many self directed traders who are professional, but they all seem to share several traits.

Professional traders respect their capital. This is more than just setting and taking stops. It is understanding that even in the markets money does not grow on trees, it is earned. Once earned it must be taken care of and protected. Your capital must be respected and protected at all cost, because it is the tools of your trade.

Respecting your capital does not mean you will never lose on a trade. Everyone has losing trades!

Another trait of a professional trader is to take your losses as a normal course of business. A small loss for an intraday trader should not be a stressful event. It should be viewed no differently than a retail store having to mark down or take a loss on a portion of their inventory. Retail stores know that discounts and even losses will be necessary on some portion of their inventory. They know that over all the items that are popular and that sell at retail, with a good margin will make up for the items that they have to mark down.

Given these thoughts as you as a trader progress, think about how you can achieve your education goals, respect your capital, and learn to take normal losses without stress.

As this blog progress, we will cover a varity of subjects on trading and training to become a trader.

Enjoy

Lydia Langston