This blogs shows opportunities we had in one of the most volatile weeks in first quarter of 2023.
The purpose of it is to show that using pre-defined S/R zones and knowing inflection points, gives you and edge, no matter of increased volatility. As one trader noted back in 2019 - and that remained true to this day - is: … "the market has shown us a bit of everything, and zone to zone trading has shown itself as a remarkably resilient method of day-trading."
What were the reasons of volatility increase, and how big was it?
The week of Mar 13-17, 2023 was a week of many potential catalysts: scheduled ones like US CPI on Tuesday, ECB DAY on Thursday, OpEx day on Friday (Quadruple Witching one); and on top of that news driven moves and sentiment skew on issues from US Regional Banks and Credit Suisse.
Previously, market was in the 27-day range, which was broken on Monday, with the Trend Down Day. From Daily ATRs of around 200 points, we got expansion with rise of volatility, and much bigger daily ranges: 604 points on Monday, 362 on Tuesday, 569 on Wednesday, 400 on Thursday, and 465 on Friday. Average Daily range on this week was 480 points - more than double than previous week(s).
USUALLY - volatility increase and daily range expansion is a product of technical break, often combined with fundamental catalysts. This week was no different.
Bigger picture for start - DAX INDEX Daily chart, from the end of the week.
By the size of those candles, you can see the difference between them, and the ones from the former multi-day range.
Question is - can we use classical charting, and "location based trading" in ANY given volatility, in a trend, in a range? Are S/R zones USABLE on smaller timeframes, when market "goes wild"? And the answer is YES.
Ok, but how S/R zones played out in THAT kind of volatility?
See that for yourself. I will use modified screenshots from Setups Gallery for first three days of the week - without a lower part and potential entry points description, and you can see the full ones for Thursday and Friday. Legend: Zones with bold lines are stronger S/R zones; orange box is Premarket range; light blue line is "opening level"; EYE symbol is often there as a pointer on what locations to pay attention early in the session.
MONDAY - RANGE BREAKDOWN
Bigger picture - how this week started: with the range breakdown, hitting Large Time Frame Support - LOD made there
Zones / Smaller Timeframes we had small gap on Index above PMKT range, and Gap Up on Futures below (blue rectangles)
TUESDAY - US CPI DAY
WEDNESDAY - EARLY BREAKDOWN
Do you see key points of these days? "Few" tweets were sent as well.
THURSDAY - ECB DAY
This is how every single day is marked in the Setups Gallery.
(where so far - on Mar 18, 2023 - 1700+ screenshots are published, describing every single trading day, from Jan 1st 2020 - 38 months, with Mar 2023 being 39th month).
This is like a trading journal + there is a Recap video for every day, discussing concepts, setups, trading routines... At the end of the day, it is important to review and to think what were the best setups, did you take them or not (if not - why not), to understand what were the KEY POINTS of that session, to ask yourself did you recognized them in the real time, and to learn from each and every day.
FRIDAY - QUADRUPLE WITCHING DAY
HOD was made at LTF R zone. Setup was described in great detail in the MORNING NOTES, trade was shown on Twitter as well. LOD was made at LTF S zone.
Can you identify key points of this day?
Trading is NOT all about levels or zones.
Short term trading comes down to monetizing setups (execution), not predicting direction.
We NEED LTF Context, Context "going into the session", to understand RISK / REWARD, inflection points AND invalidation points for our trading scenarios. Several very usable CONCEPTS were in play this week, and some of them every single day. Concepts, that you can use in trading any index, not just German DAX. Do you know which ones are those? If you do, do you apply them in your trading?
Follow me on Twitter, where I often comment, showing charts, trades, concepts, setups... If you want to watch the Recap video for some of these days, OR have questions about this - shoot me an email on email@example.com - no strings attached.
Who am I? Find out at About me page.
There are more examples, at the Examples page of the website.
In short term trading it is very important to properly understand context heading into every day, to know from which side wind is blowing - who has the short term control, and which side will be forced to liquidate IF and WHEN market hold above or below a certain level. What is the level of volatility, what can we expect from any particular day, what market already done in premarket session, what possible setups can be available, and so on... the things that we constantly learn in the DAILY DOSE OF DAX.
Cheers, Relja a.k.a. StrayDog