Yesterday we posted a chart showing four days of price activity for the 10 year US Bond futures contract (the continuous contact symbol @TY – actual contract traded TYU13).

The following chart (Figure 1) starts near the time that the previous chart ended yesterday.

Figure 1

Now, consider that my typical work day starts at 06:30. Note the two SRVs on the chart (they have been there all week long).

At about 07:00 price has apparently been rejected – again – by the SRV at 126’23.5. A trade to enter the market long at the opening price at the 07:00 bar would get a price of about 126’24.05 (for an order “at market”). Setting a stop at three ticks below the SRV at 126’23.5, makes our risk 5 ticks. Our profit target is the SRV at 1237’05.0. That equates to a potential profit of 24 ticks – and reward to risk ratio of almost 5 – excellent for a short tem trade. A little less than three hours later our profit target was hit and our exit at 127’04.5 yields precisely 24 ticks of profit. This is a classic TBL trade. Not all trades go so well – but many do – and you can easily see why the SRVs are such an important part of the TBL way to trade.

For those that do not know already, the profit from such a trade would have been $370.00 ($15.625 per tick X 24 ticks – minus $5.00 commissions). The current margin requirement for a TYU13 trade is $1,623 per contract. This one trade would have been a 23% gain on equity. Now you know why I love short term trading – and the TBL way of doing it!

But what about tomorrow?

Well, because today is Friday, tomorrow, will start Sunday evening at 18:00 for the TYU13 contract. We will have redone our charts again by then, but looking at our primary intra-day trading chart for the past week (shown in Figure 2), we would look for something like the following scenario:

Figure 2

Price may rise a bit during Asian session (it often seems to do so), but we do not expect a rise into the high 127 area because of the numerous SRVs between current price and that area. Further, analysis of our technical indicators would suggest a likely reversal of the weak uptrend in the very near future and a retreat back into the low 126 area.

However, the nice thing about short term trading, we will be prepared to trade no matter which direction the market decides to go at any given time.

We are neither a bear nor a bull – we are a shameless follower of whichever one we think will be the winner for the period of time we are in our trade.


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