Gambling is fun when we are on the winning side. I personally like to gamble and love to have that adrenaline rush, but not in trading. But it is possible to gamble in a professional way if you know what you are doing. You should take every damn step to save your ass and must not divert by the pleasures of the future output. Let’s look a trade from yesterday’s crude oil and you will understand what I am talking about. Before that, let me warn, trades like these are only for professional traders. Novice traders must stay away from trades like these as you have to manage to keep the only risk to reward in mind, as the odds are equal for both directions during news based volatility.
There was an inventory report release for crude at 8:00 P.M IST and I always stay away from charts between 7:50 P.M to 8:05 P.M IST on Wednesdays. But yesterday, there is an opportunity I have seen exactly at 7:58 P.M, which is 2 minutes before the inventory report. What it means is, I have just got only 2 minutes to gather information and interpret it to place a bet on the news which is not an easy task. That the reason why I am warning to stay away from news-driven moves if you are not a seasoned trader.
Look at the higher time frame chart first to get some context..
There is no HTF support in the framework. We only have the structural resistance. We call this as no man’s land. Now, lets add some TTF context.
The market traded in a ranging environment since the last half an hour of the previous day close. It gave a nice breakout to the downside, pulled back to the broken support (now resistance), and then strongly broke the swing low. I can now say that the environment changed from sideways to downtrend and it’s time to look for a PB/CPB as there is no support nearby. The timestamp at the right edge of the chart is 7:35 P.M. So, the plan was to take a PB/CPB trade and exit both units at T1 as there is a news release at 8:00 P.M.
Once that is decided, it is time to prepare the spider web, i.e price levels. Look at the LTF chart for that.
In Crude, I only initiate pullback trades at the minor support and resistances from LTF on the first test /BOF of that level. As you can see, there are no minor resistances, and the support line(green), 2755, is the only level that can provide sufficient order flow to halt the pullback.
After sometime, this is how the chart appeared.
Focus on the area pointed with a blue arrow. There was exhaustion, weakness on a retest of the rejection.
The following is the information I got till now.
Bias is down
There was rejection from the level I have chosen. So, the level is providing some order flow.
Clear signs of exhaustion as the price is struggling to move up, beyond the level.
I timed the entry at 2754. Now, the trade parameters are
T1 and T2- 2740
Time of entry was 7:51 P.M
I just got 9 minutes to do something with this trade. Look what happened in the next 9 minutes.
The market was far away from my targets. Now, it’s time to make a decision. I’ve just got 2 minutes to do that.
As anything can happen with the news, the odds of betting in one direction is 50% percent. But the trend is down and there is no support nearby. From morning, volumes were high on the downside swings. My stop was already at the breakeven, If I hold the trade during news, I might get a slippage of 2 to 3 ticks due to the volatility if the news is not in favour of my trade. If it is in my favour, it will at least move till 2700, round number, which is 50 ticks away. 3 ticks risk for 50ticks profit, which is 1:17, is f@#$ing awesome.
What about the target orders I already placed?
The level where I placed the target order is the only support level that can object the news move as of now. If it provides enough orders to reverse the news move after my target got hit, I will end up in taking an opposite trade as my stop loss will initiate a new trade in the upside direction, which is not good. So I cancelled the target orders and decided to close the first position at the first stall, and the second position at the round number, 2700, if the news is in favour of the down move.
Now, look at what happened after news.
Gap down after the news and sharp move down. Trade management was on TTF candle highs.
This is a pure gamble. True that there are technical evidence and odds are in my favour at the time of taking the trade. But there was no technical reason to hold the trade during the news as the odds changed to 50-50. The risk to reward is the only thing that matters at the times like these and we must be ready to lose that risked amount. There is no reason to play these if you don’t know what exactly you are doing.
Hope you enjoyed it..
great article , you are the BEST .
I generally avoid trade during inventory data.
but you show that you are one who can dare and make a trade with huge profit with the risk of only 2-5 points . really great.
Even I avoid trading during news. But this one was screaming to take with lesser risk.