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Matt Davio aka @MissTrade
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Matt Davio is an entrepreneur and full time trader and founder of Over his 19 year trading career Matt has proudly worked at Peak 6 Investments and Parallax Fund. After managing his own fund for three years, Matt decided he would spend more time with his lovely wife and four... More
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    Nov 18, 2010 12:09 AM | about stocks: ES-OLD


    Finding the market bias or direction of the day can lead to easier trading and bigger profits.  If you are like every other trader in this glorious world you have been on the “wrong” side of the market and felt you were fighting city hall.  I ‘m no different and it’s no fun.  On days where it occurs it’s important to note that you didn’t have the bias and more importantly note the clues that could have kept you on the “right” side of the market. 

    Let me clear the air…I am not telling you to “predict” the market – even though some pundits on TV think they can, it’s not possible.  However, there are clues to shift you towards a bias for the hour, morning, day…so let’s look at a few simple “clue” tools that you can put to work tomorrow.

    1.  Multiple time frames – Using two time frames can help you see a bias.  If price is trending on both time frames then you want to take the path of least resistance.  I personally use a medium time frame to set the bias and weed out the market “noise” Some popular times frames to use (depending on your style):

              Daily  - 240 Minute
              60 Min – 15 Min
              10 Min – 2Min
              7000 Tick – 2250 Tick
              2250 Tick – 344 Tick

    1. Pivots – You can use daily floor pivots or weekly pivots.  Price above/below pivot give the clue of the bias.  You can also identify a “line in the sand” level, which could be a price support/resistance area on a longer time frame.  Or you could use a Fibonacci level; 50% and 61.8% levels provide solid levels to gain  a clue to the bias.
    2. Moving Averages – There are multiple moving averages you can use but for starters stick to two.  A couple of popular settings:

              8 EMA – 21 EMA
              20 EMA – 40 EMA

    You can use a “simple” moving average as well – I prefer “exponential”

    1. Globex Session High/Low – This is one of my favorite ways to help with bias.  This can provide information on how markets around the globe where feeling overnight and it can provide some good Support/Resistance levels to watch. 

    Out of the four examples which one should you use?  Using one won’t work.  You should use a couple or all four to create a clear bias…and if you can’t find the bias using these methods then it’s  screaming “don’t trade”, which is a bias as well.  Let’s look at a chart showing what we saw on Tuesday morning (11/16) before the sell off and what clues where available. 



    1. Overnight range is trading outside of the previous day’s range
    2. Price is well below the Daily/Weekly Pivots
    3. Price is well below the 50% Fib retracement from previous day
    4. EMA’s are pointing down and price is trading below them
    5. And lastly we open with a large gap

    Hmmmm…is there a reason we should be looking for short setups?  Using clues to help determine market bias can help you catch trends and keep you from swimming upstream.  Trade to trade well!


    Trade Less, Earn More!


    Disclosure: N/A
    Stocks: ES-OLD
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