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Jeffrey Lin: Intraday S&P E-mini Futures Trade Example with David “FirstWave” Elliott’s Method

|Includes: SPDR S&P 500 Trust ETF (SPY)

*In this morning’s S&P E-mini Futures (NYSE:ES) LONG trade, I mainly used the method my trading partner Handsome James Falvo (@jsfalvo) & I learned from David Elliott, a.k.a. FirstWave.  The indicators mentioned here are seen in the bottom: Blue (CCI 50-period), Yellow (CCI 20-period), and Pink (CCI 5-period).  However, I did benefit greatly from Fari Hamzei (@hamzeianalytics) proprietary CI indicators in his HFT chatroom & twitter.  While James & I were keying primarily off the CCI, General Fari was in the same trade to the long side using his CI and other indicators.  It was awesome to “fly a mission” as we say in the HFT room with General Fari, with his calls & CI indicators further confirming our own trades.

Always cool to have real time examples…showing you how this works.  I caught part of this move…but did not trust the indicators enough to stick with it and get all the meat :(

Charts from Left to right:
333Tick   5min   15min   1-hr

Picture 8

*note: the up & down arrows ARE NOT where I entered and exited. Had them on testing the Person’s Proprietary Pivots by John Person on ThinkOrSwim.
I missed the opening drop..was sleeping lol.  When i got to my desk, /ES trading ~1065 having ALREADY touched 1063.  Look at the hourly CCI yellow (20 period).  Down in -300 region.   -200 and you should start to get interested and look for reversal signals with candlestick formations, internals like TICKS & Advance/Decline, etc.  The more negative (or positive) the readings get, the stronger the bounce or reversal will be.  HOWEVER, the KEY is to wait for the indicator to flatten out and even curl up a bit (i.e. curvature). When you see these big signals on the hourly, that’s huge, and often takes days to work off the reversal off that bottom.  I went long at 1065, then when it pulled back down to 1064, I added, using the shorter timeframes to judge when to enter or add. When price got back ABOVE the 20 and 50 moving averages, the trend has moved in your favor, so you can be a bit more aggressive.  Even tho we chopped around before the darn thing finally went higher, all the selling pressure had gone out and dips were good buying opportunities..and when the selling were ALL gone, nice woosh up to 1070+.

If the hourly was curling up, you’re READY to buy, but must wait for the 5-min or 333ticks to give the buy signal as well for the entry. Otherwise, your stop could be far far away and you’d have to sit through a lot of pain before you get the big hourly reversals up.  It’s all about the entry.  If you enter when the hourly is setting up for a big reversal rally, but the 333ticks still pointed down, you could very likely get another leg down-could be very scary and you get out of your position (whether because of a stop or just avoiding some pain to get in lower), but when the reversal comes you’ve already spent a lot of emotional capital you’re judgement is impaired.

In David Elliott’s methods, the longer term indicators (20-period is medium, 50-period is long term) are the dominant force.  The Pink 5-period indicator gives the “minor” wave moves. If the 20-period or 50-period are heading up, do not try to short for more than a scalp of a couple bucks.  Likewise, if the 20-period or 50-period are heading down, do not try to go long since the selling pressure is on full force and won’t stop until you get a wash out of all the sellers…or as General Fari says, “cleared the decks (of sellers).”

Look at the CCI indicators on the left-most time frame (333tick).  Notice how the Yellow (20-period) and Blue (50-period) were all trending higher, going from below -100 (bottom red line) to eventually +100 (top red line).  In the process of the Yellow and Blue lines heading up, the Pink (5-period) went +100 and -100 several times.  But as I just explained, the “trend” with the Yellow and Blue were UP..so the Pink “drops” to -100 were “pullbacks” where you can “buy the dip”.  Notice each time the Pink “dropped” to -100ish while the Yellow and Blue kept marching up, they were good chances to get in even if you didn’t buy the low.  You do not need to buy the low as futures markets will, more often than not, give you another chance to get in if you’ve got the direction right.

**We have a few of David Elliott’s nightly videos from ThinkOrSwim and TCnet.  David is a great teacher and a giver-for a couple years he’s been on these nightly review sessions for free, each night spending hours doing these live.  David had heart surgery a few months ago and haven’t had his nightly sessions for a while.  Please pray for David’s recovery and check out our David Elliott channel:

http://finz.tv/channel/davidelliott

If you find his methods easy to learn and very useful, as James and I have, you can get David’s training CD’s here:

http://finz.tv/get/davidelliott

I know they’re expensive, but they’re definitely worth it.  Just one good trade and avoiding one bad trade will pay for these CD’s and more.  I will honestly say I finally found my trading instrument in futures, and trading method in David Elliott’s teachings, and enhanced by Fari Hamzei’s market experience, wisdom, and how to use indicators such as market internals. I am forever grateful to what I’ve learned from these amazing professionals.

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**Disclosure: no positions in stocks mentioned**