E-Mini S&P 500 Futures

If you survived the afternoon madness, give yourself a pat on the back. I'm sure several accounts were blown out today by traders buying the down move with the thought that "this move is way overdone!", and then ES drops another 10 handles and then another 20. I took a couple of Long trades early in the morning, but once we broke below the 1158, I limited my trading to the Short side. This is something I posted on Twitter a couple of times during the day as others were buying pullbacks. The only Buy idea I tried was at 1138.50 because that was a heavy area of support. I posted last night that if the 1138 area breaks, we could get heavier liquidation, so I took a quick stop-out on that 1138.50 Long trade, and then shifted back to trading from the Short side. The rapid sell-off below 1106 was simply insane and the safest thing to do was to sit it out, and that's what I did. Once price retraced back up, I took some shorts for quick gains, but all the trades were on the Short side. Personally, I think it's bad if you bought in front of the selling and luckily made a profit on the trade because that profit is re-enforcing a negative behavior. I learned the lesson "DO NOT CATCH A FALLING KNIFE" a couple of years ago when ES dropped 90+ handles in a day. On strong trend days, I try to limit my trading in direction of trend. Responsive Buys can be taken at the Strong Support Areas, but you have to keep in mind that they are counter-trend trades, and must manage the risk accordingly. That means, don't add to them! If I'm trading in direction of trend, I'll sometimes add to a position that's going a little against me because I'm expecting the trend to continue and am generally looking to buy or sell an "area"; not a specific price. But on counter-trend trades, I never add to a position that's moving against me, and generally expect less out of the trade. My theme coming into today was "sell the rallies". I hope you all did well today, and that my posts leading up to today helped you stay on the right side of the market; or at least stay out of trouble. In conclusion, a few lessons to take away from today:

1. Stick with the trend on strong trend days. You will miss some counter-trend bounces, but sticking with the trend is a safer play.

2. When in doubt, stay out! If the market is going insane, with prices all over the map, and you're not sure what's going on...stay out and observe!

3. Don't catch a falling knife!

4. Always use protective stops (hard stops). I traded a little bit during the afternoon madness with tight stops, and ES is such a liquid market that I was still getting great fills on my stops.

5. Anything can happen at anytime! No one "knows" what's going to happen next.

ES 5-Minute Chart (Zoomed in to show Key Levels)

ES 5-Minute Chart