BarroMetrics Views: Questions from Readers

I received queries today from subscribers to the free weekly service.  Since the questions show a consistent theme, I going to answer them here.

Q1: Why don’t I day-trade?

A1: Well, it’s not quite right to say I don’t day-trade - it’s more like I rarely day-trade.

The short answer is my edge lies in the longer timeframe. There are two main reasons for this. Firstly my personality does not lend itself to day-trading.

To explain why,  I need to tell you that  trading requires two separate stages, each with its own mental state. The first state, what Van Tharp  calls the ’stalking’ phase, requires a wide focus and patient mental mindset. We are waiting for the trade to setup. The next phase, ‘the execution’ phase, requires a narrow, immediate action mindset.

In day-trading,  the two states of trading can fuse into one; the lower the timeframe, the more likely this is to occur.

Now my personality dictates a clear division of the two states.  So I tend to day-trade when the ’stalking’ phase has been completed and all I have to do during the day is to enter and exit.

The other reason is my age and general fitness.  I trade the  US futures markets. In the S&P, e-mini, this means trading from 9:30 PM to 4:00 am. Not exactly optimum hours. Now, add to that ,the fact that I am over 60 and overweight,  and you’ll see that I am unlikely to sustain trading well in this time zone for any length of time.

Q2: On Sept 24, I  wrote that on Sept 23rd, the Market Profile had given a sell setup and signal - Neutral Day Closing in the Lower Quadrant (Figure 1). Why did I not take the trade?

A2: I use the traditional Market Profile to provide setups and entry patterns. But I don’t use it to define a trend or change in trend; for that I use Barros Swings. Figure 2 shows the Barros Swings for the 5-day (weekly trend) and 18-day (monthly trend).

You’ll notice that there are no Lagging Change in Trend Patterns in the 18-day and no Forecasting Patterns in the 5-day (Forecasting Patterns warn of a change in trend in the next higher timeframe) [See Nature of Trends]. So, as an 18-day swing trader,  my trend is up. Consequently I will be looking for a buy at the 18-day retracement zones.

On Sept 23, The Market Profile Neutral Day Closing in the Lower Quadrant warned of a trend change but the pattern did not stipulate a time frame. Since I did not have a change in trend pattern for my time frame, I did not  sell.

FIGURE 1 Neutral Day

FIGURE 2 Barros Swings

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