The Market Map Tutorial

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Case Study: Dow Index 30th October 2006 - Intra day Inversion

The Market Map for the Dow Jones index on the 30th October looked at follows:

The Market Map pointed to several key turns during the day. These are marked by red circles.

This case study deals with inversions which occurs from time to time when using cyclical analysis. With proper money management inversions can provide as much information about intra-day direction as a normal day.

My trading in the Dow on the 30th October will hopefully illustrate how you can make use of the Market Maps.

My strategy was to ignore the open, unless the open was above yesterdays close. Otherwise I could end up selling a "gap" lower and I wasn't interested in the risk associated with that. I focused on finding an entry point around 15:10 London time, which the Dow Map had marked as a potential low, followed by a sharp rally.

At 15:00 the Market Map was going into a key reversal time. Although this was 5 minutes earlier than the ideal time for a low, the market gave us a geometric confirmation from the intra-day price action. When you have both a Market Map turn and evidence for a reversal using price action and simple geometry, this is a low-risk trade with a high probability of success. The geometry on the price action has been shown in chart 2.

I took a position in the Dow cash market at 15:16 at 12065. The stop was placed 18 ticks below my entry.

The Dow rallied and made it back into positive territory for the day. I knew another turn in the Map was due around 17:15 London time, and although I was long from 12065, I was looking to take my profits and go short again. At 17:05 I get stopped out of my long position for 30 points in profit. I decide to take a short position at the same time because the Map has turned down again.

Soon after, about 60 minutes later, I am stopped out for a small loss. The Market Map is pointing down but the price action on the Dow is slowly moving higher.

The Market Map called for another turn at 18:05 London time. By 18:40 the high that was made at 18:15 was taken out. This confirms that the Market Map has inverted intra-day. I am now looking for the Dow to move higher into the 19:50 time frame and not lower because an intra-day inversion has occured.

The next significant time-frame to provide a trading opportunity is at 19:50. The Market Map is pointing to a turn at this time, and I will look for an opportunity to short the Dow.

While the Market Map may occasionally invert during the day, the key turning points are as valid as before, but a low may now be a high and vice versa.

chart 1           chart 2

PLEASE NOTE Chart no 1 shows the Dow futures and Chart no 2 shows the Dow cash. There is a 30 point difference.