Federal Reserve Chairperson-Designate Janet Yellen

11-14-2013 4-41-25 PMThis morning at 10:00 a.m EST in Washington DC, Janet Yellen, Federal Reserve Chairperson-Designate, testified on monetary policy before the Senate Banking Committee. Unexpectedly, text of the testimony was released 17 hours earlier than the scheduled speaking time. Today’s testimony had a positive effect on currency. The testimony is normally given in two parts. First, the prepared statement is read and a text version is made available on the Fed’s website. The second part is a Q&A session, where the questions are not known beforehand. The questions, being unscripted, can lead to some moments of heavy market volatility, as traders try to predict the effect on the bank’s monetary policy.

Treasury Budget Report

11-13-2013 4-40-34 PMThe E-mini S&P opened today at (1756.50). The day’s low price was hit within the first five minutes of opening at (1755.25). At 4:40 p.m. US/Eastern time the day’s high was reached at (1781.50). Each month, the U.S. Treasury releases a monthly report of the surplus or deficit of the federal government. Investors pay attention to changes in the budget balance of the annual fiscal year, as an indicator of budgetary trends. The deficit reduction continues into the first month of the government’s new fiscal year, with a $91.6 billion vs a deficit of $120.0 billion in October last year. That is a a 24 percent improvement. About $8 billion of the improvement is tied to calendar timing, meaning the actual year-on-year improvement is 17 percent. A gain in corporate income taxes are led by an 8 percent increase in receipts. The temporary government shutdown is perhaps to blame for outlays being down five percent. The year-on-year spending on defence is down 8 percent, with net interest expense down 18 percent.

Jobless Claims

10-31-2013 5-11-38 PMToday’s E-mini S&P opening price was (1756.50). The market price dipped to (1750.25) for the day’s low at 10:40 a.m. US/Eastern time. The market day’s high of (1764) was hit at 2:35 p.m. US/Eastern time. In the week of October 26 jobless claims at 340,000, which is 10,000 below the previous week. Government contractors who were filing claims during the government shutdown in the first half of the month and California, with counting problems that were tied to a computer changeover, are no longer inflating these factors. The 4-week average has risen to 356,250 in the latest week, which is the highest reading since April. In the latest data which is for the October 19 week continuing claims are up 31,000 to 2.881 million. The 4-week average is down 10,000 in the latest week to 2.879 million which, is a bit above the month-ago trend. For insured workers, the unemployment rate is unchanged at 2.2 percent which is just up from the recovery low.

Time Charts vs Tick Charts – What’s Better for Price Action

Tick – tick data
Second – tick data
Minute – minute bar data
Day – daily bar data
Week – daily bar data
Month – daily bar data
Year – daily bar data

To determine what type of chart is better for price action trading (either time or a tick chart), we must first look at how our preferred trading platform, NinjaTrader, builds each bar (or candle, OHLC, etc.).

According to NinjaTrader 6 documentation, bars are plotted as follows (we can safely assume that NinjaTrader 7 is exactly the same):

You can see why calculating a year’s worth of bar data based on tick data would be inefficient, requiring exorbitant processing power / overhead for both the server and your local NinjaTrader installation. In addition, an E-mini futures trader is probably not going to trade based on the past month or year (possibly even the week!). As you have most likely observed, each day is its own, with occasional days of extreme volatility or stagnation occurring successively.

Therefore, the most like chart type you’re likely to use for price action trading is based on either tick or minute data. Not all feeds are created equal, some offer better historical data (if that’s of interest to you – some traders just don’t care). You may want to check various forums for advice on what’s currently the best feed. Keep in mind that many of these feeds come from a white-labeled source, so in many cases, you’re getting the exact same data. There can only be so many connections to the CME’s streaming service.

Now to answer the main question, what’s better for price action, this depends on the type of strategy / method you’re using. Scalp traders prefer charts based on ticks, as these generally disregard time. For example, on a tick chart, the height of each candle corresponds to the rise and fall of price for the type of tick chart (250 ticks, 500 ticks, and so forth). The amount of ticks to base a chart on depends on the average observed range of price. For systems that recognize the best times of the day to trade (using the ABC pattern and other mechanics introduced by Day Trade to Win), a five minute chart produces the best view of market conditions. Consider this to be the amount of action within a five minute time period on an open outcry trader’s watch vs. calculated blocks of price that disregard time.

Using the Atlas Line to Trade Price Action

Demonstration of Price Action Trading on Multiple Markets Combined with Atlas Line Indicator Use

Very few indicators are compatible with price action trading, as they are based on volume, momentum or an abstract mathematical formula that has no real relevance to the tick-by-tick day trading world.

The Atlas Line is much different from those indicators. In fact, the Atlas Line is not very much like an indicator – it’s more of a tool to assist price action trading decisions. For example, look at this chart from yesterday’s e-mini and ask yourself what you would have traded if the Atlas Line was not present:

Right now, you can buy the Atlas Line day trading indicator with a six-month or a lifetime license for $599 or $1800.