Gentle Trader

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There are many ways to determine if we are or not in a trend day. One of the best approaches I’ve seen is the one I found in Michael Gutmann’s book (The Very Latest E-Mini Trading). He uses a cumulative tick indicator that simply acumulates the (HI+LO+CL)/3 data of TICK data over the session. But what makes his approach unique is the fact that he estabilishes some key hours, that he calls time pivots, and calculates the average cumulative tick for that time pivot for the last 50 days. There are 2 numbers for each time pivot: one for what he calls a positive session, when the day ends with positive cumulative tick, and one for negative sessions, when the day ends with negative cumulative tick.

These time pivots levels are plotted, and  as the session goes, we can evaluate how cumulative tick is doing, comparing to these levels. As Gutmann always says, a chart is better than words. So let’s see the last session’s chart.

We can see in the chart above that at the the time pivots, CT (cumulative tick) was far bellow it’s average value. This give us the hint not to open long positions. Late in the day there was a huge short covering, but this could not be detected. As Gutmann says, this type of analysis would prevent you from trading against big trend days.

You can find more about Gutmann’s strategy on his book (The Very Latest E-Mini Trading) or in this article.