I’m mainly a Dow intraday trader that swing trades with the DIA and “scalps” (plays short-term, small targets) when needed using the leverage and benefits of the @YM (Dow-Mini) contract. One of my favorite, though rare, setups is the “Gap Fade” then “Impulse Buy” set-up that occurred in near textbook fashion this morning.

I don’t think I’ve dedicated an entire post to the pattern, but have mentioned it from time to time in a few instances. Essentially, you trade against the gap down to the open (play a “gap fade” or a “gap close” trade) and then invariably, this will set-up an “Impulse Buy” trade (new momentum high, then buy the reaction after the high) which allows you to play for a clear target.

I actually honestly jumped the gun and went in short too early and was stopped out when price didn’t fall immediately and was discouraged, but managed to enter again when price fell and a momentum divergence set-up on the second failure swing. I exited just above the target of yesterday’s close (for a 57 point profit!) and then reversed course with a tight stop to play the “Impulse Buy” trade that set-up. I got stopped out AGAIN for a 10 point loss and then entered upon the price rising above yesterday’s close (DIA) again and exited when price hit the target of the falling 20 EMA, which resulted in a 31 point profit.

Four trades. Two wins. Two losses. Acceptable but not stellar profit taken home. I was done by Noon. Lessons learned.

My ideas were totally on, but I allowed my stops to be too close, but at least I got back in once price confirmed what I was thinking. Losses were due to over-conservatism and unwillingness to ‘take heat’ in a position. I suppose they were also due to over-anticipation in both instances too, and failing to wait for price to confirm, and wanting to get in at the best price I could.

For some reason, I just can’t mentally grasp the S&P or Nasdaq e-minis. The numbers on the Dow just make sense to me and I can feel the numbers/levels better. I may look at the other indexes intraday, and always keep up with the internals, but I almost exclusively make trades with the Dow-Minis or the DIA ETF.

There’s always tomorrow!

Did you play the bounce at all in the Dow or the NAS? I could only find my setup in the e-mini s&p and it didn’t trend all day like I would have liked.