Identifying And Benefiting From A Market's power Move
Phil Storer explains how to use power moves to maximize returns
Stock and commodities expert Phil Storer says knowing how to recognize a power move in a market will help a trader time his orders with confidence and generate profits.
Phil Storer says, my rule is that for price action to qualify as a power move, a market must close in the same direction for at least three periods or days in a row.
He continues, saying during those three days, at least one day should contain a bigger-than-average move, when compared to the previous, ten-day period. Also, the length of the three-day move should be greater than that of any three-day move within the last ten days.
Storer notes that a power move can consist of more than, but not less than, three closes in a row.
He recommends joining a market trend by placing an order the morning after the first reversal--or counter-move--within a power move. Think about it, he said. You're doing at least three really great things--entering a strong market, trading with the trend, and doing so after a correction. Its simple and has worked for me many times. He says a customer told him that, of all the methods he had tried, joining power the day after a reversal provided the most consistent success.
Storer explains how to trade a power move. Buy or go long the day after the first reversal, or counter-trend close, in an upward power move, he advises. Alternatively, sell or go short the day after the first reversal in a downward power move. I discovered that this principle works in virtually any time framework--for days, chart bars and other periods.
Storer recalls a tense, several days involving a power move that had a happy ending. Shortly after discovering the joy of joining a power move on the bar after the first reversal, I had an alarming experience, he says. He bought sugar futures, and a few days later the market made its first downward reversal. At that point, enough profit had accumulated to allow me to double the size of my position. And the reversal day on the bar chart was a normal, counter-trend day. Based on the closing price that day, it left me with plenty of money.
He continued the next morning, I entered new orders to buy the market at the previous closing price or better. In fact, the fills on my new buy orders were much lower and better than I'd expected. The market had opened limit down! Back then, all commodity markets had limits--maximum amounts they were allowed to move in one day. Regulators thought limits would keep traders from losing too much money in the case of any sudden, negative news.
He said since my orders were filled at the limit down, it gave me an excellent average price, I was very happy. But then there was a problem because the market didnt budge. Sugar prices stayed locked down the limit.
I panicked and tried to sell the contracts I had bought that day. I hoped someone would think the price was cheap and would buy enough to get me out. But that didnt happen. I didn't sell anything, and fifteen minutes before that day's close, I withdrew my order to sell. Meanwhile, because the market closed limit down, the exchange doubled the normal 50-point limit to 100 points for the following day.
The eighteen hours between that close and the next day's open were emotionally brutal, he said. I imagined the worst possibilities. In the wee hours of the morning, I decided to put in a sell stop on the entire position at just one tick below the current market. If sugar opened down at all, I would be out.
He said the next morning, the sell stops were in, and I waited in a nauseous state for the opening. When it came, I couldnt believe what happened! Sugar opened up 60 points--more than it lost the day before--and closed limit up. It then traded limit up for several more days!
Storer says it's often heard that great traders have something that gives them an edge over the markets. I believe my book will give you a huge edge, he says. But remember there are no guarantees in trading. My intention is to give you useful advice and advantages in your market activities. He is Director of Trading for the stock commodity division of Dillon Gage Inc., a full-service brokerage firm based in Dallas, Texas.
by: Phil Storer
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