What an ugly day of price action. I am glad I decided to not take part in it. I cannot stress enough how important it is to have patience. How important it is to have proper risk management. Seven years ago, I would have blown up my account on a day like today. Here is exactly how I prevented myself from tearing my account to shreds:
SPY pulled back hard on Friday, down over 3% from the highs. Closed below the 21 EMA on the daily chart with a crazy amount of volume. Going into this week, I knew that I would have to be patient and let the market decide what it was going to do. Does this dip get bought or does the dip keep dipping?
I don't know and honestly don't care. As a trader you should be focusing on REACTING to price action, not trying to PREDICT it.
SPY chopped a lot once we opened up around 743. No interest in trades here with the EMAs looking clustered the way they were. We had two large negative gamma levels that kept flipping back and forth, 720 and 730. With a large positive gamma level at 760 with over 100M in cumulative volume. I was confident in taking a call position if price could hold above the Pre Market High as well as the gamma map hold that 760 positive golden gamma level.
SPY then broke above the Pre Market High and started flagging. We flagged for 25 minutes then put in a bullish green hammer with increasing volume. But by the time we had put this candlestick formation in, the gamma map had changed. The 760 golden gamma level had disappeared and 730 took over. I had my Webull brokerage open ready to press buy. But once I saw that gamma shift, I backed off. Sure, enough price immediately dumped back below the Pre Market High. Those that entered without confirmation were turned into liquidity.
Developing a bullet proof mindset is the toughest part of trading. Everyone is itching to get there fix on a winner. I prioritize managing my risk. Stop trying to calculate how much you "Would have made". Shift your focus from "How much can I make" to "How much can I lose". The cougar mindset wins in this game.
Gamma continues to give the market framework for the day. It's what kept me out of this choppy mess today. Learn to read it and drastically change your trading forever. Comment 'gex' and I will send you the exact trade confirmation checklist I run before every trade entry - gamma levels included.
@ITMatrixHQ