The importance of zones analysis day trading crude oil futures

Today was a trend reversal day in crude oil.  These days can be challenging because you have a trend that is going against the larger trend.  As more and more higher time frame players are forced to cover their shorts, and new buyers come in, a trend can resume.

Typically as this occurs the market will be trading into previous key regions of supply and demand and support and resistance. It is important when trading to make sure to not fire trades liberally into these areas unless you got in early or are already in because it smashes the risk reward potential as you trend into previous areas where the supply and demand has shifted.

Todays oil trading room chart...
Todays oil trading room chart...

In the chart above I have marked the zone above on the 60 minute chart on the bottom left (see the ellipse) and I have marked the corresponding zone on the main room chart with another ellipse.

Once an area like this is tagged on the chart, I am very suspicious about further movement upward and will wait until cycling above the region resumes.  This single technique is extremely valuable in protecting your account.  However, if we are cycling towards the zone and there is more room remaining than I have risk, I will trade into the  zone with confidence, taking trades both at 7:20 and 7:38 on the chart.

The room money management system helps to manage the position and help you to stay in the game for a runner trade.  At this point, because I had traded to the zone twice, consolidation was expected.

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Click Here for today’s full room chart.