How did I miss the trend today? Lets go over the chart. O - So at the open we have a solid drop down, and we already have a SL in play from before the open. A - We make it this far and come back up. I think I remember seeing the rise be quick, but lets just focus on what is on the chart. B - Right about here I'm still in a "short" frame of mind. I think we can either test the opening level to see if there are any buyers to take it higher, and we still have the SL in play. This does break just a few ticks higher. C - So this bar finally closes. (but I know price is continuous) D - We actually have a tiny RET here given that this bar opens lower than the close of C, and it also drops down another tick before going back up. If these one minute bars were packaged differently, then we might actually see this. But I guess the rule is that we have to see this on the chart we are using, meaning we need the high of the bar to be lower than the high of the previous bar once the bar is fully formed. E - We have a bit of hesitation here for 3 minutes, and price does eventually poke out above. On the 15 sec chart, the RET was even clearer and then the move up looked like it was going up, hence why I took my actual long here. So given that I took the long here, this is the bar I use to draw my DL. Actualy, the line doesn't even touch the low of this bar given that I get my DL from the lows down at A. But you can see that right after my entry, price drops and breaks the line and I made a fairly quick exit for about 2.5 points loss. F - Coming down to here, we have actually broken the previous low where we had 3 minutes of hesitation, so this is why along with the exit for a loss I also took a short. This short was of course not set up at all, it was just quick and instinctual. (my instincts of course are crap!) G - Now here is the thing. This is where the trade to go long can be placed since we know that the ride down to F was in fact the RET. But my brain is telling me that we just rejected the level at E. Although the low of this bar ends up forming the swing point we use to draw out new DL, we cannot in fact draw this line in until we have a higher high, above E. I am also worried that we might double top at E and come back down again, so why try for another long here? H - Ok, so we go higher, and I can now draw in the DL using the low at F. I - We make it this far, but come back down again. No problem, we are way above our DL and can have another RET. J - Above here, we just barely touch the DL but go higher. K - So I enter a long here that fills and then drops right down. In a way I guess we have already broken the DL, but we have a strong up trend now, and the little low at J could have been the low of the RET. L - Price drops right after my entry and right about here is where the exit was since we clearly have broken the line now. M - So here I decide to take a short. We have come down even further, and you can see that the high at K is in fact a lower higher, and we broke below the low at J as well, so this looks good. N - This is rejected right away, and so my exit is here. This is in fact where the good place to take a long would be. But once again, that DL we have drawn in that uses the swing low below M cannot be drawn in until price goes above the high at "I", so why am I going to go long here? In fact, I even have a SL in play by this point given that I can connect my highs at "I" and "K" and this is what made me take the short. P - So we go up quite nicely, and break through the overnight high. I draw in this little level of resistance given the sideways action, but we break above it. Q - Given that we have cleared P, given that the trend is so strong, I want just a piece of it and here is where I got in. This bar does in fact have a RET since its low is below the previous bar high. But of course right after my entry, price goes down, and broke below the low of this bar so I was out again for a loss. Anyway, so as obvious as it looks now that the trend was up, I didn't get in early enough, and when I did, it was exactly at an area I could call a micro top, and some of these retracements even looked like reversals which made me take a short. The longs after these retracements just weren't obvious to me until price had already cleared the previous high, and by then of course, the move had already gone quite a few points so another retracement is just around the corner, which happens right after my long is entered.
You bring up some interesting points Emini. Yes, seeing that consolidation area around 42/43 should have been expected given that this was a high from an hour ago... so excellent of you to point that out. I am for sure looking at levels, trying to see where the rejections were and I talk about this plenty in my journal. The half way points are also quite powerful, but of course if you go into a trade late, letting it go down to the 50% level just to see if it comes up again is too hard to swallow. So the entry has to be right at the bottom. Your entry was in fact the good one, and I've just pointed it out on my further analysis today. I do wonder what would happen to you emotionally if you were trading with real money if you had a 5 point profit, but then price came back down again and went against you 7 ticks. I know that giving price room is important, but cutting your loses and letting profits run is another great saying. And if I'm understanding where you went long, which on my updated chart is roughly at G, then with price coming down to M, which is where that 7 ticks against you would have been, we have that lower high at K from the high at I, so seeing a lower high and lower low wasn't enough for you to exit? Don't get me wrong, you're absolutely right that in the whole grand scheme of this trend, staying in is important, and even if some days you lose a few points, being patient to capture a big move is most likely profitable in the end. But since your entry wasn't till 44, and price had started going up from 34, this makes your entry somewhat late into the trend. It sure is more enjoyable once you're well into profit and can think more clearly. It also makes it easier to hold on I think when you have a fairly significant retracement. But if the entry was right at the top, just before price starts coming down for the retracement, its hard to think that the reasons for a long are still looking good. Had I been able to get in much sooner after we just weren't able to penetrate the 33/34 level which was quite pronounced when you look at all the pokes below overnight, then this would all have been easier. But not getting in at a good place just messes up the thinking process. Its great that you are seeing things more clearly! When do you think you'll be want to try trading live with real money?
You bring up good points and this is why I am not yet trading live. I am essentially looking at how many times what would be a 5 pointer like today turns into a larger move. Depending on the context if I am in I try to sit through opposing "waves". So where the first dl breaks is just one wave. After m and the break of the sl thats the first sell wave. The next HH above where the first dl breaks (swing high) defines my trend. If that makes sense.
It is a bit tricky to ask how often does a 5 pointer turn into a larger move because I just feel that there are too many variables. I think the right answer is, as Db would say, you have to let the market tell you. But alas, this is a language I am still not understanding too well. After reaching a high of 61, we actually went down to 45, and this is more than 50% (if we consider the move from 34 to 61 which would give us the 50% level of 47.50) Now I could say that it only spikes down to 45 and then climbed back up, but at what point do you draw your line in the sand? Anyway, I do see though that by using a higher time frame, much of this gets "smoothed" out, but for today at least, there isn't a single RET for an entry once price started going up. The biggest clue is those series of spikes down to the 33-34 level that all got rejected, and then as ND would say, look for the entry in the 1 minute chart.
How to draw a trend line in real time? So given how frustrating it is to lose over $200 on a day when price just goes up, I have prepared a series of slides that show what I am thinking as things are happening. I of course have the pleasure of knowing how it turned out and the advantage of time on my side now, unlike what is going on in real time, but I still am trying to do things justice as they happen. The slides are numbered in case anyone wants to comment.
well I didn't mean a 5 pointer per se, but just comparing exits for a trade. Whether that first dl break should be the exit or give price room will depend on the strategy. I just don't view one line break as the market telling me to exit. That line break shows me that demand is lessening not necessarily of an all out reversal. If price does break and then busts back into the bit of overnight sideways movement I'd exit. That didn't happen so I stayed in. I'd rather lose a few points than take 5 and start chasing re-entries. But testing/studying this is what I am doing now trying to gauge it all. When it makes more sense to take those 5 points vs. hang on for a bit. I am also testing two "mechanical" type of exits regardless of how big the initial stop might be and the "environment" in which each is more effective. Playing tight vs. loose, when, where how etc.
This makes total sense, and I certainly agree that a line break is no reason to exit. For me, its only when the line break happens right after entry. Since the entry on an up move for example is within the trough, if price turns on you, then the long entry might have happened exactly at what ends up being a lower high, so its hard to stay in. If at least price made a higher high then fine, but suppose the previous high is 60 and price comes down and your entry is triggered at 58, if price only make it to 59 and turns back down to 57... does this not look like a lower high and make you want to leave? Anyway.. never mind what I say... I like that you are taking your time to test all of this!