Nothing much has changed since I posted the chart two up, but I've zoomed out so that the weekly trend channel provides context: Trading has been exceptionally simple lately, at least in terms of the SLA and AMT. I try strenuously to avoid posting to others' journals unless I'm invited. My posts generally stop as soon as I've asked if the journalist has a (thoroughly-tested and consistently-profitable) trading plan and I receive no reply (this is almost always the case). I do, however, read others' journals, mostly out of boredom when my trade is on auto-pilot. And it occurs to me that virtually all the journalists I read could do quite nicely if they did nothing more than wait for higher lows to go long and lower highs to go short. Lines or no lines. And if they coupled this tactic with a basic knowledge of support and resistance, which is something else hardly anyone understands, they would likely not only turn the corner but speed straight for the Promised Land. But everybody trades for the money. They trade to get rich. And so they fail, accomplishing the exact opposite of what they intended to accomplish. But that's the way of it, and always has been.
DB, You have stated numerous times that hardly anyone understands support and resistance. One day when you are feeling a bit bored, could you elaborate a bit on what you feel or have observed to be the most common points of misunderstanding and perhaps offer some points on the correct usage. Wyckoff does offer some good reading on the subject, but I would appreciate your spin.
Support isn't support until proven by the price that it is. Think of support as being like water in its three basic states: When frozen the ball bounces. When liquid the ball bobs up and down. When gaseous the ball falls through. This in my opinion is the essence of support. Gringo
I do have to chuckle a bit because if each of us journalists had a thoroughly tested and profitable trading plan, we wouldn't need to post! We would just be doing our thing and figuring out what else to do with all the free time. So in a way, its not that surprising to me that only people who continue to post are the ones that are struggling. I find part of the problem, as you say many times, is that the best opportunities happen outside of the NY trading hours, so at the NY open, you're left to wonder if price will first shoot up and test resistance, or shoot down and test support. The other issue is with multiple time frames. Just looking at this smaller channel you post, it is pretty obvious to sell at the top and buy at the bottom, but taking just any one of those days in isolation (especially the past three days where we have been trading around the mean), its makes it a little more difficult to decide what to do given the context of being in the middle of the down-slopping channel. (In each of those days we dropped below the mean, and went above, and then dropped below, etc.) There was of course amazing opportunity during each of those days, but IMHO, given the extremes of this channel, those opportunities did not come from the channel itself but more immediate S/R from an hourly chart for example. Now don't get me wrong, I do understand that testing is of utmost importance and having every possible scenario prepared and knowing what you're gonna do about whatever is presented. I have very much been following along and reading everything you write and I do appreciate you continuing to post. When you posted the points possible from the trades a couple of days back, the part that I struggled with was that this was all dependent on where the entries are, and since you don't talk much about entries other than in reference to SLA, those point values are a bit in isolation. I of course won't deny that SLA would have had great results these past few days, but just given the fact that we are not only at the mean of the smaller channel but also just below the bigger one, using the channel would almost tell you to not even trade, and hence this daily chart on its own doesn't provide entries on these past few days. There were of course still great entries based on hourly levels though. (What I struggle with is that once the trade is obvious, the best entry is gone. The best entry always seems to be right at the extreme, before you even know which way it might go with just the slightest bit of hesitation if one is trading the extremes and S/R.) (As an aside, I really like some of your older stuff that you wrote where you talk about seeing a rejection and that it doesn't matter how you get in, be it a market order, stop limit order, waiting for the RET, etc., you just have to get in. I think it was from your TICKQ discussions.) Anyway, in a round about way I just wanted to say that I agree with everything you post. I agree that with myself, being the not-too-bright amateur, the focus is on the money and that totally clouds everything. But I also wanted to say that its one thing to see something happening, but another when you're wanting to act on it. And when you're wanting to take that short, you're stuck looking for a good entry, and the longer you wait for a good entry, the further price gets away from you. Many times those SLA entries are a bit late in terms of where the rejection is, so with price being able to continue or retest that level, which of course would break your new trendline, things do get a bit more difficult for the scared trader. (SLA would have been pretty amazing this week.) In conclusion, although I've just thrown out all my problems, I do want to end by saying I very much appreciate what you write.
So what do you do at R or S in either case? What else do you want? Intra-day trader isn't worried much about Weekly/Daily trends. They just have an eye on them in case price approaches those areas. Again if you are intra-day trader then stop paying attention to larger bar interval trends and channels when the day begins. Focus on price itself. You trade the scenario you have prepared. Otherwise stand aside. SLA doesn't require much thinking IMO. Entries are shown in the SLA-AMT document. What else do you need? After retracement price changes direction and you enter. To add a qualifier wait for some reasonable s/r before using SLA entry. That's about it. After the fact we can all find a better entry point. A method finds the most suitable point that is backed by some evidence that trend change is in effect. That means a LH or HL. SLA shows that via retracement. To me it seems you're not sure what you're 'supposed' to be doing and price scares you when it's not exactly at the optimal point. The fact that the previous swing is a bit distant makes you question the entry when that fact shows price is moving away from that level. We love you too. Gringo p.s On a side note I have been waiting for my entry on the larger Weekly/Daily trends. I don't force price to give me money, I wait for it to behave in a manner for which I have a plan and then I execute that plan. The rest is all chatter. There was a thread about Zen and Poker. "Inactivity" is key.
RULE #1: Learn to use inaction as a weapon. Most of the time, the market is indeed random. One can only win consistently by avoiding activity most of the time and trading only the few times during the day when a high probability trade occurs. It is our job as traders to wait more than we trade. (William) One of the best rules anybody can learn about investing is to do nothing, absolutely nothing, unless there is something to do. Most people always have to be playing; they always have to be doing something. They can't just sit there and wait for something new to develop. I wait until there is money lying in the corner, and all I have to do is go over there and pick it up. I do nothing in the meantime. Even people who lose money in the market say, 'I just lost my money, now I have to do something to make it back.' No, you don't. You should sit there until you find something. (Jim Rogers) Using inaction as a weapon means simply that one must learn to be "aggressively inactive" while waiting for what he has proven to himself and for himself to be high-probability setups. Someone else may think that his HP setups are completely loony, but that's not the point. They are his bread-and-butter setups, and whether or not anyone else can profit from them is irrelevant. He wouldn't be implementing them if he weren't making money with them. Unless, of course, he himself is loony. It is the nature of trading that the trader is going to spend a great deal of time waiting, unless he doesn't have the discipline to wait for what he wants (though he must of course also know what it is that he wants, which is where defining the setup comes in). If the trader doesn't know exactly what it is he's looking for, then he is far more susceptible to being sucked into low-probability trades, particularly if he is eager to trade. By thinking of inaction as a weapon and using it as such, he will find himself aggressively withstanding the Sirens who are tempting him to act impetuously. He will be "aggressively inactive". (DbPhoenix)
Awwww.. thanks Gringo! Well I definitely haven't been trading SLA, at least not on the 1 min bar interval. I think the context of the hourly chart in terms of where S/R is more to my liking. (This is more than likely to do with fear mind you. To get in at the extreme seems like a much better R:R ratio, and although SLA was solid in the past few days, there are days that are quite choppy.) As you say, the fact that the previous swing is a bit distant is a sign that price is rejecting that level, but at the same time, this also means that to invalidate the trade, to break that level of S or R means that price can try for it one more time. Your entry might very much be in the red if entered past the swing point, but that rejection of the level might still not be in jeopardy because this could just be another test. (ie. Level is at 4000... swing point is at 3990, so a short at 3990 might not be invalidated until price breaks above 4000, but this means a short would be 10 points in the red before you know if the rejection is still in play or not.) Perhaps I had trouble with SLA because it was too much on autopilot for me. I wanted to understand a bit more of what I was doing and why. Drawing the trend lines in real time I also found a bit arbitrary, and so losing them as Db suggests is the way to go, but then this loses a bit of the SLA mechanics. When Db took me through the exercise a month or two back with the hourly chart and the rejections, this was a huge eye opener (not sure how after so many months this still hadn't sunk in). Going through Db's older stuff, I really like what there is left about S/R, and especially the way he draws his boxes and lines. A rejection within a point of a level is a sweet occurrence, but I understand how barely any trades happen up or down there, so these opportunities aren't as common. The extremes of the trading ranges that form also provide these levels of S/R, but drawing these is not something he does as often these days, and I'm more gravitating to his old stuff. I notice that in much of his old stuff, 10,000 volume charts are used, and this certainly helps to show off where the bulk of the trading activity is, more so than time charts. Anyway... perhaps for me the biggest problem is that I use up all my "psychological fuel" trying to get into a trade without waiting for the best opportunity, and by the time price reaches a major level, I've got nothing left in the tank to take the trade.
I've also said numerous times that resistance is the level beyond which buyers won't pay the ask and support the level below which sellers won't lower the ask. However, for a variety of reasons, beginners don't know what to do with that. One is that they're not watching price move, either live or via replay. Another is that, while they may be watching price "move", they're watching the bar rather than the right tick. Another is that they're using candles, and it's unlikely that they're watching the candle body expand and contract. More likely, they're waiting to see where the candle "closes". BUT THERE IS NO CLOSE!! Or they're watching something that nulls the time factor, such as tick clusters or range bars, and without the time element, they are unable to tell when traders are excited and when they're putting their feet up. Or they're focused on stuff that has nothing to do with support or resistance, like Pivot Points, or Fibonacci, or trend lines, or moving averages, or or or . . . Absent all of this, the beginner has no idea what buyers and sellers want, much less what they're willing to do to get it. This puts the beginner in a perpetual state of surprise. Look, for example, at this. I see this nearly every day, this plethora of "support" and "resistance" lines: This is at least eleven lines, perhaps/probably more. And none of them have anything to do with the state of support and resistance at the open: Few if any will be focusing on this, perhaps because they consider the 1m chart to be "noise". Therefore, they will be sitting there going "Whoa!" instead of participating in the upmove. But, as I've said many times, there is no such thing as "noise". There is no such thing as "noise" because ALL CHARTS ARE TICK CHARTS!! If one doesn't understand that all trends begin on a tick chart, and by that I mean a one-tick chart, then he doesn't understand price movement. This does not mean that everyone should be trading a 1t chart, but one must understand where all this movement is coming from. One cannot trade what one cannot see. None of this is meant to suggest that all of these lines are useless. The premarket swing lows at 58 are going to come in handy at 1035. But they don't matter for the open. And if one focuses on these lines rather than on what price is doing and where and why, he'll be sitting there looking at the trade he wishes that he'd taken.
While I appreciate the kind thoughts, your "biggest problem", again, is that you don't understand what you're looking at because you can't stop trading long enough to study it. This is a personal choice, and while I have tons of sympathy, I don't want to spend any more time in this journal on it. All but a handful of "traders" on this site fail because they can't stop focusing on the money. And until they stop focusing on the money and begin to learn something about their business, they will continue to fail. That, however, is the case in many fields other than trading.
This has been an extraordinary week - an extraordinary month, actually. A good friend of mine visited me a few weeks ago, and the one thing he wanted to do while with me was learn how to trade. I had him read your SLA/AMT and study both Wyckoff's big course and his active trading course prior to his coming up here. I had sent him charts and he had spent several weeks prior to coming up here just watching the NQ for the first couple of hours each day. I would say he started studying about the middle of November - it was before Thanksgiving, so about two and a half months. Two weeks ago, he sat and watched me for a few days trade in the morning, and then we spent the afternoon watching and observing. In my journal here at ET, some of this activity is recorded in the first 26 or so charts. Then, he went back to his home, spent the week before this week doing exactly what I was doing in the charts I posted here. This week he started trading live, using a very small account - $5K to be exact, trading 2 contracts at a time with a broker that has reduced day trading margins (not my broker - I use IB). He figured with his broker, he could trade 2 contracts and lose $4K before he would not have enough margin to trade his plan which requires an even number of contracts and a minimum of 2. If he lost his $4K, he would stop. I imposed a similar cap of myself when I started as well. Monday he took 1 trade, and made 8 points average with two different exits, or $320 before his broker commissions. Since it was just 1 trade he obviously was able to figure out in his head about how much he made. Now, one thing I told him was to turn off his profit/loss, do not look at his account balance, not to open his daily statement when it arrives in his in-box. I wanted him not to look at any money related stuff until he got his last daily statement for Friday on Saturday morning. I told him to just trade his plan for the week, and not to concern himself with the money. We spoke every night, and we discussed his trades. He knew he was ahead but after Tuesday he really seemed to have no idea by how much. He called me this morning after he opened his daily statement as of the end of the day Friday, and what do you know - his little $5K account is now a little $11K account. Not bad, right? Of course, I had to calm him down, and I spent the better part of 45 minutes reminding him that this week there were multiple 50+ point intraday swings, and that I've seen weeks where the range for the whole week was 30 - 50 points low to high, and that while there will be weeks like this, he should not expect them to be the norm. The point is that he simply traded as though it were a job. When you do your job, you are not worried about your paycheck at the end of the week. You are not constantly fretting over whether your boss is going to dock your pay or whether you'll get that raise at the next review - who could work well under such mental conditions? He did his job: "Here are your duties and responsibilities, here is what is expected of you, here is what you do if X, and here is what to do if Y." His daily chart looks just like mine, which looks just like DbPhoenix's posted above - daily trend channel and weekly trend channel. On our intraday charts, he and I add the prior days highs and lows, and of course the globex high and low. Then it just a matter of drawing lines, making a trade, closing the trade. Repeat. From what I have read in the journals here at ET, there are three consistent and persistent problems keeping people from doing this. 1) They have no idea what they are doing - SLA, even without AMT, is an easy way to learn what to do and when, but many who try fail because either 2) they are too afraid of losses to allow themselves to win or 3) they insist on making this far more difficult than it is. I many who try this might be better off if they started their observations from a five minute bar interval chart - though I hesitate to say this because most will want to over complicate it and start thinking in terms of the bars individually and not the transactions which are being recorded to make the bars. But I spent almost a year trading nothing but stocks from a 5 minute bar interval chart before I started using SLA to trade the NQ. My friend doesn't even look at anything but the 5 minute bar interval which is where I started him. It might be a good place for some to start. But if you are trading the money, and not the chart, I think you're screwed and you ought to use the money to buy your wife something nice instead, because from what I have read in the ET journals, you're going to lose it anyway. And before someone says that my friend has done well because of his access to me, I'll say right now I can take no credit for what he is doing or how well or poorly he does it. He studied the same things I studied. If anything, DbPhoneix is more responsible for my friend's education in trading than I, even though DbPhoenix has never contacted in been in contact with him. But the bottom line is this: He did the work required to learn the job, and he did it without dragging in ideas and emotions that would have prevented him from learning and doing his job as a trader, and he made it through his first week without his individual profits and losses ever being an issue for him. If he keeps it up, he should be able easily to replace his salary trading just 2-4 contracts even under more ordinary conditions.