Thursday 3rd April 2014 NQ100 1 min chart review 1. There was a big trend up before the open after an SL break with retracement. 2. On the open price made a big drop to below the morning range, and then reversed quickly. 3. Price moved up to the opening high, rejected and then bounced off 50% point at 58. 4. A rise to just below the overnight high and a fall again to the new 50% point at 60. 5. We couldn't stay above yesterday's highs, although it made 3 attempts in quick succession, before falling to just above 60. 6. We tested 58 and failed, made a lower high and dropped below 58. Continued to fall with retracements until it reached 49 where it moved sideways for a while. 7. The SL from 10:03 was tested and then we fell to 47 back up into congestion. Stayed in a holding pattern, not making any headway up or down. A good day today for various types of entries. There were a few REV entries at 50% points if one is brave enought to take them. Price made a big 20pt drop at one stage, but it would have been difficult to make much more than one quarter of that, unless exits were fairly loose. Interesting that once price reached the chop zone, most people on the chat could see it happening, and gave up on entries.
The timing of the chop around the 11am coffee break helped. Friday 4th April 2014 Pre-market review After a big fall to 609 yesterday from the top of the range, we moved up into a tight range ovenight, before breaking upwards in the morning. We are currently back at the top of the range from early march again. If we cannot push through we may fall to the midpoint around 595.
Friday 4th April 2014 NQ100 1 min chart review Today was very interesting because we not only made it to the middle of the range, but on down to the bottom as well. We had a good mix of SLA and AMT, and various types of entires and exits to make the day very useful for training or trading, depending on what level traders have reached. One of the lessons from today, which I had noticed on other days, is to disregard support or resistance until it acts as support or resistance. Several good entries could have been missed if we stayed out when price was near to previous lows. Overall, a nice end to the week, and looking forward to week ahead. A big thanks to those who post journals and attend the daily chat, and obviously to the ship's captain. Keep learning guys. 1. We opened with a breakout off the hinge which is invisible due to the extreme width of the day. We moved up to 58. 2. We fell very quickly without a pause until eventually getting a retracement for the first proper short opp at 34. 3. Eventually reached 600, slightly above the mid at 594, and turned upwards. A retracement for a long opportunity followed. 4. The DL was broken and a small retracement followed for a short. We made a higher low and broke the SL so we look for a short. 5. At this point we have an SL break followed by a retracement which broke the DL. When the long is triggered and failed, we had the opportunity for a quick reversal to a short if we are fast enough. These don't happen very often, but it is good to be aware of them, and if possible to learn to take them fast enough. There were opportunities to get in later on as price paused at several points in the trend.
You need some sort of exit parm outside of the current ruleset. I'd suggest you look into some sort of vol-based target, even ATR would be a start.
What are the advantages of vol based targets? I understand that it utilizes the principle of immediate mean reversion. But how are vol based targets reconciled with the opportunity cost of missing large cascading trend runs like Friday?
It is not arbitrary like the 1st long of the day which was a fade. ATR would've had you out near the low of the first move near 3600. It assumes you are scaling in and out, much like a gamma-trading method. Not to say you can't take the SLA as they come, but a vol-based exit to compliment woud have done much better on that sample. A vol-based exit is self-compensating. Targets are wide if vol is high. You would want a two to three day lookback which would've resulted in capturing much of the second short. It is not a method. It is not "always in" and therefore doesn't signal MR, but that the risk of MR is high. Every successful algo I have seen on the buy-side has utilized some sort of scaling algo/vol exit, at least as one (of many possible) exit criteria.
I appreciate the input DP, and I know how many arguments have taken place across many threads between people over the past few weeks, around the journals and testing that many of us are doing at the moment. It may be seen a zero sum market, but I believe that there are more than one ways to approach it. Essentially I am forever open to new ideas, as I believe there are always ways to improve and learn, and not just in trading. My humble opinion is that most people given simple rules will make money on major trending days like friday. The amount they make, may obviously be far less than the full extent of the trend. This is where appropriate entries and especially exits make a big difference. Placing the same trading system into a choppy day, and good or great exits become essential to make a few points or limit losses until a trend occours again. I have looked at ATR type exits in previous testing, although not so far for this method. I even analysed the formula from scratch, and have some disagreements whether it really shows the true range of prices, but as a non stats guy, I will give some credit to the maths guys of the world. At the moment am focused on getting myself to understand and accept what price is telling me. If my exits require volatility analysis, or plain lines crossing, I will take whatever works, and then seek to improve constantly. Overall, I have found that stepping back and looking at this, with the help of a group of open minded, but results focused people, has given me a greater understanding of the market as a bunch of people (or bots) reacting to price in a reasonably understandable way, if not always a predictable way. Good luck with trading next week.
I found this useful as well. There are "big picture" price environments where I simply use fixed targets, and others where I trail until a key level is reached because there's so much airspace and "emotion" surrounding particular breakouts.