Ok. Tomorrow I'll trade (from a demo account) with no indicators trying to use only price action as discussed in this thread
I agree with amitman. Back to basics. Today was a very easy day on the spy's shorting lower lows. I think you are seeing the setups but it is your entries and exits that are the problem, in my opinion. You can be right every time, but if you are getting in late, with a super tight stop, you'll get wiggled out. Get it working, then figure out how to automate it.
that is only 35% per year ROI.. you might as well give your money to a hedge fund manager. Lots of professional hedge fund managers can 'PRODUCE' min. 50% ROI on account less than 1 million...man you can do that without daytrading and keep you day job.
Hi IF, Before I answer your questions let me make a few comments. Nobody KNOWS what the market will do next, but with experience you can know that under some circumstances the market is likely to behave a certain way and that gives you a trading edge. What trading is mostly about is risk management. You only enter a trade when market conditions favor a profitable outcome. For me, every trade starts as a scalp, I use a stop loss and scale out of positions as risk management tools. You need to find risk management tools that work for your trading style. As far as the 4 possible trades I listed, I have no idea if I would have taken any of them in real time. Why? While they look like perfect setups on your chart, I would take entry on a smaller fractal (like 40 tick). Maybe I would not like the PA on the 40t, maybe my limit order would not get hit, maybe prices would reverse too fast and I wouldn't be able to enter an order until it is too late. I can tell you how I like to enter trades. I like to enter at S/R levels anticipating a reversal. What I look for is for prices to stall a little in the S/R area and I place a limit order 1 tick off the extreme of the stall. BTW when I talk about S/R, I don't mean floor trader pivots, Fibonacci levels, Gann levels, PTT, or any other calculated levels; I do mean places where prices have reversed or congested in the past. >>How? I'm entering short after LLs and LHs and entering long after HHs and HLs.<< PA isn't just LLs,LHs,HHs and HLs. That is just the starting point. Everything prices do is part of price action. For example, when I look to take a trade at S/R, I want to see prices decelerate into the S/R area. When I am considering fading the trend, I want to see something that indicates trend exhaustion so we are due for a correction. >>My goal isn't to capture a 100 tick move every time, but sometimes I'll be down 20 or 30 ticks but the slope doesn't change so I keep my position open and then it turns into a 100 tick move.<< If the market moves that much against you, your entries are poor. Analyze your MAE and enter on retracements after the ma gets broken. >>The reason I don't "take what the market gives me" is because when I backtested with 2, 3, 5, 8, 10, and 15 point profit targets, I ended with a net loss at the end.<< That's not 'take what the market gives you' means. Prices move between S/R levels. The most likely profit the market will give you is to the nearest S/R level. >>The only way I was able to have positive expectancy was to hold every trade until the market stopped me out (fast slope changing). The conclusion I drew was that the occasional huge winners are required in order to have positive expectancy and therefore I don't close trades early.<< What you mean is 'the only way so far'. Any system that depends on the occasional large win to be profitable is not robust enough to safely trade because the probability of ruin is too high. If you improve your trade selection and trade entry you will dramatically improve your bottom line. >>How in the world do you know it's a LH until price has moved away from it/ It would've been a wonderful short entry, I agree, but I had no idea it was a LH until the new downtrend was established. You could say the LH was an upside-down hammer (forgot what that's called) but those only signal tops sometimes. So how would you have known to enter here when that was the hard right edge of the chart?<< It is a PB early in a trend at a S/R level. That is a high probability trade for at least a scalp. >>Are you saying it's not a good place to go short because it was the 4th wave?<< After 3 waves you should expect a bigger correction than you got. >>As for "trading into support," new waves start all the time at around the previous support level and end up being profitable waves. Look at the previous wave. It was confirmed at around 11611 and the previous LL was at 11600. Wouldn't that be "trading into support?" It went on to a low of 11581 or so." << "Confirmed" by whose standards? There are several ways to view that entry. 1st is enter at 630 where minor resistance exists (successful entry at this level would have been highly unlikely because it looks like prices blipped up there and dropped right back down, in and of itself a signal that prices were reversing). 2nd is enter on a breakout of the low of the high reversal bar at 620. 3rd that is a pin bar setup, entry on a breakout of the low of the bar to the right of the reversal bar at 614. 4th your confirmed entry based on your ma at 611. The most significant difference between any of those trades and your loser is there was a minimum of 11 ticks of profit before S/R, enough to take a scalp and move your stop to BE. Your losing trade entry was around 561, S/R was 558. 3 ticks is too small to scalp out a profit and there is no assurance prices will reach 561 at that. BTW, that was not one of the 4 trades I mentioned because a PA based downtrend had not been confirmed. >>Again, how did you know it was a double bottom when it was the hard right edge of the chart? (same way how did you know that first LH was a good short entry... how did you know it was the LH?)<< You never know for sure but the smaller than expected correction after a 3rd wave means a retest of the low (double bottom) is more likely than a 4th wave down. BTW, Alan Farley calls that a 2B reversal pattern (a double bottom where the second bottom is slightly lower than the 1st). >>Now this is very interesting to me. I never have a way of predicting what the profit target will be (and it seems neither does anyone else) and everyone computes their Risk/Reward after the fact.<< Nobody is predicting anything and I did not mention R/R. Its market tendencies. Prices move between S/R levels. Prices are attracted to these levels like a magnet. If prices are moving toward a nearby S/R level, odds are good they will get there, that is how I make profit projections; however, at all times you readjust your expectations based on current price action. >>In all my (demo account) experiences using stop losses, they always have to be HUGE (at least 1 ATR if not bigger) because price action is never smooth and always full of noise. And on that chart I attached, 1 ATR is >10, which doesn't seem like a "tight" stop to me.<< Your problem isn't noise its late entries. Sometimes your entries are so far from the pivot you are trading off of that the market starts to correct as soon as you enter. The solution isn't wider stops but better entries or skip the trade if the stop is too large. You have to recognize what you are doing. You are trading a wave that began at the most recent pivot point. The later you enter the wave, the less profit you are likely to get before a correction and if it is the 3rd wave, a bigger than normal correction or trend reversal is likely. See how you can set yourself up for a big drawdown or losing trade. >>So use the same interval of MA on the smaller chart? So if I'm using an HMA(21) on the 233 tick chart then I should use the same HMA(21)on the 40-50 tick chart to set up entries and enter when that slope changes?<< You can try that but you may have to experiment to see what works best. >>What is the stop then? When the slope changes on the 40-50 tick chart or when it changes on the 233 tick chart?<< The stop is on the other side of the pivot point you are trading off. You only use the 40t for entry, use the 233t to manage the trade. >>I was taking trades only when the MAs lined up and only after appropriate LL/LH/HH/HLs.<< Your ignoring other price action. S/R, how many waves have occurred, how far prices are from the pivot when you enter. Bill
I would not even demo trade the first few days but would just watch. Maybe just watch for a week or even longer. And have a DOM pulled up alongside the chart and watch the action over there as well. Watch the immediate RANGE that price is trading in on the DOM. Then watch how the range EXPANDS as the day moves on. Watch how many times price certain levels and how it behaves when it touches those levels. After a while you will start to see the normal "push and pull" of price action on the DOM. One can sell the "highs" and buy the "lows" for quick in-and-out, low expectation trades. They pile up after a while. Say you only did one 3-tick trade in the ES once every 15 minutes. Do the math for what that means in a 6 hour day. A market like the ES coughs up 2 and 3 tick trades all day long.
Does DOM show ALL open orders? IT seems like there's only 5 or 6 above/below the current price, and then there are crazy outliers with like "1" just sitting way above and below the current price. Am I correct in assuming there is nothing in between these values? So I've been watching price action on the YM today (233 tick chart) with nothing but pivot points on my chart. It's been chopping around R.5 for a bit and then went up to R1 where it's been chopping for the last half hour. Good thing I'm not trading today or I'd have lost a lot of money. btw on a related note, how come when I order from DOM I get the WORST fills (2 or 3 ticks away from current price), but when I order from OEC's regular screen I get better fills (at or 1 tick away from current price)? Shouldn't an order be an order regardless of if it comes from DOM or from not DOM? It just sucks to be trading YM and be filled and be -$15 already (ordering from DOM). Yet another reason scalping doesn't really appeal to me. I'd rather make 1-10 big trades a day. And don't you need awesome fills to make scalping profitable? oooh a triple top at R1! let's see what will happen!
Oh and what am I supposed to be looking for on DOM. The difference between buy and sell orders? The distance between current price and sell orders vs. the distance between current price and buy orders? Cuz seriously it all looks random to me. Also what does it mean when there's a black number between the red and green numbers as opposed to when there's not a black number between them? (see image)