I find Ammo's trading style brilliant and even thought it has it's disadvantages, naturally, as no trading style is perfect, it has very high merits.
Feng, you need to put in the time to come up with a "this works more often than not" trading plan. When you figure out your own plan, you'll be more comfortable with it and more likely to follow it than if someone hands you their plan and says "Just do this." Sometimes S/R holds and sometimes it doesn't, but it's NOT a crap shoot. For example, in a trend, when price pulls back or consolidates following a new high or low, S/R holds more often than not. "More often than not" is a statistical edge. How you trade that edge is up to you. I personally handle it one of two ways: I watch to see if S/R holds and I let renewed strength or weakness sweep me into a trade (with a stop order just outside the consolidation range, channel, or the last pullback bar before price pivots back in the direction of the trend), or I place a limit order in the price zone where S/R should hold and place a tight stop in case it doesn't. Look at ES leading into Friday's open. Once price established some tested support in the 1260's, buyers stepped in and there'd been a well-defined uptrend for several days. Friday's overnight session was narrow-range consolidation with S @ 1312.50 and R @ 1317.50. What happens in a well-defined trend after a period of narrow range consolidation more often than not? A breakout in the direction of the trend. Once the initial 5-min bar closes following the market open Friday morning, what do you know? Price is heading down toward the consolidation range low. Is there an intraday trade signaled at the close of this bar? There's a low-risk trade signaled. If you take a long position at the close of that bar (1313.75), your stop loss is less than 2 points. You prefer confirmation before putting on the trade? Then wait for the next bar to close. What do you know now? Nothing more than you knew following the close of the 9:30am bar. Wait for the next bar to close. What do you know now? Buyers stepped in near the range low and bid price halfway to the range high in a single bar and that bar closes at its high. Is a trade signaled at the close of this bar? A long trade is signaled, and a confirmed entry trigger would be a break of the 9:40 bar's high and you want to see very little retracement. The consolidation range has been in play for so long that during regular trading hours it should break out for trend continuation; otherwise the up trend may be getting tired. Maybe your trading plan says to only enter on an actual break out of consolidation. In that case, your buy stop to go long is 1317.75 or 1318.00. In a defined trend, always think continuation. Would you have a sell stop below 1312.50? No. Why not? Because an initial break of narrow range consolidation in the direction opposite the trend is not confirmed trend reversal. You're more likely to get trapped selling a low tick as buyers look to take advantage of liquidity when stops getting triggered. If price broke the low of the range with some conviction, then pulled back up to it and stalled, that means previous support may be turning into resistance and a trend reversal is coming. But until that happens, think continuation. There are various levels of S/R. There's trend/channel S/R, moving average S/R, range S/R and previous pivot S/R (previous swing high/low). Price reacts differently to each of these based on the context of price action leading into the approach. If price has been trading in a wide range and approaches a previous S/R level, do I want to buy or sell a breakout of S/R? No. I want to watch how price reacts to the range extreme and if it breaks out, I'll look to buy or sell in the direction of the breakout on a pullback. But until that happens, I want to trade the range or wait for a trend to emerge. If price has been rising or falling in a well-defined trend (such as higher lows/higher highs) or consolidating in a narrow range in a well-defined trend, do I want to buy or sell a breakout of S/R? Yes, in the direction of the trend. If the breakout fails, my stop loss limits my loss, and I look for a trend reversal setup. The small loss of a failure will be paid for easily by the next winner. Feng, you'll never find certainty in trading, but it's far from a crap shoot.
yes thanks for your time. i will be looking it over several times to decode what you mean. i have very little experience and no positive experience with trend following strategies so i dont really understand them. its going to take me a few minutes, hours, i duno to understand what you are saying.
I will also pay my respects to the lady and say that I very much agree There is a reason that NoDoji keeps mentioning this manual bar-by-bar backtesting over and over again. It simply works like a beauty! There is no reason to even sim trade before having manually tested thousands of intraday charts and developed a methodology in a pace that you can handle. Learning to identify patterns and setups in real time with money on the line is simply too painful and a waste of money and energy. The first and easy part about S/R is to learn how to identify and draw it on your chart. Then, you need to learn to observe how price behaves around S/R. Is price accepted or rejected? With the ES, it is extremely common on the 5-minute chart that price dips below support, traps premature shorts and then the bar reverses in the last minutes leaving a selling tail below the support area. It`s a great feeling to see this unfold in real time and then buy on support, remembering how one always used to sell the low
Can't win in this market with a C-game. A-Gamers take home profits, everybody below gets chopped up by the markets.
NoDoji, This is not to egg you on, while you may post long technical anlaysis, I have no idea what you are talking about and I trade patterns and H/L very well. You are making it way too complicated for anybody to follow it profitably. You need to simplify it a LOT more. Heres just a quick debunk of your theories: 1. Wide range bars -<i> does not suggest price action will break lows, it may be start or end.</i> 2. "There are various levels of S/R. There's trend/channel S/R, moving average S/R, range S/R and previous pivot S/R (previous swing high/low)"<i> Theres no reason to keep in check of everybody's S/R points, just keep in check the originating theory's S/R points. Originating theory = what you are trading. </i> 3. "Is a trade signaled at the close of this bar? A long trade is signaled, and a confirmed entry trigger would be a break of the 9:40 bar's high and you want to see very little retracement. The consolidation range has been in play for so long that during regular trading hours it should break out for trend continuation; otherwise the up trend may be getting tired" <i> The risk for a long trade signaled at a high is high risk,, I find it unlikely people would trade it profitably, unless they hold a large stop loss range, which also means a lot less size. </i>
Those of us who are familiar with price action as taught by Al Brooks and similar schools of thought do not find it complicated at all. Besides, NoDoji does not have to do anything, she does it on her own free time and without asking anything in return As for your debunking, you really did not debunk anything, IMHO. Either you deliberately or unintentionally misunderstood. 1. She wrote about a wide range, not wide range BARS. She did also mention that she would buy a breakout of that range, BUT wait for the pullback to do so. 2. What exactly did you debunk here? 3. It is correct that buying a new high may seem risky, but the truth is that this is often a low risk entry. When you use a stop order above a recent high (not just any high mind you, but a high of some significance), you let momentum stop you into the trade. On these entries one can often use tight stops since price should not retrace much beyond your entry point and often may move you well in the green in a short amount of time. Mind you, this does not mean buying the high of the day into the close if we had a 20-point + trend day. It`s on the single bar level and the idea is that a break of a certain bar means that price will most likely breakout. Thus, you let momentum carry you into the trade. I`m not NoDoji and I did not mean to answer for her, but I`m always happy to discuss price action LF
Here is a 5-minute chart I backtested my methodology on today. My system told me to enter long on a stop order 2 ticks above the opening range high as shown by the arrow. This order was placed in advance when we were trading @ 62 and testing the mid-area of the opening range. I reasoned that a break of this level one more time meant that we would get the 50% gap fill and a possible R20. Now, it`s rare to get this much momentum on the ES contract on one single bar, but it illustrates well the concept of buying a new high and let momentum carry you into a trade. A more nimble price action trader might have bought a tick or two above the highs of the two bars preceding the large breakout bar as price found support around the 50% level.