Well, there are two approaches to this problem Professionals call the first one "holding through the pain" As the name implies, you are trying to hold on while price is correcting and depending on your risk tolerance, you may experience the pullbacks, retracements, etc as "painful" If you are one of those folks who get flushed out easy, the only way to learn to do this is to take charts apart, to analyze them. What you do is to look at a chart as though it were made up of swings. For me, the open is the first hour. Look at your target market, checking out only the first hour. make your notes. 1. What is the average size of the first hour move 2. At the end of the first hour, does this market retrace and then continue? If so, what is the average size of the retracement? 3. On the days the market continues to trend, what is the retracement size after the first hour? Is there a difference in size of retracement on those days? Is there some other way to tell whether you are seeing a retrace or the start of a reversal? 4. What does your market do at lunchtime (NY). Does it just sit there or does it move. 5. At the end of lunch hour, most markets resume the morning trend. If they retrace, what is the size of that retracement? Is the retracement big enough to trade? 6. what does the last hour look like in your target market. To give another example, in the ES market, if the planets line up, the last hour will sometimes see a move that pros call the bond bounce. During the half hour right before last hour starts, the market starts to trend in one direction. Then we get to the last hour, and suddenly the market reverses. This "Bond Bounce" can be up to several points in duration, or it can fizzle out after a point. You need to know your market. The second approach is to use position sizing For example you know you have a signal to enter early on the open. You expect a profit of up to 2-3 points, but at that point, the market will either correct, or continue. One way to handle this is to put on say three contracts, take one (or two off) when you get to 2 or 3 points profit, leaving one in (or two) place for the possible continuation. Depending on your risk tolerance, you can place a break even stop or use a nearby pivot or price point as your "line in the sand". The challenge with using position size is to decide where to draw the line ("What is the difference between a retracement and the start of a new leg or reversal)? If you lack experience, it is better to trade small and take small profits (looking for 2-3 points max). You hope that you get two or three shots at it during the day. I draw my line in the sand with a hard stop that is usually near a pivot or known "sensitive" price point. I hope some of this helps you Steve
Yup, very helpful. thanks for the guidance. It's always great to be pointed towards the right direction. Now, gonna be doing some legwork...
Good luck Therer is one last think, and I want to tie this into the first interchange between me and Bronks Again it is VERY DIFFICULT to estimate changes in volatility accurately. I wasnt just being a pain in the ass. It is almost impossible to do consistently on the fly. This is why I never use vol estimates to change the size of my stops. What I do instead is to look for nearest support and resistance, and if I have time I scan left along a chart using 15 or 30 min candles. Often you will see that during previous sessions there are price points where buyers/sellers have stepped up. Sometimes these places show themselves as small islands of consolidation, or as a candle with a long tail indicating a reversal. This is a much more accurate way of deciding on a stop than using the fancy math or worse, an indicator supplied by your chart package. Give it some thought
Okay heres a chart for this mornings open This is not realtime. I can't type fast enough to do that. sorry but you can see what I did. I am still short 3 contracts
Okay then, I got out with 1 point scalp on three contracts again this is not realtime. I just can't take care of business and do all the typing necessary to post it in time. Take it for what its worth. I will post the rationale when I get a moment. Refer to the comments in earlier posts for the setup Best Steve Arzoo if you are reading this, I was attempting to do what just what I posted for the open. I let the first bar go by, then I got set to enter on the open of the next bar. Notice that the second bar opens just UNDER support. This tells me I have a low risk entry. I would have got 2 points but I was screwing around trying to post the chart instead of watching my screen. My bad. Anyway see if you understand what I was saying about this. You can do it. After that it is a matter of judgement. In this case I believed that buyers would come in so I got out. In other circumstances I might have taken one or two contracts off as profit and left one for possible continuation. Today that would not have worked.
Now price is comming back to test the DDF line. We will see if there are buyers, or if price will respect the line and drop back. Here is the chart This is as close to realtime as I can get Good luck Steve
Of course, but you can see what happened already vol died way down. I would be long above the high of the day Short below the low Just one caveat. Always take a look at a chart with 30 min candles and scan left. If you do you will see where price has previously been halted as buyers or seller fought it out. Check it out before making your big bets. Steve Edit I will post a cleaned up version of those charts when I have a moment. I am trying to monitor multiple markets as we speak.