Notes for February 3d: Reports are at 8:30 and 10 am. Ben speaks at 12:30. Violence in egypt escalates and USD is getting stronger -> market sells off after hours. It's a T-day.
that's from ES journal ... Tuesday or Thursday has a high probability of reversing and touching green if it sells off.
Yes, I tried the bands with the Hang Seng. I didn't use them though to identify congestion and stay out. They were used to fire off a trade signal when the Bollinger bands crossed back outside of the Keltner bands. An example is attached. Red in the ribbon below indicates congestion. There was serious congestion in Kospi on Feb. 1 because it was the day before the Lunar New Year holiday in Korea.
My two cents, Tightnen up, shagi made a point, your shorting 4 es at 1 in the afternoon roughly, and your not sure how to tell if its in congestion? Any futures trader will tell you to sharpen your teeth on the SPY first, roughly 500 shares of spy equals one ES, you got no business at all trading the equivalent of 2000 shares of SPY at 1 in the afternoon today and really most days at 1
Trying to trade on the scale you seem to be is tough, especially in these markets, since congestion can chop you up - then the market makes a 10pt move overnight, etc. Vertical moves such as what we had from Sunday night through Monday's close often result in congestion. All the more so if the move was bullish.
The point is that you cannot control what others say in a public trade journal at a forum like Elitetrader.com Therefore, to stay on course, you should not spend any time & energy responding to any message post that bothers you because it will briefly take your journal off track and anybody that's been here a few years can post links to hundreds of journals like yours to see what usually happens. With that said, lets now talk about your question. "How to identify congestion while trading the Emini ES futures" First, lets review your trade log in this journal. You posted the following after a few trades @ 1028am est... Later you seem to be confident in your identification of the price action @ 1052am est... Later you said the following @ 1102am est... It doesn't seem like you're having any problems in identifying congestion price action or any other type of price action based upon the above quotes by you. In reality, it seems like you have a problem in being discipline to not trade in it. Therefore, is your question really about how to identify congestion or how to remain discipline to not trade in congestion (I think this is your real question). With that said via the important question above, I haven't seen a message post by you that shows how your 1min chart of the Emini ES looks like on your computer at the time of your trades. For example, a 1min chart that shows only 10 intervals is a lot different than a 1min chart that shows 150 intervals. Thus, there is a direct relationship between the setup of your charts on your computer to your ability to identify congestion or many other things "as it is occurring in real-time" in comparison to after the fact as in hindsight analysis when we usually view a larger image of the chart. This is a critical issue many traders underestimate if they're not automated or using a mechanical trading system. Simply, we need to see exactly what you're looking at via the typical chart on your computer to be more helpful instead of our own maximized (large) image of the Emini ES. Yet, until then, I can give you some general advice about how to identify congestion. *** Most congestion represents "volatility contraction" as in you'll start to see an increase in the number of intervals that has smaller range per interval. It will often (not always but most of the time) occur after a volatility or volume spike. *** Use two reference points as a range like higher highs or higher lows like the ones you had identify to be prepare for pending congestion. Thus, price action that stays inside that range via volatility contraction = congestion The below trade occurred within the above mentioned range. * Your message post @ 1253pm est reveals that the $tick gives you trade signals or confirms a trade signal via the fact you said the following... However, you did not mention your $tick reading nor how you use it (reason why you should post a chart image of what's setup on your computer). Later you said @ 1300pm est... Continuing...you then shorted @ 1312pm est knowing you were still within congestion via the following commentary by saying... Thus, the above commentary doesn't show you have a problem in identifying congestion. In contrast, it shows you have a problem in remaining discipline in not trading the congestion. You went on to say @ 1319pm est... The above is another verification it's not an identification problem...it's a discipline problem to ignore trading in congestion...that low volatility or low volume tight trading range sometimes called price noise. I won't post anymore quotes by you for your remainder trades but it's basically the same theme. Therefore, it's a good guess based upon your own words.... Whatever trade method you're using...it's giving you trade signals within congestion and you lack the discipline to ignore those trade signals while in congestion. Easy solution...find a way to not trade in congestion after you've identified such as congestion because the above obviously show you don't have a problem in identifying the price action you're trading...you just have a problem with what to do with yourself after such most likely because you're afraid of missing a price movement if you walk away after identifying the price action is in congestion. Thus, when the next trade signal appears within the congestion you've identified...you take the trade out of fear of missing a potential profit. I gave you two important general advices about "volatility contraction" and the range involving HH, HL or LH and LL. Here's one more...don't take another trade again until you've back test your method to 2007 because there's been some extreme changes in volatility of the Emini ES since 2007. Next, determine when your method produces the most winners and profitable trades. If profits is occurring in increasing or rising volatility whereas losses is occurring in low volatility conditions...you're trade signal whatever it may be...is sensitive to volatility and performs better when Emini ES is not in congestion. Thus, the real issue is your discipline and not your method. Mark
thanks everybody for commenting. as far as trading spy, it's the same as paper trading because very little money involved, my emotional response is totally different. It's the real money that cloud my judgment. And yes, I need to add trading during lunch and after a run up day to my congestion rules.
B.L. If you are serious about trading I suggest you start by changing your user name to something more positive. What you think is what you are and it affects your actions indirectly. I highly suggest you read this and know it like the back of your hand. It will help you face the demons that you battle internally. http://prismintraday.com/readings/Disciplined_Trader.pdf