I realize everyone has their reasons for entry and exits. I know it is hindsight but but if you will indulge me I will show you how I would trade this PA. There are many things that can be said about this so I may post the chart several times to explain the concepts without trying to cram it all in one chart. A. First I am looking for buying selling pressures in the larger context before I take a position long or short. B. Then I am looking for a possible setup within that larger context. C. Next I am looking for a signal bar. D. Finally I am looking for an entry bar. E. Then I take a position (long or short) and at the same time set my initial SL and PT. So first some big picture context concepts. Starting at the left of the chart. Bear trend (red down arrow). That downward move consists first of a move down from top followed by a pause that became some sideways action. That first move down (within that big red arrow) had gaps between low of bar and close of previous bar and previous two bars. That is urgency and selling pressure. Then some sideways PA (first blue area) In that sideways action a there were a couple of bull gaps (high of bar higher than close (and or high of prev bar...both things are gaps). So, bulls are pushing back in the sideways PA. But notice a cuadruple top is formed with tails on top of the bars. This indicates more selling. Bears are trying to push market back down. Will they succeed? We don’t know yet. That sideways action morphs into a triangle within (nested) the sideways move. That means bears are pushing. Bulls are pushing back. The apex of the triangle has formed and that means a BO is most likely forthcoming. Which way up or down? We don’t know yet. Over all from context and sideways action there is more selling pressure so it can be anticipated the BO will be south. The larger context indicates selling pressure. The sideways move indicate selling pressure. The triangle in that larger context indicates selling. So what happens? Bo is south. In effect the sideways move was just a bear flag that morphed into a nested triangle that was followed by a BO south. I might would have traded this BO of the triangle but to keep things simple I will make my first trade later in the chart. The BO from the triangle flag was 3 fairly big bear bars with gaps. This second move down (within the larger red arrow) is followed by a small flag. This is profit taking by the bears who sold the BO of the triangle. They succeed in pushing it down a little more then the bulls push back. Together these forced form the second sideways action (blue) at the bottom. In this sideways action we have a reversal with 4 bull in sequence and gaps (i didn’t mark the gaps but you can see them as describe above earlier), followed by a small bear bar (pause) then a larger bull bar that breaks out of the sideways PA. Will the BO hold? We don’t know yet. Then we get two bear bar with tails on top. Bears are trying to make the BO fail. But the BO resumes as the bulls are pushing back with 3 bull bars in sequence. This means they are a tad stronger in the immediate context but the larger context (all way from the left of chart is bearish). Who is gonna win and is the BO gonna end up being a successful bull reversal from the bottom of the chart where the reversal started. Well lets look at the larger context and immediate context and come up with some probabilities. Larger context is bearish with two legs down to a bullish reversal. That bullish reversal breaks out of the profit taking sideways range formed at the bottom as bears get their profits from this 2 legged move down. The entire move down also has within 3 pushes down. That is a wedge bottom. A reversal pattern. In the more immediate context the the reversal consists of 4 bull bars in sequence followed by a small bear bar then a bull bar that breaks above the sideways action AND above the bear flag at the bottom. That is buying pressure.Then we get two bear bars with tails as bears try to make the reversal fail as mentioned earlier. But the bears fail and BO resumes. Will it be a successful Reversal/B0? We still don’t know but the signs are pointing in that direction. One sign is the sequence of bull bars after the reversal at the bottom and the sequence has gaps. A second sign is the reversal and apparent BO form a TIGHT channel. Tight channels are a sign of pressure. In this case bullish. So what are we waiting for to take a position? Well I want to see the BO from the blue sideways PA at the bottom hold preferably with a gap and then I want a signal bar and an entry bar. Once the BO resumes outside of the blue box we get a PB in the form of a doji bear bar. It is basically a doji as the bear body is so small. It is a range bar meaning bulls and bears both are exerting pressure. This is the second attempt by the bears to make the BO fail. But they fail. The next bar is a bull bar that goes above the doji. Bulls are stronger. That is my signal bar. If I see a bull bar after this signal bar I am going long for at least a measured move up (initial PT based upon PA up to this point but even it is subject to change IF price stall too much going up to the measured move.,,ROFLMAO). Why take my position now? Well because the bears failed twice to make the Reversal BO fail and they failed to make it fail. In their second attempt they could not even push price back down to the BO point (top blue line) so a gap formed (yellow). While this final bear attempt is a PB in the form of a doji it is technically not a PB because the low of the red doji didn’t go below the low of the previous bar. But I call it a PB because functionally it is a WEAK PB and if you dial down to a smaller TF you will see it is a PB on the smaller TF. In figure I got about a 70% chance of a second leg up to a measured move. Now, remember high probability means less reward. In this particular case why is this so? Well, I could have gone long at the bottom blue line on the reversal but I had no proof that bulls were strong enough yet to cause a successful reversal. So I waited for that evidence. That means I gave up the profit that could have been made in the first leg up out of the blue lines. I trade out larger reward for larger probability. So, I get a signal bar followed by a bull entry bar. So I am long on that entry bar. Anywhere on the bar but generally best to wait very near close to see if it closes as a bull or bear bar. My initial PT is a a measured move up (black circle). I will show the measured move up on another version of the same chart and why I exit there. After my entry I have two PA stop losses. I really don’t want to see price go back into that blue line area after breaks out again from the bears first attempt to make it fail (that attempt is the 2 bear bars with tails on top at top blue line) so I place my first SL just below that first attempt to make the reversal BO fail (red dot). The second red dot below the reversal at the bottom of the chart is my max SL. This is actually the more correct SL for the total price action that has transpired so if need I can move my higher stop loss down there. The decision to do so would be contingent upon the dynamic of “how” the bears pushed back. As it turned out the bulls overwhelmed them so the higher stop loss held. If price would have traded back into the blue lines and continued south of the lower line then i am exiting at the very latest with a loss at the lower SL. Why? Because this reversal BO is turning into a range that is most likely just a bear flag in the larger context from the top left of the chart to the bottom where the reversal started. So, I will cut my losses right there at that larger stop loss double up and go short. My long premise is wrong and I need to get short to get back in sync with the PA. Nevertheless, as it turned out the upper SL held and I am looking for PT at a measured move up.
Here you can see the measured move up. There was no PA reason to exit before the initial PT was reached. All bull bars....with gaps up to the measured move and no PB until MM was reached. Why exit at top of MM?. Well we got some sideways PA..means profit taking by the bulls. And a quadruple top. There may be another push up by the bulls and in hindsight we see there was but this quadruple top has tails on top of bars signaling selling pressure too so why chance a deeper PB to make more? Best to just exit. We did in fact get a deeper pb south of the blue area. @simple...if you find this useful i will continue with more and explain how I would trade the area you traded. If not, tell me and I won’t spend more time on it as it does take some time to mark up the chart and give some explanations.
You can also do a measured move up based on on the height of the sideways move at the bottom of the chart. Look to the right at this price level (top of the blue MM) and you will see a small pause in PA as some bull take some profits off the table at this level. The larger black measured moved is based upon entry of the position and the start of the reversal at the bottom of the chart.
This is good post to access and I have started continual assesement of my PT, but need to do a better job of assement of my SL rather than letting it be a hard stop. I often use to read phrases like "trust youst SL", "don't bail out from your SL", "never move your SL", "Let the market take you out". Kind of tuff to do, when you in the money on a trade and then market starts going against you. I am guilty of the set the SL and PT, and let the trade play out. I think I get caught up in the whole I HAVE to take trades where R:R > 1 and I have to let those trades play out, so stick to that PT regardless of what buying and and selling pressures you are seeing while you sitting waiting for either SL or PT to take you out. It like do I trust my what my eyes are seeing or trust what this silly risk vs reward sticking to this predefined SL or PT. So good post, good to see some other traders doing it differently and managed the trade along the way.
I have posted this vid before. It's about 15mins, with many nuggets! I am not associated in any way with this guy or anything he may promote. Additionally, this is not a recommendation of any kind regarding specific strategy, usage, setup, or anything else. There are several nuggets within, that if taken from the point of view of trading to trade well, that can be applied to ANY strategy. HTH
Well look at it this way. It is a good thing to structure a trade and plan, but the market knows nothing of my plans or my structure. So, if the market doesn’t go per my plan I have a choice. 1) Adapt my plan to the market or 2) be bull-headed and stick with the plan as in “damn the torpedos full speed ahead.” Generally, in life..most of life never..hardly ever, might be better ..goes as planned. I once planned a big project in Central America. I headed up a team and we launched the project. The original plan called for one year. After 1 year it was barely starting to be successful. It ended up being 5 years to see good success. Now it has been around 11 years and the success has been amazing and jaw dropping. However, many obstacles had to be overcome along the way. Many variables we didn’t didn’t even expect to enter the picture or even know existed when we first started presented themselves. Over and over we failed until we found what would work. But we found what worked by being persistent until it appeared on the scene. Then we had to adapt on the fly. There is something to be said about having a general plan for anything but one must, on the other hand, be flexible enough to adapt as things move along. Just sticking to a plan don’t make it work. Trading is the same. I am not just gonna sit there and let the market take out my SL. I HAVE A MAX SL that I will suffer, if need be, but I figure if PA reaches it then my plan was wrong and I probably need to double up and go the other way. Also, if I see something transpire in subsequent PA after I take a position that makes me realize (even though my SL hasn’t been hit) I am probably wrong then I will jump ship before price hits my SL. Why should I plant my SL in unmoveable concrete. That is basically what the gurus and pundits tell us. Listen the market doesn't care about my SL. I placed where I placed it because of some premise or belief I have about PA. But if my premise seems to maybe be wrong in a particular case and I see this as dynamic PA unfolds then I know I will soon have to make a decision about my SL. 1) either get out NOW and mitigate my losses. 2) widen my SL to give the market a little more room without taking me out. 3) widen it to my max amount that will prove to me I am wrong and must get out if it gets hit. I know..someone will say well why not just put it there to start with? Well because I don’t want to be stubborn and just say “regardless of what subsequent PA does or how it acts I am leaving the max SL to be taken out.” Plus, i may see something I missed when I placed my initial SL perhaps I see this on another TF after my entry and become convinced I need to change it to accommodate the new info. Everything thing I do in trading is subject to change if need be. . My planned entry...my PT...my SL. My actual exit. EVERYTHING. I CAN MISS BEING IN SYNC AND HAVE TO JUMP SHIP. I CAN BE IN SYNC BUT AT THE MOMENT NOT REALIZE JUST HOW MUCH IN SYNC I WAS SO I NEED TO WIDEN MY PT. If the market changes then my parameters need to change. Anyway, that is how I look at it. But I am a discretionary trader.