I have no expectation of being given anything. But you bring up two very good points. First you mention positive expectancy. You have said it yourself before, as have others, that you have an incredibly high win rate. But now when you mention positive expectancy, its more in line with what is actually going on, you win some, you lose some. The feeling I get from the expert posters is that if they are actually experts, they would know that some trades don't work out, but given the way they write, it makes it seem like they don't know this, so it makes a person with real trading experience question this. They are more about keeping alive the legend of being a supernatural trader, rather than actually exposing that trading is simply about positive expectancy. The fact that the "pros" don't even hint at this tiny, yet hugely important occurrence is a major oversight. They only want to bring attention to the macro trend, because its easy to get lost in generalities, but they don't dare mention something in the micro world, since this is where it becomes obvious how easy it is to get things wrong. Schizo is a perfect example of this today. He could have just said last night, I went long, going to bed, and woke up in the morning to a major win. But because he is a real trader, who did an impeccable job of getting in right at the bottom, but was unlucky to have his stop hit actually had to take a loss on that trade. You see how vastly of a different picture this is? The real trader was right about his call, but in the real world had to take the hit, whereas the supernatural trader is hardly ever wrong, because of how little he says. And of course we know some are making money, nobody doubts that, but there is no connection or correlation between those making money and those showing something, anything. In fact, its more of an inverse relationship if you ask me.
Yes, I remember your phrase very well. I'm still not exactly sure how you mean to use the word "buffer" though. Its almost as if this is an area you either stay clear of, or that you want to give price extra room to work its way through, or... well I'm not even sure. No matter though because all I know is that if in a trend, I would look to enter long positions at the bottom of the "buffer" zone, and look for reversals at the top. Of course if I'm going to just go with the trend, then the idea is to stick with just the longs, and skip the reversals (but a person really never knows this with clarity until its all over)
Yes I get what you are saying. In fact this morning, I was trading with my friend in chat and before the open I said, I'm bullish, will go long hard around open. Turned out I got long, exited a portion for profit, got stopped on the balance, had to get back in long, exited right, went short, got stopped, went long again and sort of took a scratch on that one. It was not perfect trading but money was made, many days, trading is ugly, some, even uglier, as in losses followed by losses, but it is what it is and in some cases, it can feed the family, and then some but the road can be bumpy as there is no holy grail; and in the end was I wrong saying Im bullish at the open ? No, it was the right call, but difference between such bias and execution was like night and day, so yes, I get exactly what you are saying.
Now this I can finally believe. The fact that you also say you went short reinforces that even though the trend was up overnight, it doesn't always mean a damn thing to the day trader who is looking for a trade in the next few minutes. To even read you write that you might have losses after losses makes me almost think your account was hacked and this isn't really you posting. I know you said before that you aren't afraid to get out right away if it isn't doing what you expect, but you also claim to have a high win rate, and stating multiple losses I think would bring this winrate down from the clouds. Perhaps this is more for your long term swing positions, who knows, but at least what you say here sounds realistic.
Sounds like a day at the office No matter what - manage the losers - never hesitate to exit em Hell.., if any of us knew - it would cease to be trading No chance of that happening RN
This. Nobody knows how long the trend will last, or if it's reversed already. If it were possible to distinguish between a reversal and a pullback with 100% accuracy, a group of individuals would have perfect trading records. The only racket I know of that boast near perfect trading records are HFT, and they don't take directional risk, in the speculative sense. When we're talking entries and direction, all I can do as a trader is use the best tools at my disposal to assist in the educated guesswork. Trendlines are very powerful, and I use them. Experience is required as a new trend usually 'pushes out' a steep trendline several times, before cruising at the sustainable ~45 degree angle. Also, just as steep trends are apt to reduce their slope, they're equally apt to fail and reverse. PA is only relevant to me in determining trend direction. Is a chart making new highs? Then the trend is up. Is a chart making new lows? Then the trend is down. It took me over 10 years to figure that out. What makes the learning curve hard for many beginners like me, is there is no holy grail. Keep looking and you'll never find it. The best answer is there is no best answer. So using a combination of trendlines, channels, broad PA, and experience, I throw them all together to determine if a trend has reversed, or whether its just a pullback. There's more. Classic TA patterns happen in the market with frequent regularity. They just do. A trader must accept this. I resisted this for nearly a decade, at my own peril, because those patterns didn't jive with my artificial construct of the market. Particularly broadening formations, triangles, wedges and flags. Broadening formations break trendlines, break prior pullback levels, and leave many traders stunned holding on to losses. This is why they happen. So be on the lookout. Channel bounces are powerful too. Since we're talking reversals and pullbacks, the 4th point channel bounce at 1810 on the ES, Jan 20th, was nearly to the point, for a 100 point move. This was an incredible reversal move. Same as Dec 14th, at 1995 handle for an 80 point move in the ES. This is voodoo, and voodoo works in the market. Particularly, the ES. While the topic of discussion here focuses on one time frame only, that's a debatable artificial construct. Who wouldn't take a 100 point bounce off a channel line? At the end of the day, most of what I posted is really of minimal importance in trading. I'm of the thought that trade management is of 95% importance to a trader. I want to thank Buy1Sell2 for that, because he really drilled that into my head in the Psychology and Trade Management forums, to my great benefit. Entries, which is what we're talking about here, right now, are about of 5% importance. Who cares if you get the pullback right or wrong. It doesn't matter. What matters is HOW YOU as a trader respond to your loss. Do you cut a loss short? Or let the loss run? Equally important, is what you do when you flip that coin and guess right. Do I cut my winner short? Or do I let my winner run? The answers to THOSE QUESTIONS are of far more importance to any deluded assumption that I can pick reversals and pullbacks with stunning accuracy (because I can't). Further, what is more important then that, is when I get a winner, I add to it. Say you guess a reversal right. Are you a one-lot trader? Just riding it until you think the trend ends? Or do you press that winner, and add more as the trade goes in your favor? That more then anything else is the jet-fuel you need to make this trading game work. That's my advice to anyone reading my long-winded post. Whether you flip coins, use solar cycles, trendlines, voodoo, whatever. When you get it right and find yourself in a trend, press the winners. That's what makes the real difference in the P&L at the end of the day. Price action, in my opinion, is inferior and a dangerous tool to use for trading, in most circumstances. Pullbacks can be a 1, 3, 5, 7, 13 etc wave ride. Similarly, prior pullback breaches often go on to make new trend highs. This is a 2B formation in reverse. It's a liquidity squeeze and stop squeeze all in one. Trendlines applied to pullbacks, like the image posted earlier in this thread, are useful. Because lets face the brutal reality guys, pullbacks are often fucking messy. Which is exactly why they happen - they catch boatloads of traders offside. PA is useful for telling me when a reversal call was wrong. If I go short expecting a reversal down, and price makes a new trend high, guess what? I was wrong, and the uptrend is still in force. However, one caveat, like Schizo mentioned, the market loves to break trendlines, restest and make a new trend high, THEN reverse. So we have to be on the lookout for this too. It sounds complicated, but it's not really, once you get the hang of the sequence (trendline break > reversal. Or trendline break > retest > new extreme > trend continuation. Or trendline break > retest > new extreme > trend fail). There is only three scenarios. Learn them, write them down, and trade accordingly. The way I trade, without giving my exact methodology - use trendlines, add to winners, and once I've got a full position on, or near full position, I HOLD that mofo as long as I can, no matter how many trendlines get broken or how complicated the pullback is. I know where my hard stop is that controls my risk, and honor it WITHOUT FAIL. Beyond that, once it's on, pray for rain, sit on my hands, and let that winner run. This is my style. It's a homerun methodology. I don't try and hit singles and doubles all day. I credit this to Acrary, who also made an enormous contribution here over the years, and was a big advocate of the unlimited winner style of trading. This goes back to the nature of the market having fat tails etc. I also use VIX as a filter, for how long I can expect trends to last. In a low VIX environment, the market is more apt to be range-bound with shorter trends. So I take profits earlier in a trend, once I have a few positions on. When the VIX gets into the high teens - low 20's, the market becomes more trendy, trends last longer, and so I hold my trades longer expecting a bigger move. Of course, this is not bulletproof. But nothing is in trading Scaling in and pressing my winners helped me answer the question of - is it a top or a bottom? Or is this another pullback? When you've got a few contracts on in a trend, instead of just one, you won't care if you got out at the exact top or bottom. That's irrelevant, a fools errand, and impossible to do with any degree of consistency. What I mean to say is, if you're adding contracts in a trend, you only need to capture maybe 1/3rd of it to walk away with a very nice payday, that puts you well into the black less all your losses. So now I don't really give a hoot if I nailed the exact trend high or low, or got out too early or too late. If I got a big fat winner, guess what, that's all it's about. The best part is I don't have to spend another 13,000 hours at the computer screen with my notes, studying the charts for the perfect reversal formation that doesn't exist. Beautiful, isn't it? As far as calling EXACT trend reversal points, like above, I would say long-term charts (daily or weekly) using trendline and channel bounces are extremely useful. The Obvious Thread, I think the "masters" were using time. Measuring time from one market sell off to the next. Measured moves using price can and sometimes do work, as the images posted earlier in this thread shows. But they don't work often enough in my experience to lend them much weight. Schizo may disagree with good reason. Probably the only surefire long-term reversal pattern I'm aware of that is excellent and doesn't require hindsight - the parabolic move on high volume. Any time frame is relevant, although the longer time frames are much better. The top in Silver, April 24 2011. The $1200 top in Bitcoin, Dec 2013. The $150 top in WTI, July 2008. The 2000 Nasdaq bubble etc. These happen frequently, and if all a trader/investor did is master this one particular setup and wait for it, in ten years they'd be a millionaire. Even watch the ES on a 1 mins chart. Look at all the short-term tops and bottoms. They usually occur on a volume spike. It's not a 100%. But its a good signal, and with a tight stop, a workable method etc. Anyway, I'm sure I've digressed substantially from the OP, but trading is sorta like that. Not exactly black or white
Boy oh boy if surf reads the above post he will have an instant cardiac arrest, considering he doesnt use TA and adds to losers LOL Good writeup Achilles.