jasinhbca's quest for discipline, knowledge & profits

Happy Thanksgiving traders.

I am thankful for the advice and encouragement I've received here.

Thank you.

==============

Not back to trading yet. Mon & tues had all day tax seminars. Quite the incentive to get my revised plan pulled together.

Still reviewing and writing up notes and definitions of Trends, S/R and trend lines. Even pulled out the bible; Edwards and Magee.

Trying to come up with simple, more objective rules that fit with my trading style. I've got over 2 pages written on trying to make it simple. It feels necessary to get it all out there, examine what I know and my beliefs then strip it down to something workable.

I'm asking myself "What am I trying to accomplish here ?"
There's moments of clarity and confusion but progress nonetheless.

So far , so good.

 

JIH

Some thoughts to hopefully help stay on the straight and narrow..., and keep it simple

We are day traders – which means we trade “inside” a daily bar – every day – as it's being formed

==============

So let’s think how a daily bar is typically formed

The session opens (as does the bar) …, price moves to one of the bar’s extremes…, price reverses then moves to the bar’s other extreme.., price then pulls back and the session closes (as does the bar)


Admittedly there are times when a bar opens.., at what turns out to be the extreme..., and price just keeps moving from there

=============

The above "typical" daily bar looks (and is constructed) thusly;

It opens – a tail is formed – price reverses - the body is formed – price continues moving - price then reverses and the other tail is formed – price then moves back to the bar’s/ session’s close (which also collapses the body)

Price movement..., throughout each day..., is in the form of.., AND includes;

move(s), range(s), pull backs, reversals, breakouts

ALL daily bars are variations of the above… so this is obviously what we must be able to define / frame up / trade

So……

What do we trade;

Price movement – in the form of;

Breakouts

Retracements (entry is in the direction of the move price is retracing from)

Reversals

================

What do we need to define;

An up move
A down move
A range (a range can be defined as a bar.., or series of bars)

================

What do we need to be able to identify from our definitions;

An up move
A down move
A pull back
A reversal
A range

===============

Finally what must we interpret from the above as it is being formed

Demand…, Supply…, Control..., Control switching..., Lack of Control (iow no purposeful buying / selling... or a fight ensuing)

================

Tools;

Lines similar to the ones on DB’s charts (charts I copied)

=================

Anything else necessary???


Admittedly;

I’ve not included entries or exits, (stop or profit) – but I believe those to be pretty clear once all these pieces are combined... AND we're able to admit when each trade is either working or not

================


I get that you're working through it... and working to define/ combine all the pieces

I've distilled it way down in this post - you may need to back up and work through some things to make it, make sense

Now, if by chance you're headed down another path, and this post not conducive to that path - please ignore it

Questions - ask away

RN

 

This method of studying price action was my personal Holy Grail. I PM'd RN with a question years ago and he thought I was asking something different and answered in a way similar to the above post. I looked at the example he referred to in his reply to me and at some point not long after that everything started to fall into place. It was like the Magic Eye pictures that pop out at you once you learn to stop trying to force it to happen.

It's all right there for the taking.

However, the path from seeing it to planning it to mastering the mindset to trade it is an immense journey.

I've thanked RN on Thanksgivings past, and thank him yet again for that little gem above.

 

Well shoot…., leave it to a dumbass like me to answer a question not even asked - D'oh

I say we keep on truckin Ma'am


A Very Happy Thanksgiving

RN

 

Thanks RN. We are absolutely on the same page.

A couple things I'm working on defining are 'reversals' so that i'm not entering on a retracement or range and 'retracements' so that I am not entering too soon. I'm not looking for a grail here just a bit more big picture context.

I hear ya on the tools and keeping it simple. Will do.

Thank you.

 

Random thoughts on a pullbacks / reversal

PB’s;

Trading the current move, and entering this move on a pullback – should be considered & mastered – first and foremost

It’s hard to enter on a PB – let’s face it out first inclination is to say the move is over and price is reversing – time to enter the other way

In reality – entering on a PB offers the lowest risk trade there is

================

So the question – how to determine when a PB is done (this is but one way btw)

Watch the 5 min

Higher low = uptrend

Lower high = downtrend

Well duh….

But it you think about it – in an up move – a 5 min bar closes (with price at / near its top), the next bar opens with price at / near the previous bar’s top – then moves lower and near to the bottom of the previous bar’s low – doesn’t breach it – instead creates / retains a higher low – then keeps moving up

Or - price moves down to the TL connecting the bottoms of the previous 5 min bars - then proceeds to move on up

Both are a classic PB entries on a 1 min

It’s a low risk entry (where a breach of the previous 5 min bar’s low - TL connected low – is the stop – and is where we can reasonably assume the PB failed if / when breached)

=======

This works best in the beginning stages of an up move – the longer the move has existed – the more everyone see it…, has jumped is…, and momentum begins to wane

This also works except – where / when outside bars are formed (outside bars = potential reversal / potential range / potential chop – recall I did say potential)

Real time analysis is required….

Real time analysis, and adjustment on our accord – is always required

Like I said – this is but one example – there literally exists a plethora
===========

Reversal;

We talking

Intraday (when what we’re actually trading reverses from one extreme and is headed off to make the other extreme)

or

When price…, in the current day’s candle…, drops below the low / rises above the high – of the previous day’s candle

or

Over the longer TF channel

Sounds as if I’m being overly dramatic…, rather the exact opposite – drill down and specifically identify what you’re seeking out / defining / trading

============

Reversal behavior (intraday – iow what we’re trading)

A sharp move in the opposite direction

A sharp move in the opposite direction, followed by a retrace for a test (or to shake out the weak – the resulting price movement is the same)… price then shoots off

A retracement that held, and kept on going

A range that price broke out of in the opposite direction

An attempt to resume that failed… once, twice, possibly even thrice – then boom

What these look like;

A “V” / inverted “V”

A “W” / inverted “W”

Price retraces from an extreme…, consolidates…, forms a small range (in time and price)…, then breaks out and moves off

Price consolidates near the extreme of a move, then breaks to the opposite direction

A double/ triple attempt to break through that fails (not to be confused with a repeated attempt to break through that ends up working)

=====================

Note;

A top reversal seldom appears like a simple inverted bottom reversal – they have different signatures - and different buying/ selling dynamics

Tops usually materialize quicker – except in the case of a “V” reversal at a bottom

I believe this covers > 95% of all reversal manifestations

====================

When you have an equal H (in a here to for up move) or an equal L (in a here to for down move) on two adjacent 5 min candles – take note – they hold – you have a reversal.., or range – potentially forming (whether either hold is another matter and takes real time analysis – I did say potential)

Same for an adjacent outside bar

================

As to the mindset necessary to trade PB’s or reversals
Be open
Be flexible
Readily admit when a trade is not working
5 min sets the way…. 1 min is the micro structure building the 5 min bar…, AND the entry signal

Whenever your view is not clear – stay out till it is

If you think your view is clear – make sure you can first identify a low risk stop before entering – and for if / when that trade fails

=======================

Volatile PA

Stick to your guns and take every stop

3 to max 4 stops in a row – should be a clue that a range / volatile condition exists / is forming

You’ll see your trade fail – you'll exit – then price comes back – and you begin to think damn if I only stayed in I would have made money

This works till it doesn’t – and when it doesn’t – price will move way the hell against you

It’s sloppy directional trading

Volatility can be traded – as can directionality – but they require a different mindset & almost counter skills

Example of mindset/ skills;

Directional trading

Get in,,, hang out…. don’t get be shaken out… capture the majority of the move… exit… find the next entry
Low/ slow (patient) / not easily swayed (for the shakes – we are always prepared to exit when a trade stops working)

Volatile trading;

Get in…, get a small move (possibly to the other side of the range??)…, exit… reverse... over and over…

WHILE ALWAYS prepared to exit if / when the price moves counter… and /or breaks counter out of the range

Uhh – that would be a real B/O… not a head fake B/O meant to trap by quickly reversing – again

Quick / fast / easily swayed…

Also easily frustrated – if one is predisposed such

==============
Trading both conditions requires a little mental dexterity
==============

Above Just a few random thoughts JIH – hope they help if only a little

Damn I talk allot

RN

 

Nice random thoughts, RN.

All good stuff and what i'm focusing on. I hadn't thought about outside bars like that. Thank you !


--------------------

Spent some time over last few days reviewing printed out 5 min. charts. Drawing some TL's and noting interaction with S/R.

Also looked at bar formation 1 minute to 5. Need some more time with that.

Today I observed and did a little Sim trading. As I said before my focus had been too much on the 1 minute (& 20 second) charts. Too much noise and micro-managing. Today only had up the 5 minute and the 1 minute. 2 monitors.

I like where this may lead. A bit calmer trading and better feel for PA. I think Nodoji mentioned once that at the end of the day her charts looked like the web of a spider on caffeine. Mine were getting there. TL's and some channels. I try to pull some off during the session to keep it cleaner.

Had I taken all the signals I saw it would have been a nicely positive day. Another day or two of sim then if all goes well back Live.

I'm not doing too much different in reading the 1 minute. Just getting the proper context/trend off the 5. I think this will really help.

 

I've been aware my trade management is not ideal. Partly discipline, exiting too soon and not sticking with targets, and partly the plan, too close stops.

I've reviewed about 80 trades over the last 3 days. Quite time consuming. 35 from Sept , 9 from Oct and 34 from November. I plan on reviewing more from Oct and go back to June, I think, when I had a very good month.

Proposed (or Proper) Trade Management (PTM) for review: Move stop up to -3 after MFE +10 and exit at +20. If a trade stalls at S/R for 3 bars move stop to -3.

I'm comparing my actual results to: 1) same tight stop but with PTM 2) slightly larger stop with PTM 3) Market Structure stop with PTM

In each sample set and in total, any of the stops with PTM outperform my actual results. Just using the same tight stop with PTM results in approx 90 more ticks. This is a huge difference considering my actual results have some >+35 trades which in the PTM set would have been limited to +20. Also this is a time period when i've been trading very poorly with a low win rate. This is rigid test. In the PTM set there have been some trades +15 - +19 that showed signs of reversing that for test purposes came back and stopped out at -3. If allowing for limited discretion those trades likely would have been exited for a gain.

The market structure stops are performing the best showing about 160 more ticks over my actual. Some of these stops are wider than I would like to use; in excess of 20 ticks. Some are only a few ticks more.

One thing that occurred to me is the comment i've heard by some that where one enters a trade isn't as important as trade management. Perhaps this is true but it's also probably true that trade management alone can not make provide an edge.

If my results are improving with PTM but that is not my edge then what is ? I think it may be as simple as trading with the trend. Obvious ? Yes . Overly simple ? Maybe. In my actual trades, nervous early exits hurt my results. In the first two PTM tests the win rate did not improve but the overall results did. Maybe the actual trades just needed time for the trend to pull them along. Probably no logic to what i'm thinking. Perhaps, just intuition from all the review.

There was a reason my results have been inconsistent to poor the last few months. It was because I needed to learn these lessons of trade with the HTF 5 minute trend and to learn to understand, with stats, my system and PTM. As Nodoji has said before, having the stats on the system and trade management allows one to trade with a confident, probability mindset. I'm a slow and stubborn learner. I should have done this review sooner. It's making some sense now. And using market structure stops forces a slightly bigger picture look too

After I finish the trade review, at least 100 trades, i'll see if discretion or even a non-discretionary rule can be used to increase targets. What conditions will allow for it ? What rules should I use for exiting before a target or stop is hit ? A signal in the opposite direction for one.

I'm still studying the 5 minute trends and conjunction with the LTF.

 

JIH

Don’t fall for that nonsense

===============

Good entries are the very foundation of low risk trades

Where a trade fails is where it fails

Chasing - only increases the distance between where you enter, and the price where that trade fails

Not waiting on a proper setup (entry) - does not provide clear, or possibly even - low risk opportunity (let alone a clear reason / or direction to enter in the first place)

=====================

Entries are just as important as exits – and it takes doing both well for longevity in this business

This is a "not negotiable" in my book Sir - which is to say I always reserve the right to change my mind as often as price dictates... but I never skimp on clear entries ( and I would rather miss a trade than budge from this stance one damn bit)

RN

 

I agree, RN. And don't worry I'm not going to start throwing darts or chasing entries. I was just thinking that even with proper entry and management, when done outside the context of a proper trend (or new trend;reversal set up) the edge is decreased or non-existent. I want all three working for me. I probably didn't express that clearly but i think that's what i was trying to say.