Keeping It Simple II

I thought this simple strategy went well beyond the ORB trade. In fact my post had nothing to do with the initial ORB trade. But you're right when you try to choose between reversal, breakout or retracement it can get very complicated. One trade, possibly one reversal and thats it, done for day. That has much appeal over trying to explain every intraday move. Guess i put my post in the wrong place though. Thanks for the reply anyway.

 

It's downright liberating.

 

If you want to continue the discussion, perhaps the Determining Trend thread would be to your liking. It veered off into a direction that was not what I intended when I started the thread, but it's an important topic. Or you could start a journal, which would give you some control over the focus.

--Db

 

It's a term of convenience (God help me if I'm inventing more jargon). What I mean in this particular case is entering above the lowest high, deep inside the "V" of the second half of the W (though I'm not yet sure if this should be done if the bar is an inside bar). Yesterday I would have done this if the second half of the W had been higher than the first (this is one of Dunnigan's "Preliminary Signals"). However, the second half was lower. So, technically, we were still in a downtrend and the probabilities favored failure.

On the other hand, the "higher high" after the midpoint of the W was exceeded was not necessarily an entry opportunity. Remember when I said at the time that we had formed a "megaphone" (i.e., an expanding triangle)? These tend to be sucker plays for anybody playing the breakout. And there was that multi-day DTL that you pointed out.

Which is why reversals aren't part of the ORB strategy. One has to have some sense of the demand/supply dynamic during the day, and many people have trouble with this.

--Db

 

What I mean in this particular case is entering above the lowest high, deep inside the "V" of the second half of the W...

Thanks, thought so. Just to clarify for anyone who might misread your comment (and correct me if I'm wrong), but in this case "lowest high" refers to a single bar high, not a reaction high.

Good point about the megaphone. That ties in with what I was saying about the behavior of the last leg of the "W". We were able to draw a preliminary UTL there, but the move up was very messy, basically just a couple spurts seperated by totally sideways, overlapping bars. So on the way to "breaking out" above the middle high, it didn't do anything to invalidate the megaphone condition, implying that it was not a reversal but just the beginning of chop.

(though I'm not yet sure if this should be done if the bar is an inside bar)

Ah, those pesky inside bars. Always seems like a toss up between the benefit of early entry and the risk of... well, early entry. In the context of retracement entries and moving away from what I was attempting to do months ago, I am leaning towards not trying to "sneak in" on inside bars and instead letting the retracement tell it's story. In the context of reversals, what comes to mind right now is Dunnigan's approach of ignoring inside bars. Trying to enter on those smacks too much of "cleverness" to me, at least at the moment.

 

I agree about the IBs. This doesn't come up often enough to be able to draw any statistically significant conclusions, but it does seem as though entering off an IB is generally not a good idea. The reason for this is that the IB represents a sudden change in sentiment, doji or no doji. Entering off of it is much like entering off a coil in terms of probability of direction.

--Db

 

Was there an NQ short breakout trade at 10:50 Eastern at 1085.50 (2 points below the morning low)?

If the trade was not taken, would it be because of the large gap up from Friday’s close? 100*(1093.5-1050)/1050 = 4%

The ES was not breaking out of its morning range, so this could be a reason not to take the NQ breakout trade.

Thanks for the insight!

 

For me, no. For me, it's about probabilities, and after all these years, I don't argue with probabilities.

The likelihood that a gap that size would fill was only 23%. The likelihood that a Trap Gap would trend in the opposite direction was not great. And the likelihood that you'd have two days that trended from high to low, back to back, with the second day being a Trap Gap day, were - how shall I say? - low.

So, no. I didn't take either the double top or the triple top in the NQ. Nor did I take the ORB down. If the gap had been only 20 or 25 pts? Maybe. Probably. But not 40. And if I had anyway? I would have been stopped out at least once at BE.

The only trade I would have taken was the retracement at around 1445. But I'm lazy. I'm not going to sit around until the last hour or so just waiting for a trade. Whenever I have, I've wound up making trades I shouldn't have just for something to do.

Sorry to disappoint anybody. I'm not concerned about days like this. Now days like the 13th, that's a different matter. That was a snap. If I had missed that, then I would have been ticked.

What I do come away with, tho, is knowing that the longs may not be as confident as they were, that the shorts may just rally themselves and start to drive this thing down again, that the Japanese are once again correct about threes. Tomorrow may be unendingly boring, but I'm looking forward to finding out what people do.

--Db

 

I was a little ticked. I did get back in time to watch the retracement under the mid-day range, and my rules, strictly interpreted, triggered a short at 1075.50 (about 2:52).

I was complacent I guess, and part of why I didn't take it was due to the daily avg range. But that's dumb because I've already decided that is not generally a deal-breaker for me (although, it's more likely to be if it's this late in the day).

I understand and agree with not trading against those probabilities, and that's why my rules passed on the ORB in the morning. But having passed on one trade, nothing lost, it was probably worth a shot on the afternoon breakdown.

I just didn't "see" it going much further than yesterday's high. But I try to remember that anything can happen, and even though today was an unusual situation, a lot of times some big wins come from being where good rules suggest being, at the right time.

Of course, that's my tweaked version of ORB. The basic one as stated in this thread could've been short all day from 1085.50. It would've been a heroic effort to hold through that, but I think I could argue for not moving the stop to BE to soon.

Anyway, it's kinda funny in the end. "Hey, you never said it was gonna be a Trend Day down!"

 

Thank you so much for your help.

After the morning breakout period and possible gap plays are over, what technique would you use to trade later in the day?

You have emphasized the importance of staying with the trend using trend lines and making the occasional reverse using M’s/W’s, 2B’s, and support/resistance (lateral, not trendline). Do you have any advice for staying out of the chop while looking for the decent later-in-the-day trends that seem to occur every other day?

Thanks again.