What do I want to see before placing a trade? I want to see a high probability situation - a compelling LOLR. The drivers of high probability situations are principles. Principles arise from the dynamics of market structure and trader behavior. Being an expression of the very nature of the market, principles remain the same. Some of these are: Trend - Represents the current reality of the supply/demand balance and predicts continuation due to reflexivity. Retest - Optimum balance of price and information risk lowers total risk. Failure - Signals unmet expectations and precedes cascades. S/R - Levels that mark the extremes of value zones. The extreme separates regression to the mean from a move towards new value zones. Compression - Escalating disagreement about value precedes violent release of pressure. Trades aligned with these principles are aligned with the Line of Least Resistance. While these principles contribute towards the bulk of the LOLR determination, there are other finer markers that help to further refine probability judgments. Some of these are: Pace, Duration & Extent of Swings Climaxes Air Pockets The goal is to use all available information to continuously update judgments on the probable direction of price. Then, to act when these probabilities are high enough to afford a wide enough margin for error.
Nice entry at the open. Didn't you get an entry at the Retest of 81-82, right after your exit of your first long. You had a parabolic movement to the downside but sellers were unable to break S. I am only talking in hindsight, but I thougth you would have taken that entry based on previous posts.
The LH at 0943 ET and HL (created by the test you are referring to) marked chop. Plus the sharp fall down to the re-test did not produce much conviction for the long side.The failure of the congestion to breakdown at 1009 started shifting the LOLR up but I wanted to see a decisive break of the congestion before going long.
I assumed you saw chop. I am trying to filter chop from valid moves, given the fact that last week entries have not been easy and they usually originate from what at the time of the trade looked like chop to the uninitiated (me ).
It's been helpful for me to look at the larger context surrounding an instance of PA such as the LH/HL chop marker. My LOLR assessment at the time of the test was this: The larger trend Daily/Hourly has been up + But price just failed to go beyond PM R - It retries going over R but there is a LH instead - It falls rapidly - The sharp fall finds higher S + The +/- observations cancel each other and lead to an assessment of the LOLR that is not compelling enough to warrant taking a position. If there was no clear PM R or Failure, the context would have been slightly different, perhaps shifting the odds slightly in favor of a long. Or one could stop as soon as any instance of LH/HL appeared - but then one would have to accept that certain moves will have to be either missed or joined late.
Ouch on the first long, tho I can understand why you took it. But you got out fast and got into position for the first short, which was a nice one. As for the rest, you did the best you could with a crappy day.