Day 5 of 20 http://www.sierrachart.com/image.php?l=1370710709339.png Too many mistakes and not enough motivation to write them out.
Rather than dwell on mistakes, I'll show you how I would have played this along with several alternatives and you can take away what you like. Remember first and foremost that it's all about buyers and sellers, not about lines and bars. However one chooses to illustrate the activity serves only to clarify what buyers and sellers are doing. The lines and bars themselves mean nothing. First start with the daily, or at least the hourly. This places you in the trend (the most important element to know), or lack of it. From that point, you then know where to begin. Here, the NQ has been in a trading range since the previous day. The fact that price breaks out of this range an hour before the NY open gives you an idea where the balance between buying pressure and selling pressure may lie. About 40m before the open, price settles into a TR, but the TR holds above the TR that had been established since the previous day. This suggests that buyers have the upper hand. A few minutes after the open, price falls out of this range, which suggests weakness. But buyers push price back into the range, which indicates strength. On the third hand, buyers can't get past the midpoint of this range, which indicates weakness. If one likes, he can short this, placing the sellstop a point below the crest of the RET. Or he can wait and see if price exits the range and assess the situation at that point. If the trader does take the short, he'll be out of it quickly with a small profit. Buyers then push price back into the range, an indication of strength. But, again, they can't push it past the midpoint, an indication of weakness. So, again, the trader can short if he wants to, even though the balance is anything but clear. When he sees that price finds S at the bottom of the TR, he must be prepared to exit at a small loss and take the opposite side of the trade, one pt above the trough of the RET. If he misses it, he'll have to wait until price exits from the TR and either buy the BO or wait for the subsequent RET. Either way, he needn't do anything further until price breaks the demand line (not drawn) at around 2976. Once the demand line is broken, one looks for a short op off the first RET. This occurs where I've shown. However, immediately thereafter, price makes a HL, signaling a TR, and no more trades are taken until price exits this TR. It does so five minutes later and a long can then be taken off the first RET after the BO, one point above the trough of the RET. This is good for only a couple of points, but it's near quitting time anyway, and in any case one made up to 17pts off the first long. And for those who have just tuned in, yes this is hindsight. But that's how analyses of prior days' trading are done. And the strategies and tactics have all been explored in exhaustive detail to the point where they have become a drill. The challenge is to forget all or nearly all of what one thinks one knows and adopt a fresh look at trader behavior. Game should be applauded for making this effort. Few people do. Note that only one TR has been drawn and no demand or supply lines have been drawn. If anyone is interested, I'll be happy to plot them and upload a revised chart. However, if one can't see them even though they aren't drawn, he really ought to work on that. There really isn't enough time during RT trading to draw all this stuff.
This post showing how you would have approached the day is very encouraging. For me, your recounting of both the broad outlook as well as the tactical details contrast what I did versus what I can aspire to do. Example: Prep: Before the open I went through the process of reviewing past S/R levels. However, my attitude was mechanical and this led to missing the elephant in the room - i.e. the strong break of the TR an hour before the open. I was still thinking about yesterday's S far below and getting primed for shorts, instead of acknowledging the substantial buying pressure from an hour ago. Determining context for entry: Your quote above about using the immediate HL to establish 'ranging' was also enlightening in showing me what attention to detail looks like. I have been sitting back, mildly watching price and identifying the obvious features of larger swings, but ignoring the immediate moment to moment clues that are reflecting where pressure is headed. My focus going forward is to stop expecting trades to work without putting forth the effort to observe. It is not complicated, but it is a process. Until I can absorb the basics completely, I need to be very conscious about the reasons behind my entry decision. If that means missing out trades because of slow decision making, then so be it. I will get faster with practice. What I did today is a long ways from what I can do. Got to stop hacking away at this, expecting things to work just because they should. Got to start respecting this endeavor.
I suggest you're going about this entirely the wrong way, though it is nearly identical to how every other trader with a background of disappointing experiences goes about it. This isn't about entry criteria or the context for entry or entry management or entry decisions. It isn't about entries at all. It's about developing a sensitivity to the balance between buying pressure and selling pressure. You should not care in the least who "wins". If you find yourself approaching that state, you are opening the door once again to all the fears and hopes and tensions and anxieties that cloud your judgement. The goal is not to control these emotions but to rid yourself of them, and that can't be done as long as you care about the outcome of the trades. You speak of "putting forth the effort to observe". The mere fact of putting forth effort implies tension, which generally leads to anxiety, and there we go again. This should require no effort whatsoever beyond the effort required to stay awake. You are merely observing the continuously changing balance between buying pressure and selling pressure. Where are buyers halting declines? How much trouble are they having doing so? How successful are they in doing so? Where and when and how do they start bailing out of their own rallies? How many torpedoes do they have in their tubes? Same questions apply to sellers with regard to halting rallies. This is not a task that one checks off on a list. It is a constant and ever-present concern, a refuge that one can turn to when he begins to detect a return of tension and anxiety and frustration. Even after years of trading successfully, there will be moments and periods -- sometimes extended periods -- when you will find it necessary to back away and just observe again to determine just what traders are thinking and how that thinking has changed and how those changes affect their trading behavior. Therefore forget about entries for a few days. Just observe, preferably in real time, though having done your prep, of course, with regard to trend and support and resistance. Maintain a log of what you saw and thought and noticed and were puzzled by (use a digital voice recorder if necessary). Replay the session as soon as possible if not immediately and record what you notice the second time around. Replay it a second time if you need to. Forget about couldawouldashoulda. Focus on what traders are doing and when and where and why and how. If you find yourself caring about who's winning and who's losing and about the outcome, then back away again until you can view all this as you would a game between two teams who are completely unfamiliar to you and whom you couldn't care less about. At some point, if you value this activity as much as it deserves, you will find that the fear and tension and anxiety will have evaporated.
DB, absolutely OUTSTANDING contributions here (as usual). A couple of quick questions if I may. In the example you just posted, you mentioned that the mkt had been trading in a range for about 12 hours. Then, just before the open, the mkt broke out of that range to the upside and formed another range that lasted for about an hour. You said that was bullish, which makes sense to me. What confuses me is when you say that there was a short after the buyers were unable to take it above the midpoint of that (smaller) range. Doesn't that ignore the "context" that you got from the higher timeframe chart (the hourly)? I like the idea that one can trade successfully with nothing more than a single timeframe chart, but when you mentioned the congestion on the hourly and how breaking out of it to the upside indicated strength of the buyers, it seemed like you were saying that higher timeframe context is relevant. But if getting short based on something that happens on a 1m chart is valid, that seems to contradict that idea. Thanks so much for your contributions.
Context is just that. It is not a guarantee. The market environment is dynamic. Reports are issued, national and world events intrude, mistakes are made. Therefore, once NY opens, one must be "available" to unanticipated changes. The fact that price fell out of that higher TR was not a plus. If buyers were in control, price would have risen out of it instead. As it turned out, buyers were not helpless (neither short worked, at least by much), but they were only marginally stronger than sellers. All of this held above the previous TR, but one can't know that in real time. The trader could wait and see if price drops all the way to the prior support level (shown in the hourly chart), but taking advantage of buyers' temporary weakness is perfectly legitimate. The bigger problem is the trader who is so wedded to a particular bias that he can't get out when he sees that his bias is working against him. Believing that price is going to go up or down is very different from noting that price is going up or down and trading accordingly. If one is alert and refuses to allow his ego to interfere with his trading decisions, he can play all sorts of possibilities/probabilities without losing more than a couple of ticks, if that. Or he can wait for the highest probability trades and ignore all the rest. If he were to pursue the latter course, he wouldn't be placing any trades at all until price exits that higher TR at around "0700" (1000). All of which is why this can't be mechanical. But it's a lot more interesting and a lot more fun than following the Trading For Idiots software with changing colors and flashing lights.
I see what you're saying but it seems like if you're willing to allow an event on a 1m chart override what you saw on the 1 hr chart then why bother thinking about the 1 hr chart at all? I've never been able to decide if having a "bias" based on higher timeframe context is helpful or not that's why I'm asking.
If this is of interest to you, I suggest you look at the Trading in Foresight and Auction Market Theory threads at TL in the Wyckoff Forum. There are hundreds of posts and charts that address this subject. If you want to apply this to your own trading, open up a journal and explain in detail what you're doing with regard to strategy and tactics in service of your trading plan.
With regard to PMs, this is how I begin to prepare for the day when I'm daytrading. The most important thing to determine is the trend. This is why one bothers with daily and even weekly charts even though he's daytrading a 1m or 5m or whatever chart. If one has no idea what the general trend is, he begins his session blind. Waiting for the market to tell him what to do is one thing, but being thrust into the middle of a busy intersection with everybody taking off in multiple directions almost simultaneously is not the way to start the day. Especially if he's still in his pajamas. OTOH, spending hours at this is a clear case of making something complex out of something simple. I look at a daily chart just long enough to see it, maybe 5 seconds. I then switch to the hourly to determine where support and resistance had lain and where they might lie during the upcoming session. This takes maybe two or three minutes. If this seems like a ridiculously brief period of time, try opening up your chart, staring at it for a count of five, then covering it up, or switching to a tab of something else, then trying to recall what you saw. Was price lower at the right edge of your chart than it was at the left? Or higher? Were there any obvious levels where price just drifted sideways without going anywhere at all? If so, were any of them wide enough to act as trading ranges? Or were they all no more than traders marking time, waiting for something to happen? One can spend an extraordinary amount of time drawing lines and circles and boxes, or he can just do a quick and dirty pan-and-scan of his chart that will take at most five minutes. Here is an hourly chart for last week, up to and including Friday. Price clearly liked 85 as support on Monday and held there until after midnite, finding resistance there the following morning. None of which is likely to matter to tomorrow's trading, but you never know, so it gets filed away. We then form a hinge, which is unfilled but which nonetheless is created by higher lows and lower highs, value being found in the middle, again worth knowing since price falls out of this, rallies almost but not quite to what had been the premkt high (almost to this value level), then segues into a tight trading range. The bottom of this range becomes important Friday morning as price finds resistance there, offering a nice short. Again, none of this is directly applicable to tomorrow's trading, but it does provide a context and it does give some idea of the trading environment to expect. If price hits that trading range again, there may be another short opportunity. If price instead falls to the midpoint of the preceding rally (the dashed blue line), there may be an opportunity for a long. Or price may fall all the way to the swing low at 2900. Or it might not. But being aware of the environment and knowing one's place in it with all the lights on sure beats peering around in the dark with a penlite. And if traders find new and unexpected support and resistance levels intraday, at least one knows where the more important support and resistance levels (those seen by traders using larger bar intervals) lie and can place these new S&R levels into context before deciding whether or not they may be worth playing. Generally, then, I'd look to 2957 and 2935 for trading ops, but we have hours to go before the NY open, and who knows what the mkt will make available between now and then. But if it just marks time, this area is where I'd look first. Incidentally, on a previous subject, if simtrading more than one contract increases rather than decreases tension, skip it. Better to learn how to exit quickly and re-enter either in the same or the opposite direction than to confuse the process by trying to manage multiple contracts. The uber-goal here is to decrease tension and anxiety and get past the fear.