Try writing out the story of this chart: what I was looking at, what I was looking for, why I went short where I went short, why I went long where I went long, why I sat on my hands when I sat on my hands.
Started the session with a bias on the short side coming from prep work. 0830 Price rejected on the downside and traders explore upside. 0832 Buying pressure fails and now OH and OL have been established. Short bias remains in place. 0834 Look to get in on a Reversal, but no RET opportunity. It goes straight down. 0838 First Opp to get in to the short on a RET. I take it even though it is right above OL because of the larger short bias. 0843 Price at prior significant S level of 2877, so I am looking for signs of buying here. Price hesitates and I decide to get out of all 3 contracts since this is a major S level. 0846 Price retraces to form a swing high and my short bias has me looking for signs of a Reversal. 0847 Once the 0846 bar is brought down, I enter the short immediately after break of DL as Reversal entry. 0849 Trade is not working. I give it room till most recent high but get out once it crosses that point. Immediately afterward, I see the entry as being too early. But the short bias led me to take it as I thought the price risk would be low by getting in early for the downtrend. Till 0900 I keep watching price trend down, waiting to see how it reacts at the S level of 2877. Price goes below this level, but then Reverses to form a swing high at 0904. 0906 Price retraces. I enter and make a tactical mistake because the entry is too early and close to the retracement. The Swing high is lower than the last swing high, meaning the trend is still down. After 2 poor trades and a slowing down of pace, I don't enter on any further RET opps on the downside.
0834 The exploration on the upside is brought back down and the DS line is broken. A Reversal is setting up on the 1 min at the same time as a RET on the hourly. This warrants an aggressive short entry without the need to wait for a retracement, which never comes anyway. 0843 You do not enter into a straight Reversal off major S level of 2877. I don't know why. 0848 The upswing presents first major retracement opportunity and you enter a long in anticipation of a break beyond the 50% boundary. 0850 Price fails to break and you are quick to exit since a dip back down in combination with the larger downtrend warrants it instead of giving the trade room. 0851 SAR it for a very attractive short entry. One or two contracts are exited, but since price never crosses the 50% mark, you stay in the short trade with the remaining 3 contracts and no foreseeable exit on the remaining chart. That long you exited and the SAR entry: How did you balance getting out of the long quick versus giving the trade time to work?
The overall trend is down, the attempt to move up at the open failed, the preceding downwave was far longer than the upwave before, price failed quickly and dramatically to get past the midpoint of the preceding downwave. To stay in would be little more than hopeful. Your interpretation of my trading behavior is quite good. If you're not bored with the exercise, you may want to try it again without any reference to demand lines or supply lines or retracements or reversals. Just support, resistance, and trend. Or you may want to use an earlier chart. But this exercise may help you get back to the essentials, to a simpler approach. There is no "right" interpretation. There are millions of other traders looking at the same thing you are. If they all interpret what's in front of them the same way you do, price will never move. What matters more is an understanding of what they may have in mind and what they may try to do about it. Each trading session is a story. The professionals have not only read the prologue, they've memorized it, though they won't all look forward to the coming session in the same way. The amateurs won't even know what play they're in. When the bell rings, buyers will have one thing in mind, sellers will have another. If you view the activity as an ongoing and continuous drama, you may be able to better understand what the other players are trying to do and avoid getting too caught up in minute details. Try relating the chart I posted yesterday evening in terms of a story. No demand/supply lines, no RETs, no REVs, no BOs. As if you were explaining the dynamic to somebody -- preferably a child -- who knew absolutely nothing about charts and how they track buying and selling (though if it's a child, he won't likely have any trouble telling up from down). Those who have tried this in the past have benefited from it, and you might too.
Price goes up a little after the open and then goes down to where it had been a half hour ago. Once it reaches this place, the people who had bought at this price a half hour ago once again buy more. Due to their interest price starts rising. It climbs past the opening high. Shortly afterwards, the people who had bought start selling to take some profit. But when they sell other people join to buy the thing that keeps going up. After 7-8 mins of this dealing, there are more people who want to buy so price once again goes up. Again, people start selling and price drops a little. But it stays above the last zone of activity, where a lot of people were either getting off or getting on. More buyers join and price rises again. But this time, as price rises after the initial selling, it cannot rise any more. Nobody wants to buy anymore and people start selling. Some people keep holding hoping that someone else will come and buy to make the price go up again. But when they see nothing is happening, they too start selling, making the price drop fast. This selling is stopped as people come in to buy at lower prices. The short sellers are also taking profits. Price rises because of their actions but it never manages to cross half the distance that it fell. Seeing this, the people who bought at the lower level get nervous and they start selling. Price drops again. This cycle repeats itself another time and price drops even more, crossing the level from which it had initially risen all the way to the top.
This is excellent. If you benefited from the exercise, feel free to do another. Remember, though, to include the "backstory". If you've ever followed a series, you know who the characters are and their relationships to each other, the plot progression, and so on. But if you find yourself watching an episode without ever having seen another or read anything about it, you won't know who is who or what anybody wants or anything about the story. On the other hand, if you're familiar with the backstory, you'll be more likely to be able to lay odds on what's going to happen and who's going to do what to whom and win your bet.
Day 13 of 20 Price rose sharp at pre-market and has now made a normal RET. Bias is for buying pressure. If it breaks R of 2751, it could make for upward boundary of 1 month old TR. Currently it is at top of a TR made during the last few days between 48 and 25. S: 2743 (LSL from PM) S:2739 S: 2731 (Overnight S) S: 2725 R: 2751 R: 2757 http://www.sierrachart.com/image.php?l=1371958691299.png
Day 14 of 20 Prep: Price climbed from middle to top of TR on the 1st and has dropped sharply back into range during pre-market. Anticipating price to bounce between 35 and 53/62. Otherwise an RET is forming on the hourly. See if the 1 min confirms taking a short position in this RET. S: 2737 (from PM) S: 2730 (MP of TR) S: 2725 (from 31st) R: 2744 (LSH from PM) R: 2753 (from overnight) R: 2762 (from 1st) R: 2765 (Swing high from Oct) http://www.sierrachart.com/image.php?l=1372012555223.png Waited for the OH and OL to be established. Saw price hitting R at 2745.50 and decided to take the Reversal without waiting for a RET. Did not feel good about the trade soon after taking it because the action had been quite volatile and I did not feel comfortable with the risk. So got out. Observed a lot of indecision with erratic swings up and down. Hinge formed. Break on the upside got rejected. Then it broke on the downside and this too got pushed back into the hinge. Then it broke up again and this time I took the RET early because there had been pressure building up and it was bound to get released. As price reached 2751, I started looking for signs of weakness as it was my predetermined R level. Saw hesitation and decided to get out of all 3 contracts at once. There was an opportunity to get into a short on a RET but since there had been a lot of activity since the open, I did not want to short right above this zone. Price did fall through this zone but stopped to form a higher low. Then it formed a lower high and this was the signal to stop trading until the hinge was resolved. Price showed weakness and explored the bottom of the range. I opted to take a short in anticipation of a definite breakout. Price moved adversely. I stepped back and drew a supply line connecting the high of the day with the swing highs. This kept me in the trade and I was able to exit with a smaller loss than if I had just capitulated immediately. Price kept on bouncing within a small 3 to 4 point range. Then it once again explored the downside and I once again decided to anticipate the breakout. When the trade did not work immediately I got out because the behavior of price since the open indicated a higher chance of going back into range than this being a normal retracement.
Better. Your first trade, though, was not off a REV but off a LH after a HL. However, you quickly saw -- even though you may not have been consciously aware of it -- that you were trading inside a range and got out of it. As for shorting off the high, I probably would have taken it. However, you saw the muck waiting below and elected to let it go, which is fine. You thought about it and had sound reasons for your choice rather than just panic and exit. Looking back, you can see that the morning was essentially trendless, and the decisions you made were based on that perception. A lot less wasted movement and wasted money.