Day 15 of 20 Prep: Price has fallen 150 plus points since the 19th. Now well below trend channel. Likely that old channel is not valid anymore as a reference point for mean reversion. This is new territory so no obvious S zone nearby. Bias is on the short side, although I expect the downtrend to lose momentum as buyers come in to buy at these levels and this may cause a bounce back to swing highs or even the MP at 2918. The upswing at PM has retraced 50% plus. S: 2842 (from PM) R: 2856 (from PM) R: 2861 (from Overnight) R: 2875 (LSH from 21st) R: 2898 (Swing high from 21st) R: 2918 (MP of downswing from the 19th onwards) http://www.sierrachart.com/image.php?l=137211848467.png The opening showed immediate weakness. Normally price surges and shows a lot of back on forth action within the first min itself. But today, the small upward thrust was brought down quick. I started thinking short but before I could do anything price fell. This was a missed opportunity but not a big mistake considering that there is normally much more hesitation and back and forth during the open. Got a good RET opp and entered the short. Being inexperienced with trading the first few minutes of the open, I was expecting volatility and got out as price seemed to find temporary support. This was an expensive error. Given my bias from prep and the action's confirmation of that bias, I should have stayed in the trade with confidence. Now that two short opps had been missed I became aware of the tendency to want to join the trend late. I reminded myself not to get inside any small retracement thrust and to wait for the larger retracement swing. Drew a MP line and saw price hit it and reverse. My short bias prompted an aggressive Reversal without waiting for much of a ret. Got out of 1 lot on the break of DS line. Then got out of the remaining two at the first hint of Support as selling was being brought back. But this was not a predetermined S level and I did not need to be this jumpy. This was a good opportunity to apply orderly scale outs based on rules. Once price Reversed from the downswing, I was tempted to get into longs on RET's. But the pace had slowed and range was small. Traditionally, this is when I get sucked into trades, then get impatient with the slow pace and nervous about going against the larger trend. So I reminded myself of this and somehow avoided taking longs. At 0921 price fell sharp below the DS line and off the MP. The presence of R overhead via MP allowed me to take the short. Price moved back to entry and I got out on a cross of DS line as the pace was slow and the presence of the low beneath meant this was likely to be chop territory.
Support was found at the top of that trading range from March/April (the ES found support at the same trading range, though it dropped to the midpoint of it). Even if one doesn't spot these potential levels/areas of support ahead of time, he should keep a daily chart open somewhere so that he can see where price might find support as it falls, or resistance if it's rising.
With a few more days to go until the end of this first cycle of testing, I find myself thinking about where I was and where I am. I am categorizing the different elements that may make up context. Context here being the approximate probability of a given action at any given time. Regression to the mean: inherent quality in nature S/R: Base rate of probability for context Trend: reflexivity,cascade effects Pressure: tactical elements of pace,time,range Narrative: The tying together of these various elements to present a coherent story. The purpose of the narrative is to develop a consistent logic. This has to be balanced against falling into the trap of hindsight and outcome bias.
Day 16 of 20 Prep: Price in steady upswing in pre-market. The downswing from the 19th was stopped at 2819 and has been retracing since. Bottom re-tested during overnight with a lower high. Expecting price to be range bound today as there are important points of S/R on either side of price. S: 2860 (PM) S: 2834 (Overnight S S: 2819 (yesterday's low and S) R: 2873 (High from PM) R: 2875 (Swing high from 21st) R: 2898 (Swing high from 21st) R: 2909 (MP of down swing from the 19th) http://www.sierrachart.com/image.php?l=1372204738477.png The early exit on the profitable short trade was taken because I was in the red for the day and wanted to make it up. If I had been positive before the short or if the short was my first trade of the day, it is very likely that I would have stayed in it for a while. The existing P/L is driving trade management. At the time, I used the past S at 0838 as information to anticipate that price had found S again, and that the exit was justified. But this was just confirmation bias - grasping for any reason to justify the decision that had already been made. The memory of past V reversals is causing me to exit too soon. These reversals are memorable because they are dramatic. But they are also rare. Even if the trend stops at S/R, it is more likely to chop around rather than go straight back up. So I have time to make these decisions. This method is based on trading swings and not thrusts.
The NQ has worked its way back into its May trend channel, as did the ES on Monday. Therefore, the LOLR is up, at least for the moment.
Day 17 of 20 Prep: 40 point climb since last night. Most recent pre-market swing is up 7 points. S: 2872 ( From PM) S: 2847 (yesterday's and overnight low) S: 2835 R: 2898 (Swing high from 21st) R: 2909 (MP of down swing from 19th) http://www.sierrachart.com/image.php?l=137228950762.png
Day 18 of 20 Prep: During pre-market Price breaks TR. It is just above the swing high from the 21st. Bias is up, although it may find heavy R at MP level. Next R level to monitor is the MP of downswing at 2909. S:2899 S: 2896 (LSL from PM) S: 2890 (Top of overnight TR) S: 2883 (Bottom of TR) S: 2846 R: 2909 (MP of downswing from the 19th) http://www.sierrachart.com/image.php?l=1372376169532.png
Day 19 of 20 Prep: Sharp 20 point fall since pre-market. This, in combination with the larger down trend weighs my bias on the short side. The big S is some distance away at 2846. So if it breaks down, it could run till here. The selling waves in the premarket sell off have been getting smaller. So if price finds S at it's current level, there is a good likelihood of range behavior. S: 2886 (Important level that will show whether this sharp recent fall is a normal retracement of the upswing or if it is a continuation move of the larger downswing) R: 2899 (overnight S level) R: 2908 (Last swing high http://www.sierrachart.com/image.php?l=1372462102818.png
Day 20 of 20 Prep: Yesterday price fell from top of TR all the way to bottom. Price found support at close and has been retracing since overnight. Is just above last swing high. Bias is up based on the TR holding on the daily. S: 2721 (PM S) S: 2717 S: 2718.5 (MP of upswing since overnight S) S: 2709 (Overnight S) R: 2726 (PM R) R: 2730 (MP of yesterday's downswing) http://www.sierrachart.com/image.php?l=1372540524201.png
Results of latest test: Total Sessions: 20 Total Trades: 87 Trades Won: 25 Trades Lost: 54 Trades BE: 8 Total Contracts traded: 299 Total Contracts Won: 89 (28.7%) Total Contracts Lost: 190 (62.07%) Total Contracts BE: 20 (9.2%) Total Longs: 42 Total Shorts: 45 Avg Winner: 3.46 Avg Loser: -1.44 Expected point value per contract traded: 0.12 Strategy performance on a per contract basis: RET Total trades: 51 Per contract P&L: 0.55 REV with retracement Total trades: 22 Per contract P&L: -0.15 REV straight: Total trades: 14 Per contract P&L: -1.07 Cumulative P & L Distribution: End: 35 Peak to Valley: 77.75 to -10 Avg 33.38 Daily P & L distribution Max: 77.75 Min: -38.75 Avg: 1.75 St Dev: 24.27 Per contract P/L Distribution Max:8.25 Min: -5 Avg: 0.08 St Dev: 2.61