Recently I have been focusing too much on S/R and not enough on the LOLR. While it is S/R that gives a Reversal trade a high probability of success, I have been misusing this concept in the following ways: 1) Regardless of what has happened in the past, anticipated S/R is always tentative unless confirmed by the PA. I have been a little mechanical in not observing and waiting for this confirmation. 2) In addition to price stalling at S/R, there needs to be some kind of pressure change in the Reverse direction. Then, once price comes back to test S/R, I have a chance to place a stop close to the danger level. I have been using S/R more as a range, resulting in very high information risk Reversal entries. This is what caused the early entries and resulting whipsaw today. The exception to this would be when the broader context presents a compelling case for taking a high information risk Rev trade. But this should be the exception. Solution: The 5s is a great bar interval to use during the open, especially when price opens close to an important S/R zone. The speed and range of the action during the open warrants the 5s. However, relying too much on the 5s during slower periods has resulted in early, high information risk entries (as described earlier). The solution would be to change focus from the 5s to the 1 min once the opening thrust has been established and overall pace slows. Thereafter, basics like the crossing of DS line would be used as the information needed to validate tentative S/R into confirmed S/R. Once S/R has been confirmed and LOLR established, I can once again zoom in and use the 5s for more precise and lower price risk entries. The 5s also serves as a good trade management tool in the event of adverse action upon entry.
Though I'd qualify it as a "possible" or "potential" solution, I agree for the most part with where you're going. However, consider using the 5s only to find an exact entry once the overall "setup" is determined. For example, if you're finding resistance somewhere, wait until price actually finds that resistance before looking to the 5s for entry. Otherwise, you're more likely to be whipped.
I have illustrated a scenario based on today's action. Am I looking at this right? http://www.sierrachart.com/image.php?l=1378922998807.png
Unclear on the difference between me finding resistance somewhere and price 'finding' the same resistance.
The difference between you visually seeing a resistance area on a chart, and price itself proving that the resistance is valid through PA. A lower high or double top. I believe this is what DB was referring to, but I'm sure he can correct if I'm wrong.
Well, I wouldn't say "right". If you're capable of trading this interval, go for it. If not, I'd suggest waiting for your signal off the 1m, in this case the 0945 bar, then switching to the 5s for an entry. In this case, you might have been more likely to take one of those "potential" shorts after the failure to make a new high. Understand I'm not talking about either/or. Have both charts running side by side. Having the 1m there might help you avoid jumping into something that isn't "ready".
Correct. A variation on trading what you see, not what you think. The market couldn't care less what you think, so make sure that you and the market are in synch before putting yourself out there. For example, look at how long price held at 72 before falling. I want price to show me something before I make a commitment.
So in this case did the length of time that price was hanging at 72 increase of decrease the strength of R? The Ant R at 72 was based on the SH rejection from PM. It wasn't a high VAP zone. So, in this case I would have needed more confirmation of it being genuine R. Thus, by waiting for more confirmation, I would have avoided going short on the first ret after the DS line was crossed. I would have waited for the retest that resulted in the HH breach.
The inability of price to get through 72 is the confirmation, or at least its inability to get through and stay there. As for high VAP, you aren't going to find that at extremes. VAP is highest at the midpoint of a range. Waiting for further confirmation, of course, puts you back in the price risk v information risk muddle.