The criteria to enter the trade when I did was based on the strong uptrend indicated by the long candle stick bar (indicated below). After such a large sell off and a strong move represented by the charts, it indicated that there were buyers at the respective level waiting to buy, which is why I entered. The fact that it moved down sharply almost immediately indicated to me that there were buyers looking to get better pricing and not simply chase the market up (however the uptrend was going to come). The initial stop placement was at LOD because if it continued to break below this level than the market would have continued to trend downwards and I would have minimized my losses. It is evident that I chased the entry way too early, and also I shouldn't have moved my stop-loss from the LOD because I arbitrarily thought that the new support level was 4839.00. Had it remained at LOD I would have been in place to caught the strong reversal, which was expected predicated on the bar I highlighted. What are your thoughts on how I played it? I know you think it was a disaster based on my results, however had I kept my emotions (and stop-loss) in check it could have been a very profitable trade. How would / did you play it differently?
You will know how many buyers and sellers are there by watching Market Depth or Booktrader. I am not sure how many trades on the NQ are attributed to automated programs, but they are a lot less than the ES. If you watch Booktrader you will get a hang of when momentum is starting to build up, and after a while will get good at calling breakouts from consolidations, but trying it without charts is not that easy and requires a lot of experience. If you look at too many charts you will get distracted and start thinking about things that do not really matter. Remove all TA from your charts, even volume for now, and just use the Booktrader. You can also use Time & Sales to help with Bid/Ask trade identification (this where TWS falls down, as other platforms automatically color trades that go off at the Bid/Ask with different colors across the whole row). Think in terms of momentum, as you do not want to keep missing the boat. When momentum slows be wary, and if price retreats back into consolidation area be prepared to get out with profit if not already locked in with auto trail.The reason is simple, as you can easy re-enter if momentum build up again in the direction of your initial trade. Of course, if momentum has reversed, then you need to reverse also. Never marry a trade, as it is like marrying a woman, in that she will break you with bad habits. Never place a stop at LOD as you will get hammered a lot. When you see a spike on the 1 min candle with no follow thru, be wary. Always be aware of Time of Day, or TOD. Always watch the SPX (2 week x 30 min) for major levels during Regular Trading Hours, or RTH, If I was you I would start with 2D1M.RTH with no volume, or 2Day1Min.RegularTradingHours.
Can you see why your entry was a bad entry, and why you should not have put your stop at LOD and moved your stop?
Thank you for this! I will keep this in mind. I just recently subscribed for level 2 data, so I'm getting used to Book Trader / Market Depth at the moment. In terms of the momentum build up that you're referring to.. are you looking for a larger than normal amount of orders building up at a certain price level? So if there was a large number of orders (say 200 contracts - average amount is around 50 to 70 contracts) on the bid side at one particular price (4820 for example), then is the logic to assume there is support building up at that price level and momentum is building on the long side?
Yes, I think I see why it was a poor entry now. I went long close to the high end of the range, and there was a high probability that the market was going to sell off towards the bottom of the range (where my initial LOD stop was)? The 4845.40 line is the resistance line, while the 4834.78 line is the support line? I should have waited to go long at the bottom of the range or wait for the break-out above the resistance line.
I gave you some wrong advice in relation to major levels when trading the NQ. As the NQ is not the ES, then it is best to use the NQ hourly bar chart to identify the major levels. You can use the full trading session hours for the NQ, as they are important when the European Markets open. Same for ES if trading the ES outside of RTH. You first major levels, no matter what you trade, is the PDH and PDL for RTH. The reason why the SPX chart is used is for cleaner charts, especially for the longer term levels. But, you must be aware that Futures lead Cash, so the ES chart is always the most important for SP500. As you have seen recently, the NQ can diverge greatly with the ES, and this in itself offers some opportunity with pairs trading, but be very careful if you try this, as sudden news can drive the NQ way out of sync % wise with the ES, and you can lose a good bit if trading multiple contracts. Never trade with money you can not afford to lose and you will be fine. Keep the risk small until profitable every week/month for at least 6 months. Be aware that trading larger size is not the same, as the emotional effects of holding 4 contracts is far greater than 1 contract, and you are more prone to make mistakes. Contrary to what you will read and hear, it is not easy. The key is discipline. Without it you will fail, especially with the E-minis.
You should have went long above the line, as below it you are trying to catch a falling knife. Previous support becomes resistance, but once the resistance is tested a few times it can then break. These are the low risk trades. Sometimes it is better to wait. You can of course trade anytime, but there are a lot of variables to look at and it takes a lot of trading to get used to them. For starting out, you are much better to only trade major S&R line breaks and retests. This will mean waiting it out, but better wait than be sorry, which most are when they start to try and trade the E-minis. Sometimes it is best to forget everything you think you know, and just start by drawing the PDH and PDL lines. Above PDH you go long, and reverse short if price comes back below PDH (you have to give a little leeway of course to avoid whipsaw, which is why you need to get good at reading momentum on the Time & Sales. Below PDL you go short, again reversing long if price comes back up above the PDL. The sooner you start getting used to momentum the better, as you will see the difference when price approaches the PDH and PDL levels.