I'll be honest. I do not know what to make of the activity since the 35.50 to 43 run. I covered enough to make me happy on the way down, and there is no reason, as I see it, to do anything but to stick with my original plan which has me with a 1 point stop loss and a 12 point profit taking limit order on the remaining position. Total remaining risk is only $200 and I took far in excess of that already, so I'm going to let my bracket orders take care of the rest and as I leave for a late lunch with my wife. Here is the chart cleaned up so as to show my original plan per my plan red = short entry; black = stop loss; blue = profit target Scale outs are prior hinge midpoints and range midpoints (shown in previous charts).
Didn't even get out the door and the trade is obviously done. I'm finished for the day, but anyone following along, here we are, at the top of the range - this is when you should stop reading trading message boards and start really focusing your attention on what price is doing and what it does from here.
These are the moments from which a trading plan may be born - if price moves higher, what indications did it give that this was likely. If price again fails to move higher, what indications does it give that that was likely? Down the road, it is observing these moments that will allow you to know what will make you get short, what will make you get long, where to place your stop, where to scale out and take profits. I plan my entries around the extremes because it allows me to enter my whole position at once with a very small risk, and then to scale out in pieces while maintaining usually half the position as a core to hold to the other side of the range. I really have to go, my wife has been waiting for me for almost an hour now ops:
Questions for yourself: Did you identify a range this morning from which you would plan your to focus your observations? Did you then follow through and focus your attention on price activity at the extremes of the range? If you cannot be disciplined enough to do a simple exercise each morning such as finding the most immediately relevant range, and then discipline yourself enough to focus on price activity in at and around the extremes of that range, how can you ever trust yourself to come up with a consistently profitable trading plan, much less have the ability to follow it? For me, I had a primary range which was the 45 high from Friday and the 30.50 retrace low that followed Fridays BO above Friday's premkt high. I was using a secondary range within a range that was pretty much what DbPhoenix posted at TL - 43.75 - 34.25 (44-34). Using those levels, a trader who knows the difference between a breakout and a reversal and who was disciplined to just take trades at the extremes, scale out of some while holding some for the trip across the range should have had a pretty good day today.
If he could stay awake You may have noticed that I posted early that those who were going to participate should upload their charts with the ranges they were looking at by 0915 so that they could be discussed before the open, at which point I'd post my own if I had something substantially different. Even though we had twenty people, only four or five uploaded charts, which is fine as far as it goes, but, as I posted, watching somebody else doesn't mean much. The beginner has to engage the material. Otherwise it's more of the "there's a trade I would have taken" nonsense, which gets one nowhere. I hope to see many more charts posted tomorrow. And the next day. And the next. Learn from each other.
Imagine for a moment that you are a successful at home day trader. You trade a simple plan. Each Friday you check your market's daily chart and weekly chart to see where price is relative to its long term trend - while this does not give you a "bias," it does keep you from wondering why the market trended up 70 points (it was oversold) or why it is waffling around doing nothing (it is hanging at the mean). Each morning you check the overnight range, compare it to the prior day's range, and come up with what looks to you to be the likely immediate levels to watch for S/R, BO's/reversals. You know that if price trades to one of those levels and it holds, or it bends but doesn't break, you will enter as close to that level as possible for the ride to the other side of the range. You know this because you've planned for this. If the level breaks, you know you will look for a retracement to enter in the direction of the breakout. You know this because you've planned for this. You've been doing this long enough that you know you will likely enter needing no more than 2 point risk, though you carry a hard disaster 5 point stop beyond your entry "just in case." You also know that even if price does not traverse the range as you expect, you will likely have the opportunity to scale out with very close to an average 5 point profit on 1/2 of your position, so that even if you take that 1 or 2 point stop on the remaining half, you still did well. You also know that most days you will travel that range at least once, sometimes twice. Imagine all of that - You are a successful trader. You make more $$$ most days than you used to make in a week. You have even had a couple of months where you made more than you did during an entire year at your old day job. Imagine that. Imagine that and then ask yourself this: Would anyone truly successful have an unfulfilled ego need that could only be satisfied by being an internet troll? Of course not. Which is what we all need to remind ourselves of when faced with the ugliness of those so beaten down by failure that the only rush they have access to capable of lifting their crippled spirit momentarily is to insult, criticize, and otherwise "call out" anonymous others who are guilty of nothing more than trying to help others achieve what at one time the trolls themselves also sought - success.
I can see why using the previous sessions high would make sense as part of a range, but what made you choose the retrace low that followed fridays breakout above fridays premarket high? Kind of arbitrary? It seems everyone is using different ranges whereas i'd have thought that all of DB's students would all be using the same ranges as part of a method. Is there no right or wrong as to how someone defines their range? What timeframe do you use when looking to define the range and the state of the market (trending vs ranging) What are you looking for tomorrow in terms of a range? regards
40D, I have to complement you on the simplicity, directness and common sense contained in your post. No doubt, this accounts for your friend's quick entry into profitable trading. Thanks, BMW
I have observed that following a breakout, the pullback point - the price at which sufficient demand materialized to prevent price from going lower - is typically the first line for support during the next pullback. Sometimes, perhaps most of the time, this pullback level is the prior high +/- a couple of ticks or so, or as it would have been in this case, Friday's Globex high. But sometimes demand is so strong after the breakout that the "typical" pullback is arrested, and price puts in a higher low above the BO. It happens too often to be random, and therefore, imo at least, its selection is hardly arbitrary. It is human nature: Many BOPB traders were no doubt waiting Friday afternoon with limit orders at or slightly above/below the BO level. Price never got back there to fill there orders. They do not want to be screwed out of another chance today at buying a cheaper long/cheaper cover (if short) again, so they now try to buy near the point where price left them in the dust during the prior session. Had that level failed, I'd have dropped my gaze to Friday's 25.25 Premkt high, then 4412.50, then 4396. I do not know what "everyone" else is using as a range. As I said, my primary range, based on the the prior session and the Globex session, gave me an initial range consisting of Friday's high and the afternoon pullback low, and a secondary range within that range based on the activity since Friday's NY session close that was basically tick to tick what DbPhoenix stated to be the range (he rounded 1/4 points and I didn't - $5 one way or the other makes no difference, imo). I assume price will stay in the range I identified until it doesn't. I use the weekly and daily bar intervals to identify the longer term trends (a timeframe of years), and a 60 minute bar interval to help me locate, when necessary a shorter term counter trend range (we saw a few of those during January - usually lasting a few days or even a week or so). Once price breaks out of the range, I assume it will continue trending, that it is unlikely to return to that range again during that session, and I look left to see where it might run into S/R as it runs right, i.e. I look for past swing highs/lows, recent session highs/lows. I have observed that price rarely fails in the middle of nowhere - there is almost always a prior breakout, pullback, swing high, swing low in the area of the reversal. I can't say always, but I can say almost always. The more I study turning points, the better I get at find potential limits to these trading areas. At the moment, I would be looking at today's high and today's low - but that may very well change before the open. If overnight price trades beyond one or both of those levels, the overnight H&L will become my primary range. If price makes a new high overnight without ever challenging today's low - then my primary range will be today's low and whatever tonight's overnight high is. Then, as we near the the open of the NY session, price usually tightens up. This gives me my secondary range (it is this range that DbPhoenix seems most to focus on as the open approaches, and our levels are nearly always identical). Very often, not always, but often, price approaches equilibrium, forming what we have been referring to as a hinge, and it is not unusual for that hinge to be either at/near the top, at near the bottom, or at near dead center of the primary range. Where it is and what it is doing is the basis for my opening gambit. The open is the only time I will straight trade a breakout from the range - any other time of the day I will let price breakout and retrace and then enter in the direction of the breakout.