Looks like a successful test/hold of long-term mean to me. Bears don't want to see a break above today's highs
There's no point in creating a rule that hasn't manifested itself through your testing. The testing comes first.
As Db would say.... "I wandered off into the weeds!". (yet again!) How good of you to point this out ND. Jesus, making mistakes is such a good thing. I had fallen into the trap myself that Blotto described. I thought I could see these swing points in the 1 minute chart that would be in the 5 minute, but somehow, it just doesn't look the same as when you only use the 5 minute for the trend lines. It hit me just now so I updated my journal after hours of self inflicted torture! (the torture also comes from being aware well in advance Db's clairvoyant market "call", yet inability to get into that short for the 40 point drop) So a big thanks to Blotto as well who ironically helped solidify the importance of that 5 minute chart.
While the "clairvoyant" remark is flattering, there is nothing clairvoyant about it; it's simply a matter of characterizing whatever market one is trading. This is simple and even easy if that market respects a trend channel and is mean-reverting. The NQ does both, which is why I like to trade it. As for 5m bars, these can be useful if the model one is trading is based on them (through research and testing), but there's nothing inherently superior about 5m bars over 1m bars or 3m bars or 7m or 12 or 28 or 1 tick. Price movement is continuous; therefore, whatever bar one uses to represent it is irrelevant. And since price is continuous, there is no such thing as "noise". Every tick provides information. There is less urgency in using a longer bar interval. But there are tradeoffs. For one, the trader is nearly always late. For another, he must use a wider stop. For yet another, he must wait longer to find out whether or not he is right, analogous to waiting for the Pony Express rider rather than using the telegraph wire. It's not about lines and bars and whatever: it's about the continuous movement of price and how that reveals the imbalances between supply and demand.
Of course I can't argue with anything you say, but what I found for myself was that by using this 5 minute chart, it prevents me from getting into a move that is counter to the trend. If I drop the lines, and I do understand this rationale, then I have to do more thinking in real time. This is my ultimate goal, to be fluid and so called "one" with the market, but right now, it seems like I need a firm set of rules so that I can reach some sort of positive expectancy. It seems to be like a filter for not taking every SLA trade, more like the 2nd or 3rd retracement after the trend is well under way as you say. This of course does get me into the move later, but it prevents me from trying to trade counter trend if I just focused on the 1 minute, especially the way I was drawing my lines. I do of course realize that if I just followed the rules of SLA, took the counter trend trade, got stopped out, and after 2 failed trades waited for price to go to a different level, I would still be positive over the course of a week, but I was terrible at following these rules and didn't have the capacity for 3 or 4 failed trades in a row. Looking over my trading charts I do of course see that I wasn't even trading via SLA rules but rather just "testing" random entries, so I was doing it all wrong. I'm trying to get back on the horse right now so I can learn to take advantage of AMT and looking at the big picture, but for me I'm still at the stage of having the confidence to put on the trade, have a clear idea of where my stop is, not feel anything if stopped out, be able to put on the next trade, and end positive for at least a few days in a row.
The confidence comes from doing the testing, as Donna did and continues to do, and building up your own statistical foundation. Your ultimate goal may be to be "fluid", and you may be able to get there by developing a "firm set of rules so that [you] can reach some sort of positive expectancy." But it's not going to happen by copying somebody else's rules. You have to do the research and the testing yourself. Only then will you be able to begin to conquer your fears. If you don't go through this process yourself, then five years from now you are likely to be no farther ahead than you are right now.
Couldn't agree more and this is what I'm working on. As Donna has said many times, all she had to do was listen to her mentors because there was no need to re-invent the wheel. So I too am just using what you and her both teach and trying to make it work for me. (If it takes 5 years, I'm sure I won't have an account anymore so I needn't worry about it taking that long! ) You once again hit the nail on the head when you said a few weeks back that unfortunately amateurs tend to start by always putting on trades using random entries and such. You of course said it better, and I hope I captured the essence of what you were saying, but it is nevertheless interesting how this is always the way and I am clearly no different.
"All she had to do was listen to her mentors" is something of an over-simplification. They may have given her suggestions and guidance, but they didn't do the research or the testing or the statistical analyses for her. If she had done nothing more than follow others' suggestions, she might very well have gone broke long before now.
I like that you're pointing all of this out Db. In a way I just assumed that SLA would be strictly mechanical, but then when you do have to figure out for yourself how you draw your own trendline (this is where I was clearly failing in real time), and what for you constitutes a line break, and where you will in fact exit, then this certainly means having to make SLA your own. May I ask you, when you trade, do you have a very firm set of rules you follow? I understand that you track the balance between supply and demand, and when I talk about fluidity, it was the way that you trade that I had in mind. Would you have an exit simply because price drops by a point below a level you outlined or below the low of a previous bar? Its taken me a long time to rationalize the difference between having a trading plan that is backtested (and a solid plan would include having firm levels marked, and trend lines drawn I would think, and firm stops in place), but at the same time tracking the difference between supply and demand which is more fluid, more based on the higher time frame as you also encourage, more about watching behavior. My impression is that you can only get to your level, since I assume you don't have rules set in stone, you must first have a solid, tested to the tick plan, and follow this religiously before you can take a step back and not track every point and not enter each trade precisely to the tick as well.