price action in "action"

Discussion in 'Journals' started by asap, Aug 18, 2008.

  1. asap


    the main purpose of this journal is to monitor short term (intraday) trades based on support and resistance levels. i have been trying to develop a code that would emulate the concepts of price action theory effectively. my findings indicate that as of today, the contract future that has been more adequate to this type of trading is the nq. so, for starters, I 'll be posting intraday charts of this contract with entries based on my code. the code itself has been developed to follow just the reversals and not the breakouts. the reason behind this is that the rate of fake breakouts is so high that is nearly impossible to profit from them on the long run, at least from my historical analysis. on the contrary, the reversals are the vast majority of the price action in the nq, which opens the door for profiting from it.

    a very important aspect of this code is that it scales in but doesnt scales out. scaling in is important as the support and resistance lines are not set in stone and thus it is sometimes important to average the entries to avoid missing the whole trade. the other side of the coin is that, sometimes, the system enters a trade against the trend and scales in it, hence amplifying the DD. i have to be clear about this. this is done in a controlled way and it is being implemented in this way after carefully measuring all implications in the long term viability of the system.

    you'll notice that not always the system reverses on a s&r line. that's because those lines are constantly being evaluated as the price action evolves. confirmation of a line might only be perceptible several bars after the actual reversal has taken place. thus, the code tries to identify the lines in real time, while the lines itself, in some cases, will only be evident after the trade has taken place. this results in a potential mismatch between the code execution instructions and the lines. in other words, the lines represent the perfect entries, while the code shows the best approximation algorithmic projection.

    this a sample chart i intend to post in the journal along with commentary and analysis of as the day unfolds.

    i welcome everybody interested to participate.

    good trading

  2. asap


    here's the price action in the nq during the gmt morning session.

    the system went short around 11am gmt selling the early morning resistance level and then later in the morning, shorted the friday's res level, which also resulted in a new resistance line for the day (1976.00).

    lets see now how the active trading hours unfold.

  3. asap


    quick update to show a minor reversal right after breaking friday's support of 1952.50. i am also posting the equity curve of the last few days. now, this is price action in action :D, courtesy of asap.

  4. I could be wrong, but to me that looks like a mean reversion/double-down strategy. How much draw-down do you accept on those trades where you're carrying 3 or 4x your base size?
  5. asap


    i guess you could put it that way.

    dd max has been in the range for $5k for the nq.

    however, in my view, this is not doubling down strategy but rather scaling the entries to optimize the entry price (the strategy predefined size is 10, not 1).

    the goal here is to mimic the typical price action manual type of trading in a automated fashion. this means translating much of the subjectiveness of drawing line charts into a mathematical concept. the scaling-in takes place to average the typical entry produced by a pure "price action" manual trader.

  6. wave


    asap, keep it coming. You've got my attention.
  7. asap


    not much to say. the nq has been showing this behavior for the last few months. hence, the system reached another peak in equity today, based on the trades displayed.


    i am now using a similar approach to trade ndx options, basing the entries on the nq hourly chart. i am looking at an initial long gamma debit positions which will be later be adjusted into a net credit short gamma position, if the price moves in the right direction.


    :eek: :D
  8. jfw215


    This is awesome. I've been thinking of coding a similar trading system in TS. I'm curious though, why do you find NQ better than ES?