Discussion in 'Technical Analysis' started by nwbprop, Mar 23, 2004.

  1. I currently trade the ES mini and have a problem i am trying to solve that seems easy but is killing my PnL. I would like to hear other peoples opinions on the way I trade or ANYTHING else as I may be going about trading wrong(back to the drawing board)=(

    I am a trend trader. Essentially i look for a trend to be initiated using 5 min bars with lower lows and lower highs. For reversals i look for breaks of 5 min bars that lead to breaks of 15 min bars to confirm the reversal. The current problem i have is that reversals on the 5 min bars often fail too continue and often lead back into the original trend direction. This can be seen as a 5 min bar pullback but does not break the prior 15 min bar confirming the reversal. Instead it resumes the 15 minute trend and does not turn into a reversal.

    I know an easy way to get around this problem is to just use the 15 min bars high and low as reversal points instead of the 5 minute. I think though that the 5 min bars can offer a higher yield if traded correctly but it shows in my bank account that it churns more and gets me out of some nice slow moves(15 min trends) which happen much more frequently than the fast pace 5 min trends. If I cant figure this out successfully, I will use the 15 min bars for reversal points instead.

    What I currently use for a possible reversal is 3 bar monitoring. For example, I will use a short trend. What signals a reversal long will be a break of the high of the prior 5 min bars high and a close above it. This signals to me a possible reversal. I will call this bar 1. What I want to happen is to see the next 5 min bar close higher than the last 5 min bar(bar 1). Essentially a confirmation of the reversal. If this was the case, then i would hold until it broke below the prior 15 min bars low or 1 tick below where i got in; whichever first.

    There are many many combinations. With 3 bar monitoring, I have 3 options of my own. I can hold, sideline, or reverse. What I am doing now is not currently working for me.

    A.I hold if i get bar 2 confirming my reversal and will exit if it breaks through my price after that. This in my opinion has a high probablility of being a reversal.

    B.I hold if bar 2 is a inside bar(inside bar 1) or a bar that does not break below the price i entered. If this happens, i look for bar 3 to confirm my reversal. If that doesn't happen, I sideline.

    C.I sideline if it breaks one tick below I entered. This means that the resistance that it broke through should act as support and it didn't because it broke through that level.

    Right now B is holding me back cause it seems that half the time it continues as a reversal and half the time it continues the 15 minute trend. I don't want to be sidelined but I also do not want too take a loss for guessing on the way it will go.

    This is probably not in enough context and I left out some combinations as it is still brainstorming and a work in progress. If you guys have other suggestions on reversals in ES, I am all ears. The examples above is usually in the context AFTER I get 2 15 min bars confirming the trend meaning 2 bars with a higher high and higher low. If anything in my post was confusing, please ask. Any replies would be appreciated. I have given this my all and more for the past year and will call it quits soon. Another one might bite the dust BUT it sure was a lot of fun and challenging.



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  3. Simple answer.. trend trading the ES intraday is a losers game. You are basing an entire method on an instrument that is one of the most choppiest trading vehicles in the world. If you want to trend trade intraday go with currencies or bonds..

  4. dbphoenix


    You're making this much more complicated than it needs to be. To begin with, are you using trendlines at all?
  5. Im sorry if it sounds so confusing. I look for initial momentum and then enter on the pullback. The pullback then creates a pt 3 and i look for continuation of the trend. What happens is if get a reversal signal before the price reaches the other side of the trend channel line. Its at this point that i am not sure that it is creating a reversal trend or just widening the trend channel for a slower pace and resuming.

    Its at the point where the trend fails to make it to the far side of the TL and breaks above and closes above the pior bars high(for short trend) that confirms a possible reversal. Its at this point where I am talking about the 3 bar monitoring and combinations.

    Sorry for the confusion.

  6. Going through it now. Thanks for the Link.
  7. dbphoenix


    Well, I don't know what you mean by "point 3", and I'm not clear on what a channel has to do with it, but, as I said, you seem to be making this much more complicated than it needs to be.

    The trend is simply the direction of price. But what you do with it depends on the bar interval, how much risk you're willing to assume, how you take profits (if any), etc. A channel isn't really pertinent, though perhaps you can provide an example that would persuade me otherwise.

    It sounds like you are using trendlines, but you may not be using them properly. Can you provide chart examples?
  8. The ES and the other major indexes are a big fat game, played by folks with so much money, they have to use the markets cause the poker table is too small.

    Plot your trendlines, your CCI, your pivots, but be warned that the moves are made to rip you a new one, not to provide an early retirement. It can be beaten, but know your enemy.
  9. colina


    But Keep it simple! Keep it simple! Keep it simple!

    Opportunity knocks, scenario 1)
    Day trading perspective. Mark off intra hod/lod using horizontal lines after the first hour or so in the morning day trading session. Look to see if the same resistance/support levels are approached in the later half of the trading day. Monitor volume closely. If volume isn't there, chances are, it ain't gonna break thru.

    What amount of volume is needed varies, circumstance to circumstance. But if you monitor such events over and over again (1m/5m) you may be surprised how an intuitive sense will develop. When a push shows up you will know it. When it just fizzles, you will know it. If so, an opportunity exists to enter a trade counter to the trend early on. Other TA perspectives' may see this as double( or sucessive diffusive) tops/bottoms, etc etc etc

    Opportunity knocks, Scenario 2)
    Pay close attention to "very distinctive" inside bars (5m), if accompanied by low volume so much the better. Not an everday occurance but when they do show up... The trend may be coming to an abrupt end. Or at the very least an abrupt stall. A scalping opportunity prevals. If it marks the end of the trend and reverses, so much the better. However, if the trend just stalls into some kind of side ways consolidation you can close your scalp. If it stalls then resumes, you can always reverse your scalp........

    Opportunity knocks, Scenario 3)
    Pay attention to rate of acceleration of the trend. If the trend accelerates, and the slope continues to increase, and the volume peaks a the very apex, as if it is a parabolic projectory, watch out. You may be in for a sharp reversal In those rarest of instances you may even be 'BUSTED' and what appears on you chart does not count - lol.

    Some advise(learned the hard way):

    A) Learn to monitor the health of a trend. Don't want a reversal before a trend has expired. Envelope the trend in a parallel set of lines or channel. Monitor the channels' volume. It helps to distinguish between trend volume and retrace volume. Volume increasing, trend continues, volume diminishes trend expires. This is nothing new and has been studied by Rollo Tape, Arms, Granville, Shaleen and many others. But something so simple may be elusive, so be careful. Where the price bars' close with respect to the bars' opening may be a consideration of how much buying/selling has transpired. What resolution you use(1m,3m,5m etc) may give you different interpretations. Quantifying an exact amount of volume per effect on price also varies depending on trading environment. All this is just a long winded way of saying do the monitoring in broad strokes only, keep it simple. It can get get overly complicated very fast.

    B) Experience thru repetition is what has helped me. If you see your indicators or setups appear a dozen times, learn it by studying the same setup in a hundred unique trading instances. If you have reviewed your setups in a hundred different instances, study them in a thousand unique trading instances. Over and over and over. Again, again, and again. Ad nauseum.........

    C) Don't try and pick top and bottoms. If you learn to scalp and it blossoms so much the better. If not, so what! You are in just for a point and you are nimble to get out early on if you feel uncomfortable with the follow thru. The motivation is not to pick tops or bottoms. Anything unforseen may happen within the next trading bars.

    Perfectionism is a weakness in traders....
  10. Hi nwbprop,

    How come your not posting any charts to show exactly what your talking about ???

    Charts of when it didn't work and when it did work.

    #10     Mar 24, 2004