switching gears to Price Action via SLA

Those who are moving past old fears are doing just that. But it's up to the individual to know when to take that step. And there's always the option of stepping back into the SLA when necessary. Eventually the lines will be set aside permanently.

 

So today was an interesting kind of day. I still have a hell of a time holding when price is going my way. Yes - you read that right. When it's going against me, I try like hell to 'stay the course' but when it's going for me, I can't imagine it continuing to do so. I have rules - exit only when SL/DL are broken and the LSH/LSL are compromised. However, with parabolic-like moves, I get antsy wondering when it's going to end or if I've missed something and it's just pausing and will continue. I still need to work on "seeing" price - no doubt about it.

With this morning though, I could kick myself with not noticing (blue diamond area) that there was a LH and then a resumption in the up direction. There hadn't really been a LSH - just some sideways movement - so I picked an arbitrary level to exit. I should have known at the blue diamond area that price had changed course.

I got in on the long but the big pullback (red diamond) caused me to exit. I got in again and with a tighter DL, it was broken and a short could have been triggered so I got out again.

Then the wheels started to fall off. I haven't marked all the trades, but let's just say that I went into "scalping mode." The market started swinging more and my nerves couldn't handle it. My rules went out the window. After 2 or 3 times of this I knew that my head wasn't right so I had to close out my sim platform. It was about to get ugly.

 

I appreciate you stopping by, RN. As always, there are nuggets of info that I can put to use. Thank you.

 

So it seems as if I've been somewhat schooled in that I'm not using the SLA entirely correctly. In discussing the BO of this morning's hinge, I mentioned how it's so much easier to hold during a pullback when your entry price is higher/lower (depending on the trend).

I was asked to give an example and I did. Niko and DM were surprised at my late entry. I showed them my chart and Niko exclaimed - you're not trailing, gears. Well hell. (pic attached for what my entry was - red dot - vs what the others would have used - purple dot)

If the trend is going to continue in the direction that you think it is (in this case, short), of course a higher entry would be beneficial. Here's where gears' head is - I could get sucked into a trade that isn't going anywhere. What if the 'trigger' bar is just a RET in the opposite direction. Yes I'm pretty warped. I haven't necessarily taken as well to the idea of scratching, but I think it's a necessity that I do so.

So Niko has challenged me to an experiment for two weeks - trade according to the strict SLA. I knew I had made some tweaks, but the entry part is key (trailing) and I have NOT been doing that.

New Rules (for gears):

1. At break of DL/SL, look for a RET in the opposite direction. If found, place buy/sell stop one point from the high/low of the RET bar. If subsequent RET bars occur, move said buy/sell stop to the new price unless HH or LL occurs (of previous direction).
2. Trade is scratched if market goes one point against the entry price.
3. Suggestion from db - give price just a few minutes to do that you expect it to before scratching.

---Not sure how to handle breaks of DL/SL (from Niko's perspective) but modifying my entry mode should change things quite substantially.

Comments?

 

This replay session (1/16/14) wasn't the greatest I've had. Getting used to new rules takes some adjusting. Also, the prior few days were big movement days, so this morning anyway, there wasn't a ton going on. There were likely some good REV opportunities, but I'm not there yet. Still looking for just RETs, watching the right tick and using SL/DLs to help me keep an eye on the buying and selling pressures.

The range overnight was pretty tight - just 10 points. The hour prior to the NY open had been trending up. After the open, it continued to do so, but couldn't get past (with staying power) the overnight high. Parabolic move though so I knew it wouldn't last long and exited.

Used the new approach of 'trailing' for a better entry on the down move. The swings were pretty big though and I used the 1 point rule for a scratch. Price had gone lower, but it fiercely moved back up.

For the next hour, price stayed predominantly in the same range as the overnight. It finally broke through for real around 1020. But then price couldn't get past 3607. I used the trailing bit again and got a decent entry down. I wasn't positive about my SL though - so I kept adjusting. Because of that, I wanted to give price some room. I was a decent clip from my entry, so I felt a little more comfortable doing so. After the final fanning of the SL, price couldn't make a LL, retraced some, broke the SL and the right tick was indicating long so I exited.

Took another long at the first RET figuring there was a chance it would go back up to 07. Not a huge range, but I'm just practicing. Triggered and definitely moved up, but it couldn't stay there. DL fanned and broken so I exited.

I'll keep plugging away.

 

Gear

I think you’re muddle minded (900 thoughts roaming around in your head.., when a very few will suffice)

How about seeing if we can gain a little clarity


And I’m referencing this chart

==============

Aim;
To enter short – on a down move PB…, anticipating the down move will resume

We’ll be entering (going against) the current move (the PB – which is moving up)

We’ll be entering at the hardest point – shorting when it appears price is heading up… and up w/ perceived conviction (where we otoh are looking for the hesitation/ reluctance to continue)

We never know if the PB will conclude - or evolve into a retrace.., or even into a reversal

Our stop is placed just on the other side of the down TL (the upmost dashed line on your chart)

So.., our goal for this trade – is to enter **as close to..., that upper dashed line – as possible** – so our risk is as little as possible

** As close to as possible** = will always be determined by price – first…, and our ability to read/ gauge it – second

Price will always do what it does…, and seldom are we perfect – We simply do the best we can – with what we’re dealt

===========

Above is the easy part


Now.., the hard part;

Reading price and trying to figure out just how close price is going to come to that upper dashed TL

Maybe it’ll get close it / or even to it

Maybe it won’t (which equates to sever weakness)

Maybe it’ll breach it

We simply don’t (never) know

Accordingly.., we must read the PA then make a judgment call – based on its behavior / by using our skill

Once we deem it time;

We enter

Then

Price either resumes the down move – which we hold

Or

Price breaches the TL (upmost dashed TL) – at which time we exit for a loss

Or

Price forms a range – at which time we must reassess and make the call to hold or exit

==============

And that’s it… that is entering/ trading PB’s in a nutshell

Please…, don’t make it any more complicated

identify the move

identify the PB from that move

identify how far price is pulling back by gauging price behavior ( btw past the TL formed by the move is too far and time to reassess )

enter as close to the TL as price / your skill allows

mange the trade

price will either resume the move..., evolve into a retrace/ reversal..., or evolve into a range

==============

When trading an up move PB;

We look for the opposite – and enter long AS price is moving down

It'll be hardest point possible (psychologically speaking)..., and it'll be at some point during the PB as/ when price is closest to the Up move TL – as is possible (must always keep our risk low)


==============

Other notes;

Fanning

Necessary when price evolves from a PB to a retrace – which – is likely a PB on a higher TF

Even a reversal (or what’s perceived as a reversal) on a smaller TF – many times – simply turns out to be a PB on a higher TF

This is one.., of the many reasons – using multiple TFs is important

It paramount that we are diligent in maintaining our bearing (price’s location) in relation to the overall landscape


My I respectfully suggest you work on simplifying trading PBs – first – then work on the skill of reading/ gauging PB’s strength (in all their variations)


Initially.., and even for a time – you may miss some trades – big wooo

Work on perfecting the skill of identifying PBs as they form

By using the PA just before - during - and as they’re concluding / price resuming its original move

Also learn to identify the behavior when a PB – evolves into a retrace – and/or even into a reversal



These be my comments Sir

RN

 

As always, RN, I appreciate you stopping by and commenting on my journal. I have to admit though that I don't understand all of what you've said.

So you're saying that if possible, the ultimate entry point would have been higher than both the red and purple dots? In this instance the high of the bar with the SL drawn from it would have been the highest place that price went but your goal would have been just south of the downward sloping dotted line? I attached the pic again with an area circled.

This is definitely above my pay grade at this point. I think I understand how your mind sees price and what the outcomes might be. I'm just not there yet.

Could you further elaborate on what you mean about the area in red?

Simple is usually the best bet and certainly is so for me. I've only really been concerned with retraces/pullbacks and not so much on reversals or breakouts. I think I thought I was simplifying things, but based on your feedback - doesn't seem so.

Thanks again for taking the time to comment.

 

The last two days have been a little less productive than I would have preferred. I'm back in the chat room and that's definitely a distraction, but I haven't adhered to my own rules as well AND I've had difficulty if at first with a trade that doesn't go my way, getting back on board for the next round.

I've also felt that while I was impatient to get going with the trading aspect and probably blew through the observation phase too quickly, I don't think I knew what to look for or how to go about describing it. I've done a lot of reading and have had quite a bit of screen time and now it feels like I'll have more success in just watching price and observing what happens.

For instance, I used to really hate a pullback - especially one that occurred after a nice, sharp rise or fall. Now I realize how useful they are in keeping price moving. The sharp changes of direction are not sustainable. The pauses and pullbacks allow buyers and sellers to get comfortable so that when price moves again, they jump on board.

So back to phase I of observation - at least over the weekend.

The only area I highlighted on this chart at the outset was the overnight high (OH). I had no clue how important it would be on this particular morning. My prep for a replay session with just watching price doesn't include many significant (S/R) areas. I'm kind of hoping that by just watching, the significant areas will become apparent.

1. Inside the SL, but price that seemed to reject 3550 and went back up above the LSH. Price then went on for a LH rather than continuing the down move.
2. Right after the open, price rises definitively breaking the SL as well as going above the LSH. Can it stay there or will it go down again? As is typical with the open, price is very vertical - not measured.
3. Watching the right-tick, price did hesitate before being able to just pop on through the overnight high with very little resistance on the way up. But just as quickly, it went right back there.
4. All of the bars are moving frantically. Though in a smallish range, neither buyers nor sellers are in charge.
5. 2nd trip back down to the OH level.
6. Since the LH, each successive ‘high’ has been lower than the previous.
7. Price moved down just higher than the 50% level from 0921.
8. Popped back up, but couldn’t get much further than the OH and then price plunged - dramatically - leaving the 50% mark in the rear view mirror.
9. Hmmm - 50% area attracting a little more attention as price slinks back up a bit. Another attempt at the OH level?
10. Appears so. In another frantic move up - incredibly parabolic, price drives through the OH area but still can’t get as high as it had been right after the open.
11. As quickly as price went up, it fell out of the sky. For the last 5-7 minutes, all movement has been dramatic - nothing seems to be occurring orderly.
12. The magnetism of the OH is apparent and price has formed a hinge.
13. Attempt to the low side.
14. Attempt to the high side.
15. The high side it is. However, within the one-minute timeframe of the 1003 bar, there’s a lot of frantic activity - up and down and up and down. Significant RET within the bar.
16. Again the magnetism of the OH with a quick drop.
17. Price did go on to make a HH, but did so and immediately retraced. During the formation of the bar, more time was spent at the lower end than the upper end.
18. Another bar where more time was spent in the lower range than the upper range. It’s also a LH.
19. Price did pop up off of the OH area without much resistance. Seems as if there’s some now or it’s the beginning of another trip back down to 58. Another succession of bars with LHs with price hugging the DL.
20. DL definitively broken and then a cascade down occurs through the 50% level of the move up from 1005.
21. Just like the pop down towards 58 occurred, a pop up back toward the high of the morning occurred and SL doesn’t hold. No nice waves today - more of a rough water day.
22. DL drawn and it doesn’t hold either and another hinge is in the making. Buyers and sellers are having a hard time finding value this morning.
23. Break out to the high side of a hinge for the 2nd time in the day but not with conviction.
24. Back into and through the hinge range quite abruptly.
25. Another pop of buying pressure but can’t seem to get above the 1010 high. In watching the few bars form there, it really seems like that price is a ceiling.
26. Transactions finally found there, but it wasn’t sustained. Last 4-6 bars have been less vertical/frantic. Much smaller range where buyers and sellers are agreeing.

I feel like I have a much better handle on PA than I did a month ago - no doubt. I do feel like I'm "seeing" things more clearly than before and again, don't think I had the notion or vocabulary to describe what I was seeing. As has been my mantra lately, I'll keep plugging away.

 

This is typical. People chomp at the bit to start trading but soon realize that they're not quite as ready as they thought they were. But by going through this, they end up getting more out of the observation phase when they return to it than if they had never given the trading a shot.

 

Anything you don’t understand…, ask please – and I’ll do my best

One important rule I follow when trading PB’s

Never enter while price is pulling back – wait for a break / a pause/ a reluctance – iow some sign

Bar w/ red dot – price is pulling back

Bar w/ purple dot – price is pulling back

Remember – we never know how far price will go – it could very well keep going… and going... and going

Important Note;

The purple entry price is not a bad price to enter – its just 1 bar early imo

The next bar is the one to enter on – okay why

There are a few reasons – and I’ll spell them out – just don’t get buried in the whys right now – instead focus on learning to identify PB’s... again - for now

As to the whys

1 – there is a range – formed by several small bars – within the triangle – price pulled back the middle of this range – but no further (see rectangle in attached)

2 – price breaks down and out of the triangle

3 – price breaks the up TL formed by bars 1, 2, 3 (again see attached)

4 – price breaks below the previous bar’s low (bar 3)

5 – bar 1 & 2 are relativly long – bar 3 is not – wtf – possibly the PB is petering out

Now – do not misinterpret the above as – well hell…, it must have been a foregone conclusion price was resuming the down move

We never know

We identify the signs – then go with the preponderance of what the signs say


Rule that over rides all else –always keep risk as small as possible



This trade’s short bias doesn't cease to exist – until and unless price breaches the upmost dashed TL

Until then.., entering a short is valid

We want to enter as close to the stop point as possible – so our risk is as small as possible

The red circle is the ideal entry - don't know about you... but I am far from ideal

What i am not - is hesitant to pull the trigger - getting in..., or out - when it time

Sentence you highlighted in red

It was a tongue in cheek comment – but - also contains a serious undertone


If price pulled back – all the way to – and then through – the most recent move’s TL...

That is a show of strength (if the PB up)… or weakness (if the PB down)... AND a potential sign control / sediment has shifted

It would be time to take a step back…, reassess…, and see if this pullback really has legs… or if it simply a stop run / move to shake out the weak – before resuming

HTH

RN