ROFLMAO is that for Biden? Or Trump? Or both? two thumbs you know. Confusing.. Maybe you are for Kamy??????
Thanks volpri for your continuing and interesting journal. My discretionary day trading is improving; I do have an automated system that has shown a little success as well, but watching bar by bar has been interesting in seeing how days develop with trends and trading ranges and so on. I am working through the Al Brooks bar by bar book, which is proving very interesting. The rather obscure style is not too much of a problem, as I am used to taking time to understand hard stuff (I took a Maths degree 40 odd years ago). A lot of material is presented many times in slightly different ways, which is helpful to an extent in hammering it home. Some of the underlying principles have been really useful (talking about traders being ‘trapped’ in trades by certain patterns for example is an interesting idea in helping understand why some patterns work). I am gradually coming round to thinking there is quite a lot in this price action stuff, whereas I started out being quite sceptical. I still find your response to trades going bad a bit too dangerous for me, but maybe with your experience you can make it work. The idea of ducking out if a pullback retraces 70% of a move is a useful rule of thumb though. Doubling up in the opposite direction when a trade goes wrong may in general be a sound policy, but I’m sure you know that it is not for everyone, and certainly not for the faint-hearted or new traders. The major thing I am coming away with from the book is that in general you want to be trading with a strong trend on a pullback if you can. I have problems trading successfully when there is no obvious trend, so for the moment I avoid that, which is easier said than done. Again one of Al Brooks’ key ideas seems to be to not take low probability trades, which is a simple but effective way of increasing profitability.
Repetition, in different ways, to drive home the same point is a didactic principal that works really well for learning IF the student has more than the attention span of a jumping flea which seems to be quite a challenge for the new generation as they get bored so quickly if there isn't music..lively videos..jumping around..waving arms. dancing...etc. So naturally they gonna find Brooks out of date ...ole fashioned...not to their liking so they will dismiss him and his principles as hogwash. That is unfortunate FOR THEM. Reversing and doubling up I learned years ago from Day Trading with Precision. It does take guts for small retail traders and even larger traders. I would caution a newbie trader to start with a SIM very small like 1 contract in MES then average down another. If the trade fails then exit. Then go in the opposite direction but this time with 4 contracts. They will see the process isn't that hard to get back to at least BE and perhaps in the money. Trading PB's in a strong trend is good and high probability but I make MORE in trading ranges, unless I make multiple entries and exits in trends. Why? because 70% of the time PA is in some sort of range. Trends are of two sorts. Strong BO's (spike) then once there is the first PB they morph into a channel. When you think about it a channel is just a range that is tilted. That is all. I will fade the tops and bottom of ranges and channels all day long until there is another BO. If they are broad enough I will trade PB's ...implied and actual .within channels or ranges. I will trade them in the middle of the channel too not at just the edges. To do so the channel or range must be broad enough to trade. That means at least 3 times as broad as the minimum scalp in the instrument one is trading AND at least 3 times as big as the average size bar in the range or channel. For ES min scalp is 1 point for me so I want any range to be AT LEAST 3 points broad with is quite tight to scalp for 1 point. AND I want it to be as 3 times as broad as the average bar (just a cursory glance not exact measurements) So it is say 3 points broad but average bar is 2 points it is extremely hard to scalp for 1 point. But if it is 3 points broad and average bar is 1 point or half point then it is 1 point scalpable because you got a little room for averaging down. This said the minimum broadness to scalp one point is certainly not ideal. I generally prefer it to be at least 6 points broad and 3 or 4 times as broad as the average bar to scalp 1 or 2 points all day long. I have to give myself room for averaging down techniques. Or scaling in if you wish to call it that. It seems a bit more PC to cale it scaling in and doesn't frizzle already frazzled nerves from the anti averaging down people whom cannot shake the mental picture burned into their brains from tudors desk sign " losers average losers". But, bottom line, scaling into a losing position IS averaging down! ROFL They can see the link right here if they are inclined to do and thus refresh their minds again and increase their resolve to NEVER do the dastardly thing again. https://www.trendfollowing.com/losers_average_losers/
Thanks for the compliments! Hope what I share helps. Not hinders. As always I say SIM it. LOL Actually brooks recommends traders learn to first trade MTR (major trend reversals) These are generally LOW probability trades. They will fail more than they will succeed. However, the risk is small and the reward can be big (big ...by intraday standards if daytrading) when they do succeed making them a viable strategy. But Brooks does say he personally prefers high probability trades. But, usually high probability trades mean worse reward to risk ratio except in strong BO's. It is nigh impossible to pull off ...as a norm.... low risk, big reward, high probability trades. You have to give up something to gain the other. The market just is not going to rendering a trader those kind of trades very often so he will be there sitting twiddling his thumbs and gulping down coffee waiting for the perfect trade to come along. The odds of it coming along during the session are next to nothing.
Do you find it strange Tudor would say "losers average losers" but believe in putting on a special pair of "lucky" shoes when the trade was real important? Hilarious! To me anyway. Perhaps his style of trading was not compatible to averaging down or scaling in. However, regardless of whatever his sign said I do believe he averaged down or scaled into a losing positions. Probably quite often.
There are rules that govern in scalping ranges or channels in both directions (short and long) such as the broadness of the range being enough for a min scalp (long or short). That means: 1) MOST of the Bars in the range to be at least as big or larger than a minimum scalp (which is 4 ticks for ES). 3) the height of the range to be at least 3 times the size of a min scalp (i.e. 3 points in ES) 3) And the range needs to be three times as broad as the AVERAGE size bar with the range. We also have to remember a range starts when a PB becomes 20 bars or more of sideways price action. It is the average size of those bars that are WITHIN the formed range. Not the average size of ALL the bars on the chart. We are talking about trading in a range behavior environment. The tighter or less broad the range is, then trading has to be with limit orders. It is a limit order market. It is too hard to trade a 4 or 5 point broad range with market orders. A 10 or 20 point broad range can be traded with market or limit orders but I generally even trade them with limit orders, unless the up and down movements are fast. Then I might enter and exit on a market order. But in general ranges and channel are usually best traded with limit orders. Price needs to come to your order, especially for entries. This is even more so true in narrow ranges or channels. That is about as tight or narrow of a range I want to scalp for 1 point in the ES short or long. And it means shorting at or near the top of the range at the top of bull flags with limit orders or going long at the bottom of bear flags that are close to the bottom of the range and doing so with limit orders. Otherwise it is better to wait for a broader range to trade.
Trading in a relatively tight trading range AND Trading an implied PB in a relatively tight trading range. 1) First to review the definition of a trading range: It is 20 or more bars of sideways PA. That means overlapping bars. Typically Bull bar or two then bear bar or two. Races to top then races to bottom. Or drags around to the top then slowly to the bottom. 2) Remember the concept: at top or bottom 80% of BO attempts fail and within 5 bars or so price trades back in to the range. 3) Exception to #1 above. Now when RTH’s opens IF PRICE HAS already been within a range in overnight session of at least 20 bars, and the first few bars of RTH’s open are within that overnight range, AND after a few bars it appears price is going to stay in that range then I usually will go ahead and start using range trading techniques, even though there are not yet 20 bars of sideways PA in the RTH’s. PA behavior is the key item to zero in on here. The first chart will show the range before RTH’s and first part of RTH’s. Take a look at it. 4) Also remember: a) MOST of the Bars in the range to be at least as big or larger than a minimum scalp (which is 4 ticks for ES). B) the height of the range to be at least 3 times the size of a min scalp (i.e. 3 points in ES) C) And the range needs to be three times as broad as the AVERAGE size bar with the range. The tighter or less broad the range is, then trading has to be with limit orders. It is a limit order market. It is too hard to trade a 4 or 5 point broad range with market orders. A 10 or 20 point broad range can be traded with market or limit orders but I generally even trade them with limit orders, unless the up and down movements are fast. Then I might enter and exit on a market orders or stop orders. But in general ranges and channel are usually best traded with limit orders. Price needs to come to your order, especially for entries. This is even more so true in narrow ranges or channels. A 3 to 4 point broad range about as tight or narrow of a range I want to scalp for 1 point in the ES short, or long. And it means shorting at or near the top of the range at the top of bull flags with limit orders or going long at the bottom of bear flags that are close to the bottom of the range and doing so with limit orders. OK WITH THE ABOVE IN MIND. I want to highlight two trades of today 1-14-21 First lets look at the context. Range behavior over 20 bars. BO’s top or bottom failing and price goes back into the range. Range height is roughly 8 points. It is meets criteria of a) above. It also meets criteria of B) above. It comes close to meeting the criteria of C) above. The average by (cursory glance) is probably 2.5 to 3 points. Therefore, the context is close enough for meeting the criteria to trade the range for a min scalp which is 1 point in the ES. I would stick to 1 and 2 point scalps in this range until we see a successful BO. Trade # 1 - a long scalp with entry on bar 9:35 (green triangle and a two point scalp with exit being the lower red triangle on the same bar.) Betting the BO attempt at bottom will fail and price will go back up into the range far enough for a 1 to 2 point scalp. If it had gone against me I would have scaled in with more contracts up to 3 points below the range. As It turned out there was no need to do so to get a two point scalp. Trade# 2 An implied PB on the same 9:35 bar after exiting the previous long trade. The entry for trade two is the upper red triangle on bar 9:35. Why is it an implied PB? First, the trend is down from bar 9:20 so we have a bear trend in a tight trading range. And it is an implied PB because bar 9:35 opens then trades down to it’s low but by the it's close it forms a bear doji. (locate the same 9:35 doji on the top chart (a 5 min chart) and the second chart i.e. the 5 min chart snapshot) However, it’s high is below the high of bar 9:30 so it is an implied PB on the 5 min chart (again look at the first 5 min chart with the gray box to compare). You can see it was an implied PB because it’s high stayed below the high of bar 9:30. And by looking at the third chart you can see it was an actual PB on the 1 min chart snapshot. Bar 9:30 opens trades down then trades back up ( actual pb on 1 min) to close as a doji and an implied PB on the 5 min chart. So, that up move off it's bottom IS the actual PB on the 1 min chart. So on that one bar (9:35 bar) I take trade 1 and exit it, then I enter again on my initial entry on trade 2. All on bar 9:35. Now notice, this implied BP on the 5 min chart is in the middle of the range. My averaging down area, should it go against me, is up to the top of the range maybe a few points above the top. Should it immediately go my way I try to capture two points. As it turned out it went against me to I scaled in with a second short entry on bar 9:40. Why? I am betting any BO at the top will fail and Price will go back into the range enough for at least a 1 point scalp and maybe 2 or 3 points. So what happened? The BO attempt failed ..price goes down in the range and I exit on bar 9:55 (my entire averaged down position.) I make 1 point on my initial entry and 3 points on my averaged down entry or my second entry. Note; my initial entry on the 5 min chart (second chart) was a little early. Normally, I would enter on the close of that doji (bar 9:35) but in the waning seconds I could see it was going to likely end up being a doji (therefore an implied PB) so I went ahead and made my initial entry on trade 2 before bar 9:35 closed. Maybe all this will make logical sense to some of you.
MES 9-28-2021 Trading implied PB's and actual PB's AND bar counting in a bullish BO. Here are some trades taken this morning. Implied PB's in a BO conditions have bigger odds of succeeding. Implied or actual PB's can fail to succeed like any other pattern. However, multiple scalps in the larger context of BO's increase the odds of the high win rate. I am posting a 5 min chart, a 2 min chart and a 1 min chart. The latter two cover the first trade just as a recap on implied PB's. The 5 min chart covers all three trades. The 2 min and 1 min chart thus help clarify how an implied PB on a 5 min chart is an actual PB on a lower TF. That is IMPORTANT to know because in BO conditions the odds go up for a successful trade, if managed correctly. The traders equation has three variables: 1)Risk 2)Reward 3)Probability. It is usually impossible to get all three in my favor. But when I can get two that give me positive traders equation then it is time to jump in. I constantly have to be asking myself "what is the probability of my trade reaching my reward before it will reach my initial risks?" Then I adjust the risk and reward accordingly. I don't just play patterns. Probability has to figure into the equation. Often times the initial SL never gets close to getting hit and actual risk as opposed to initial risks ends up being much less because of the BO conditions. When that happens that then increases the reward to risk ratio. When my actual risk ends up being small (as in the trades immediately moves in my favor after my entry) then my R:R ends up being better. Nevertheless, in BO's you can see deeper PB's because of the volatility hence the need for a BIGGER initial risk to avoid getting stopped out as I average down. So, in BO's the initial risk are going to be bigger. I know that sounds backwards but it isn't. The reason for wider SL in BO's is again because the volatility increases in strong BO's (usually) so I have to have a wider SL to keep from getting stopped out, before the trade goes my way. Plus I want to give myself room for averaging down (scaling in to be more PC..ROFL) BO's give great opportunities for averaging down but again bigger risk is assumed. BUT the probability is higher for the trade working out IF the SL is placed correctly. So I have a high probability, big risk, medium to large reward, averaging down conditions trade in BO's. In general in such contexts I prefer to take my profits quickly as much of the move has been made during the BO so I don't like to "hold" a position for bigger profits. Because in the BO much of the move was already made. I prefer to lock in profits when it gives them to me. I can always enter again if the BO were to continue. I am posting the charts. First chart is 5 min. Second is two min. Third is 1 min. Later today I will give some explanations.
I don't have time to explain these implied bull and bear PB's right now as I am working on something else. But I marked up the charts while resting after a late lunch and decided to post them. I will try to explain the charts later tonight. These charts are how the day progressed after my earlier charts above explaining some trades. See, as the day progressed many opportunities were presented to trade today's PA using implied PB techniques from both the long and the short side. I am highlighting these long (green boxes) opportunities. Blue lines mark entry and red X's mark the exits. The second chart shows shorting opportunities. Red boxes. Red arrows mark entries and green X's mark exit area. You might ask why not just enter and hold? You can. But this is a way to scalp 1 to 8 points over and over and have a high win rate. Especially, when market trends both ways for awhile. Anyway, food for thought. It may not resonate with you and that is fine. I am just showing one way I like to scalp PA, in certain contexts, with multiple entries and exits, over and over, as the day progresses, locking in profits. Since none of us really knows where the market will be 30 minutes from now or 60 min from any entry point, therefore, I consider it a good strategy to take profits over and over, as the day moves along. Added benefit; my broker is smiling. More commissions! Ribeyes to eat instead of round steak (bologna) ROFLMA Note 4 bull opportunities (implied PB's opportunities) after my trades earlier in the session. And in the second chart 7 bear opportunities (implied PB's opportunities)