Good. Even though strong BO's on a single TF comprises about only 10% of the bars on that TF I as a trader need to learn to trade BO's too as they can, be some of the times, the type of PA where I as a trader will allow a scalp to run often capturing not only the first leg of the BO, but also a second leg, and maybe a 3rd or 4th leg. In other words, one BO can eliminate any losses incurred during the session and cause me to end up a winner or the day.
Yes BO means "breakout" I took a few trades in MES this morning. All profitable except for 1 small loss on one of the contracts. I also took a couple of small scalps on the ES. I am stopping for now as I have to go work in the garden. But I wanted to highlight a few concepts as concerns the the PA shown on the chart and my ES scalps. 1) Both scalps were on the same bar but at the extreme ends of the bar. One a long scalp and one a short scalp. The long scalp has an entry close to the bottom of the bar and an exit 1 point up. The short scalp has an entry near top of the bar and an exit 1 point down on the bar. In and channel that has an overlapping range I can trade most any bar and make some $$, as a scalper. There are 81 bars on a 5 min chart. They will usually render 20 to 40 trades if I wish to take them all. 1) I am playing two things here in this scalp. The bear channel that was formed earlier before RTH's open. And the sideways range that is partially within the bear channel and partially without. 2) The basic idea is to fade the outer limits on both until there is a successful BO. Then I go with the BO. If I am caught on the wrong side while fading (as for instance, in a successful bull BO of the topside of a channel or range when I have already taken a position short thus fading the top but then price doesn't go down but continues up resulting in a successful BO.) When that happens (and it will, sooner or later, if I am actively fading tops and bottoms of channels and ranges.) In such a case, I have to reverse and maybe even double-up and go in the opposite direction of my previous fade. This way I get back my loss and soon I am back in the money. Another thing to remember is if the BO was successful AND made on gusto then there will likely be a second leg so I will want to hold for more profit. 3) Most BO ATTEMPTS fail within 5 bars and price heads back towards the range or the channel and usually will go back in them. For some examples: a) On bar 8:45 we see a BO attempt (that actually does trade outside the top of the channel) of the channel (orange lines). One bar later price is back in the channel. b) Then on bar 8:55 we get a BO ATTEMPT of the range AND of the channel that trades outside both. Four bars later (9:15) price is back in the range (box) and ALSO headed back to the channel. Six bars later it is back in the channel. Notice on BOTH BO's (of the channel and the range they were made on largest bars in many many bars). That is what fools many traders. They go long thinking a successful BO north. They soon find the move dies and price heads back into or toward the range or channel. 80% of BO attempts (top or bottom) fail in a range and 75% of BO attempts of a channel, top or bottom, fail). 4) One characteristic of PA in ranges and channels is a race to the top and a race to the bottom. I don't want to be fooled by that sort of PA. I will fade it. 5) If a BO has FT (follow through) that is, it resumes after a PB and/or it does not go back into the channel or range within 5 bars but resumes then I consider it to be a successful BO and will trade in it's direction. If it is a strong BO with the BO bar closing on or near it's high and is followed by another strong bar closing on or near it's high I won't wait for 5 bars. I am going to trade the BO direction. Why? Such strong PA usually has at least a second leg up. 6) Notice the BO attempt of the orange channel on bar 9:30. Two bars later price is back in the channel. Notice the BO attempt of the range on bar 9:35. One bar later price is back in the range. Notice the BO attempt of the bottom of the range and the channel on bar (9:40) one bar later and price is trading well around the top limits of both. I suggest practicing fading the outer limits on ranges and channels. Do it on a SIM. You might be surprised! It is counter intuitive and takes some quick decision making. I will often start fading in the top or bottom 1/4 or 1/3 (if feeling real giddy that day) of the range or channel and adding to it as it moves against me. Why would I do such a thing that all the gurus with one voice yell "DO NOT AVERAGE DOWN". Well mainly because of the 80% and 75% failure of BO attempts. See mathematically it is a good strategy IMO. Of course there are trades I get caught on the wrong side when a BO does not go back into the range or channel but continues against me. It is then I must be brutal and dump the position (as hope will not generally work here) then double and reverse getting back my loss on the previous trade, and quickly, and in less distance for price to travel than it did to render me my loss on the previous trade. Bottom line I have a technique in place in my mind when things go awry. 6) Now notice my scalp at the bottom of bar 10:05. It was taken in the middle of the channel but at the bottom of the range. Look to the left. Where were most of the lows hitting for the last 40 bars? Was it not at the bottom of the range? Therefore, I had no problem fading this range even though the fade took place in the middle of the channel. In overlapping channels and ranges or even in ranges within ranges trades can take place in the middle of one and the outer limits of the others. PA to the left will generally indicate if it is reasonable to do so. AND if the PA went on down what would I be doing? You got it Averaging down to the bottom of the channel. What are the odds of PA breaking out of the bottom of the range ...followed by a successful breaking(successful as defined above) out of the bottom channel too, i.e. of both of them. NOT BIG! Chances are within 5 bars price will either be back in one or both of them. Now look at the short scalp. It was also in the intermediate overlapping area of the range and the channel. My entry short was above the top of the channel but within the top 1/4 of the range. I was reasonably sure I could get a 1 or 2 point quick scalp out of this. I didn't have time for trading to day. Gotta cut grass..tend to the garden..etc I also took some trades in MES ended up profitable but simply don't have time to discuss those trades. I lost on 1 contract. A tiny loss. All other contracts made money. Over the years I have heard arguments about trading patterns such as ranges..BO's..channels..PB's triangles..wedges...etc that they do not work. The reason folks say that is because they never learned how to effectively trade them. And they have usually not practiced enough to become skillful. They try them a few times ...lose..and declare they are too subjective and will not work. A trader has to be cognizant of where these patterns are taking place in the larger context of things. Not every triangle is the same or has the same probability of rendering a profit. Trading price patterns can be better than a 50/50 proposition to the dismay of many LOL. We must ask ourselves why do these patterns form on a price chart? They formed on price charts in the 1940's and here we are in 2021 and they still form everyday in 2021 that the market is open. Why? Simply because they are a graphical display of the pressures at work in the market, on any TF (time frame) AND they are a reflection of human nature which has not changed since the 1940's regardless, of what those say who believe in evolution. We ain't evoluting! ROFLMAO. Who causes those pressures? Humans buying and selling. Institutions and retail traders, but mostly institutions. But you say it is computers. But who programs the computers? The more computers trade the more exact trading will become, because they are operating outside the realm of emotion as the trades are going down, nevertheless, their programing is a reflection too of human nature. IT is of great importance to understand why these patterns form over and over and also "where" they are formed or in other words, their location in the general context of things. In Real Estate they say location..location..location. In trading it should be context...context..context. As a house that needs repairs but is in a good location is worth more than a good house in a bad location, thus a pattern and the setups to trade that pattern are worth more in a good context, even though the pattern or it's setup, may not be perfect. It is worth more in terms of probability or possibility of working out to be profitable than a good, perfectly formed and ideal pattern, in a bad context. Not realizing this often results in many traders coming to the conclusions that patterns such as triangles ..wedges..etc do not work and are best a 50/50 proposition. That is mistaken thinking. Everyone of those patterns formed for a reason. They reflect the pressures in the market of the past, the present, and can generally be correlated with the context to then extrapolate them into the future. Well my rant ends. Good luck trading today. And Remember the harder you work the luckier you will get. We make our own reality in the markets. We got to practice and practice so things become second nature. We just have to practice the rights things and practice them enough until we become skillful. Thank goodness we got SIM. The value of SIMS? Oh well that is another rant. I have heard both sides. Those for and those against SIMS. Think about it what is the Patriots never practiced? They just showed up to play each game.....well maybe you get the idea???? Maybe not.
You are among the most skilled gardeners as well as a most worthy contributor to ET. I am happy to be allowed to read your well presented Journal. Thanks @volpri
Thank you. My desire is that it helps and not hinders. And how I trade is FREE. I try to explain it well and charge nothing. I try to be open about the techniques and strategies so others can try them out, of course on a SIM, LOL. I have no fear at all that I am giving away my edge or edges. We as humans just simply ain't gonna change that much to make a dimes worth of difference. Technologies will change and affect the markets but even then they are based on human nature and what we humans can figure out. Beside most folks ain't gonna pay attention to my malarkey anyway. It will be dismissed with a casual wave of the hand by most.
I could sell the vegetables but I usually give them away to friends and family. Of course I get my bait of them.