It is late and I am tired so all I can say is I too have a hard time figuring out why I drew that range that way. It is actually drawn wrong on both charts 1m and 5m. Not sure what happen there. There was a day or two that I without meaning to do so accidentally moved or widen the range. I have no idea why it is the upper boundary. Just a mistake. But it isn’t even right on the 5 minute chart but closer to being right on 5. I am sleepy right now. It is nearly 2am. When I can think clearly I will try to show how the TR on both charts should have been drawn.
I looked again at my TRs on both the 5m and the 1m chart. I am not sure why I drew them that way but it is without a doubt wrong in the end after the fact. I am thinking that I was trying to show from a 5m perspective why I took a trade in what ended up being in the middle of the trading range on the 5m chart. If I recall correctly I am thinking I just drew the TR on the 5m thus highlighting the middle of the TR (after the fact) and then just went to a 1m chart with that same TR intact. That is to say I didn’t even draw the TR on the 1m. That first long trade actually had nothing to do with TRs. The TR on 1m just showed up that way because it was extrapolated from the 5m chart where it was drawn in. The purpose was to explain why the first and third trade were trades taken in the middle of a range. That is a technique I sometimes use (which I call small-intra-bar probes up and down that can serve as support and resistance for quick small scalps that can end showing to be in the middle of a TR instead just waiting for a setup to trade a TR fringes. After saying all, neither TR was drawn 100% correctly but the 5 min TR was more correct and when I went to a 1 minute chart the same 5m drawing was off. Your version of it was certainly more accurate. That first trade taken a 5m chart had nothing to do with a TR setup as there were not 20 bars to the left of my entry. I just drew it in and it just showed the first trade as being in the middle. But when I went to the 1m chart with the already drawn range intact there were 20 bars to the left of the entry and on that 1m chart it was a BO out of the top of that very tight and narrow TR to the left of the entry. I am not sure if I muddied the waters and have caused even more confusion with this post. Bottom line I was trying to highlight techniques to trade small scalps in the middle of what appears to be an evolving TR vs just fading tops and bottoms of TR. And I was showing two different TFs using the same TR rectangle.
Understand most of the time I am drawing in TR rectangles once I get two points top and bottom to draw them in. That usually means 3 legs. For example; a leg up followed by a leg down then another leg up. That then gives me two points top and bottom to begin drawing an anticipated TR that may not yet have 20 bars in it. I extend that out with TR rays anticipating the evolving TR before it actually happens in PA however, that doesn’t mean I am trading it yet using TR techniques. I still like to see 20 or more bars in that anticipated TR (regardless of the legs) before using TR techniques. But sometimes I will fudge a bit and trade at 17 or 18 bars. LOL
Aloha volpri, Thank you for clarifying your thought process; I really appreciate it. TRs are a challenge to me and your posts greatly help. Mahalo
Three legs vs two legs to anticipate and extend a TR rectangle out as a possible near future pattern that is evolving. The more legs the higher the probability the pattern is valid even if not perfect. ANTICIPATING AND EXTRAPOLATING TRs.
3 legs harder to see on same narrow 1m chart but they are there. On 5m chart only one leg when i took that first entry. So it was not an entry based on TR techniques. However, at the top of the TR and top of last leg I would have no problem shorting the top edge of the TR because now is has become a sideways move with 3 legs up/down and 18 bars. Fudging a bit but good discernable 3 legs.
Out of curiosity I went back on Sept contract on that day of the above 5m chart just to see wht happened if I had of shorted at the top of that third leg and top of the TR. It was good for at least a 4 to 9 point scalp, depending on when I would have covered. I marked the chart up with the three legs .potential entries and exits. Notice actual risk was very little. This is why 3 legs 20 bars makes a good point to use TR techniques such as fading tops and bottoms. In this case it was 17 or 18 bars (a little fudge LOL) but because of 3 good identifiable legs and a good bear second leg to the left.
Take a bull trend that starts with a spike or strong BO. Has a PB and then becomes a bull channel (still a bull trend but a weaker one than a spike or BO). That channel will eventually begin to flatten out. And we will see a PB then a move back up. If it stops near or just through the previous high then heads back down we are going into a TR. However, I usually don't label it a TR until I see 20 bars and preferably 3 completed legs that allow me to draw a TR rectangle with two points on either side. But I don’t count it as a TR until I see 20 bars (sometimes I will settle for 17 or 18 bars) sideways movement preferably with at least 3 legs in it, overlapping bars, and maybe non consecutive like bars. For instance, bull bar, bear bar, bull bar vs bull bar, bull bar, bull bar. However in broader sideways moves, often large up/down legs will have 3 or 4 consecutive same type bars but when price gets to the edge price reverses back into the TR. The main reason for waiting for 20 bars is that by then the initial BO and channel up have lost their influence on the forthcoming immediate PA. The sideways motion is no longer a PB but an established TR. A pullback can be a bull flag with 3 legs in it, then price continues up in the direction of the initial trend. So, I want to make sure a sideways move is not just a PB followed by a continuation of the previous bull move but is likely an established TR and 20 bars does that for me. So, sideways with 3 legs and 20 bars is a TR. That said there are always exceptions. In some cases we get 20 bars sideways but NO legs. Just up and down consecutive bars where the high of one stays close to the high of previous bars in the sideways move and ditto for the lows of bars. But if it has 20 such bars I call it a TR even if there are not yet 3 discernible legs. Because there are several points to draw a TR rectangle.
I took 3 trades in a SIM this morning and recorded them explaining some concepts but for some reason in the recording I didn't have the mic on so none of my explanations have any sound to them, so I took the video back down. Sorry it would have been a good video, I think. Maybe later today I will get a chance to record. Will see if I do so SIM or live. But for now, I got to do some things to the MH to get ready for the trip. Durn volume! Or I guess more accurate to say scatter brain VOLPRI. Anyway, the three trades capture 20 points and all were winners. MES small size trading. Here they are on a static chart if you just want to look at them. I don't have time for writing explanations. First two trades two long trades. third trade long but average down. All were winners. Green are entries. Orange are exits.
I am back. I only took those three trades today. I do in fact want to make some comments. So, I have marked up the RTH session. I think the mark ups on the chart explain the concepts. However, I do want to clarify a few things: First all three trades were trades taken based on the channel trading techniques. None were taken in an established TR as there was no establish TR when they were taken. Nevertheless, the channel was evolving into a sideways movement that was not yet a TR. All the trades had their entries in the lower 1/3 of the channel. On the last trade I averaged down in the lower part of the channel. Then it broke out of the channel. I was waiting for 5 bars or so to see if it would head back towards the bottom of the channel or even up into the channel. If you look at this on a 1m chart is WAS a successful BO of the bottom of the channel. But I entered these trades on a premise based on the 5m chart, so I need to trade the time frame of my entries, otherwise I am flip flopping back and forth. If my premise proves wrong on the 5m then I need to exit with a loss. However, on the 4th bar it headed back up towards the bottom of the TR. So, my premise was correct. I held. Before my exit (just below the bottom of the channel) well by them I had already drawn in the evolving TR (blue rectangle). Now notice something. My exit price was on a move back up toward the bottom of the channel, but it was ALSO in the top 1/4 of an evolving TR. So, I was at resistance. Once I got a profit on both contracts (small one on the initial entry) but larger one on the averaged down entry I just took it without waiting for more profit. What follows to the right of that exit shows why. See I grabbed what the market gave me. The 3 yellow legs allow me to draw the potential TR rectangle and extend it out into the future as an evolving TR. Once it got 20 bars in it then I would use TR techniques. Price went a leg down after 20 bars and went outside the TR multiple times but each time within 5 bars it went back up to at least the bottom of the TR within 5 bars. Then around 12:45 we got a nested smaller TR within the larger TR and that endured till the close. There are a couple of ways to handle this. Either draw in a nested TR and trade that as such. Or widen the original TR to include those BO bars out of the bottom and trade accordingly. There were plenty of price points to widen it. Even look far and see left that channel (blue) PB bar could serve as the first point to widen the TR to hit the lows of those BO bars to the right. So, just 3 trades. 20 points in (noise LOL). One good leg down starting around bar 10:45. One good leg up (the channel) The rest of the chart's PA many traders would just label it noise and not trade it. But most of the session could be labeled noise. But not by me as I don't believe in noise, only movement. All three of my trades are in what many traders would call noise. I extracted 20 points. That is $100.00 on the micro and $1000.00 on the ES over a period of 60 minutes. Noise can be profitable! Chop can be profitable. Sideways offers way more trading opportunities than BO's and much of the time more than channels. Remember, my concept of FOT (frequency of trades). This is a scalpers bread and butter. See market cycle? BO ...channel...TR. Also, remember 3 legs (yellow) up and down in a sideways move give me the opportunity to draw in an evolving TR with at least 2 price points on either side to serve as my guide for the height of the evolving TR.