Ok lets look at trade 8. As you can see trade 8 was averaging down short on 4 one contract entries. On the chart which is a 5 min chart you can see that I am averaging down on a two legged PB. So, why would I keep averaging down as opposed to dumping the losing position, reversing and going back in long doubling up. Let me explain. From 8:15 a.m. down to the bottom of that red highlighted area we had 5 PB’s they were all very minor and within 2 or 3 bars price resumed. Notice the steepness of the highlight tight channel down. So, at the bottom we begin a 6th PB. What are the odds that this is gonna be a real deep PB or maybe even a reversal. Pretty low, being as the previous 5 PB’s were all minor reversal attempts and in a tight steep bear channel composed of 11 bear bars, of which 5, were very large (relative to the bars at the very top of the chart). We had 6 bull bars. Some bear bars in sequence. Gaps between the high of a PB bar and the low of a prev PB. Gaps between the close of a bear bar and the close of the first bear bar after a PB is done and then trend resumes. These gaps speak “urgency” “inertia” “momentum”. So, considering these things are the odds high it will be a minor PB even if deeper than the previous 5 PB’s and that price will simply resume south enough for a scalp or at worst go into a range? And even if it went into a range I would still likely be able to get out with a good scalp as ranges go up and down, back and forth. Therefore, I had no problem to just keep adding to my short as price went against me, but I did it on small size, just in case. Remember..40/60. I could be wrong and have to exit, double up and go long. An astute trader prepares himself for all sorts of scenarios. Ok, now consider this; From my last entry (blue line) what are the odds (taking into consideration that tight steep bear channel) that price will go and hit my first SL (first red X) BEFORE it would go down thru my first entry And allow me to exit 1 tick below my first entry like I did? Odds heavily favor PA making my PT before making my SL. Odds would even be higher had I used the wider SL (second red x). Always think logically about the total context and be prepared for anything. Get a premise, then structure your trade, and watch it like a hawk. Never be satisfied with losing. Be a winner. Learn how. You make your own reality in the markets. Blame no one. Be responsible for each and every trading decision. It is YOUR TRADE and yours only. As it turned out price did go into a range giving me more than one opportunity to exit my 4 lot averaged down position. You may ask why are you divulging your trading secrets on a public forum. Well there are no secrets. It is just trading the probabilities of price action graphically. If every one on ET did it then it would just be more precise and accurate. Please do join me but do it on your SIM ROFLMAO. The beauty of it is that the tactics will likely be working 50 years from now. They won’t get old and outdated as long as we humans look at charts for trading decisions. We may have to adapt some things ..like...for HFT’s..algo’s and modify our stops losses and profit targets but basically it will probably work for the rest of our lives, at minimum. So, I have NO SECRETS TO HIDE. PS It is discretionary and would be hard to automate because you have to monitor visually bar dynamics as each bar is forming. I am not a programmer but that seems as if that would be difficult to pull off with a computer. It cannot compare to the power of the human brain to make judgment decisions. It can only do what it is programmed to do, but a brain adapts on the fly to all scenarios. It would be IMO extremely difficult to program all the variables. I just hope the concepts help some small traders get really good on a SIM! What they do afterwards is totally their business. I ain’t telling anyone to trade these concepts with their money. Most traders ain’t gonna listen anyway cause I break too many of the guru’s rules. That gets depressing to me as it is alot of work typing this malarkey up and taking snapshots of charts and annotating them. But I press on. I’m 65. And don’t know how much longer I will explain these things. But I do still enjoy doing it even though it is alot of work. I sincerely hope folks are finding it useful.
I want to show trade 8 in some other Time Frames and make some comments but it is late and I am tired. The wife and I go grocery shopping tomm morning early but when we get back maybe I can add those charts to this thread. I don’t know if will get any trading done on the 29th. Just have too see.
Lets look at trade 8 of yesterday 4-28-2020 on a 1 hour RTF chart. Ok first I want you to ignore all my annotations on the chart. Look only at the bars. What do you see? I hope you see what I see. What do I see? 1) I see an aprox 35 point gap from the previous day’s close. 2) I see 3 bear bars in sequence with the last one being the largest. 3) I see price not only completely closed the gap but actually closed down below the gap on that large bear bar by around 15 points. 4) I see the first PB since the open and it starts 16 points or so below the gap that has been closed. 5) I see, while the general trend is still up (per the 3 MA’s), with price on that last bear bar and that first bar of the PB, they both are right at the 20 EMA. That is, the bear bar ends there and the first PB bar starts there. (Doesn’t that seem like a logical place for profit taking as opposed to say a reversal back to the top?) After all, those bears that have been shorting since the open, want some profit. Bulls are likely buying try to get a reversal at the 20 EMA as general trend is still up (see slope of MA’s). So you got bears covering and pulls buying at near lows of the previous day AND at the 20 EMA.) That is what causes PB’s. 6) Since the open I see the biggest bars of the last 2 days and guess what? They are bear bars. Is it likely the bulls will succeed in reversing the price in this session in the next hour or so? 7) I see gaps between the low of a bear bar and the close of the previous bear bar. Speaks of urgency. 8) I see a gap between the high of that big bear bar and the low of the bar 2 bars back (first bear bar). Again speaks of urgency. 9) I see the last big bear bar before the PB is the largest bar. Speaks of exhaustion. Would it not be reasonable to expect a deeper PB even though it is the first PB since the open? There may be some other observations too that could be made but I think these are enough to arrive at some logical conclusions and build a premise for structuring the trade. My premise: there is extreme weakness since the open. This is the first PB. While it may be deep (or may not be deep ..as I don’t know yet when it first starts and I start building my position) but whatever scenario takes place it shouldn’t go above the high of that exhaustion last big bear bar, or at the very most, above the high of that second smaller bear bar. So, I start averaging down short on that first PB bar. If it is a shallow PB and the trend south starts back up...well I have a position on. If it rallies more I am adding to my losing position. Why? My premise is, at the worst case, it should not make it above my widest SL. If it gets there then my premise is invalidated. It will have rallied back too strong and the market is probably going on up. Actually, I would probably just exit at my first SL double up and go north. Ok before I discuss my chart annotations: Now just looking ”only”at the bars if a person held a gun to your head and said; “take a position.” Short or long. You got 2 hours to make a profit. If you are successful you will live. If you are wrong you will die. So, just based on looking at the bars, with no calculations, or measurements: would you go long or short? I know what I would do, in a jiffy. I am shorting I believe within two hours I will be able to exit with a profit and go home to my family. Can you see how much info is portrayed and can be captured just by looking at a graphical display of PA? It can render alot of info and help one to make the right judgement as to which side is stronger, the bears or the bulls? Ok now I want to discuss bar by dynamics. How do you think PA was made on these 3 big bear bars? What is your best guess? Slow and grudgingly? Swoosh? Normal? The gaps between each other that they left and cannot hide what does that tell you? As for myself I see “urgency” to close the gap and drive price down, for whatever reason (p.s. I don’t need to know the reason now do I?) so, No PB’s for 3 bars. Don’t you think there was some volume there, especially on that last bear bar before the PB began? If you are going downhill and you press the gas peddle ...well...where is the inertia? Up or down? The momentum, up or down? Ever watch a football game and a team cannot get anything going it seems. Suddenly they get off a great play and the entire momentum changes, immediately. Whereas before they struggled to move the ball 3 yards per down suddenly they are moving it 10, 20, 30 yards at a whack and in less than 2 minutes they are down at the 10 yard line of the opposing team who is shaking their head in bewilderment. We are taking dynamics here. The “how” the movement was made as opposed to just measuring the movement. Samathing in trading boys! Linda Bradford Raschke, years ago, made a statement that I have never forgotten. “The best indicator of price is price itself.” “Where” it goes to and the dynamics of “how” it got there. ok now let us look at some annotations I made: 1) look to the far right. See the magenta colored thick horizontal lines? See where the 50% PB point is at. On all my adding and averaging down none of it was close to the 50% PB. If the PB goes above that and gets close to my first red X SL then I gotta be thinking I may be wrong here. I may need to exit and double up and go in the opposite direction. If it reaches 70% to 80% (around the area of my second red X wider SL) then my premise is blown. I have to get out. I don't use fibs in trading but 50% is a very logical place to gauge the strength of PB’s and help one make good judgments on PB‘s as being strong or weak. It is mathematically sound I can tell you that much. At least from what I have observed. 2) Look at my dashed blue and red lines. From the point of my last averaged down entry what has the higher odds..that price will go south to my blue x PT BEFORE it goes north to my first SL (narrowest SL)? Considering ALL of the above info that I have written thus far in this post I would postulate that the odds are probably 65% or greater that price will reach my PT before my first SL. That is good enough odds for me to hold my position. 3) What about my second wider SL? I would postulate the odds are even higher that price will come down to my blue X PT area BEFORE it would take out my wider SL. 75% to 80%. 4) In either scenario odds favor me first of all, even averaging down on the PB, and second of all, holding my averaged down position and waiting for a profit. BOTTOM LINE: Who is stronger here bulls or bears? Who is winning? Bullish institutions or bearish institutions? Which side do you want to be on? I know which side I want to position myself on so I start shorting. If price immediately heads south ....well I got a position on and making money. It it heads north momentarily on a deeper PB well I get AN OPPORTUNITY to average down short. See, the overall pressure is DOWN NOT UP. I know this looks like alot of stuff to internalize, much less apply it “live” in the markets but once you grasp the concepts, you can practice them live on a SIM. It should build your confidence to “read” PA better and execute better and take profits better and who knows it may drastically increase your win rate. Just work at it on a SIM and it will become second nature. But it does take a while. What you do with it after that is your business. I will not tell you or advice you to trade this with your real money and remember I ain’t selling education here I am showing ”how” I look at, and trade the markets. Many have influenced me over the years including Al Brooks. I have adapted much of what I have learned to trade in a way that makes sense to myself and fits my style and personality. This said, I am not a shill for Brooks or any other educator/trader but I will say I have found many concepts to be useful from a myriad of traders and have invented some myself. Hope this post is useful. Later will show a 30 minute chart and a 15 min chart of trade 8 and make a few comments. It will be a shorter post.
4-29-2020 I did take 3 trades today. Will explain later as I have to go to town. But here are 3 charts to look at. The first two are 24 hr 5 min of the MES. One with vol and one w/o vol bars. The third chart is RTH's. All three charts have the trades on them.
Ok I am gonna post the trades I took today. I took 3 trades. An averaged down long scalp. Next a straight 3 point long scalp (no averaging down) and finally an average down short scalp that lasted quite awhile. On the last trade after the initial entry I added to the position 5 more times (averaged down) then I exited all positions at the same time with my profit target being at least 1 tick beyond my initial entry. I didn’t have much time today for trading but the 3 trades were winners. That is all the trades I took today. If someone out there has been following along watching this journal and attempting to understand the tactics I use in trading could please respond and tell us why they think I took those trades today, then that would be great. That is, the reason for my taking these trades based upon the principles I have been sharing. I am posting the 24 hour chart with the trades and volume show on it and some annotations. I am also posting RTH’s chart. Notice how both charts show a bull channel. Sometimes in trading it is useful to look at both the 24 hour chart and the RTH’s chart as often one will show a setup to trade while the other doesn’t. In this case both charts just showed a simple bull channel. Do you remember the principles for trading bull channels? One other thing. There often are many more trades to take that I miss because I am typing up annotations a a chart snapshot of a trade I took so I miss the next trade. Also, at times I skip a trade because it happens on a bar I already made a trade on and so as to avoid marking up too many trades on one bar I just wait for another opportunity on another bar. So, it will be less confusing my entries and exits. ok some one tell me why I took these trades.
Slept in today. Just a few minutes ago made my first trade. Will post later. In the meantime I want to post 15min and 30 min charts of the trades in post #561. My post #563 was a 1 hour version of the trades.
It is clear to see why you took the first two trades: pullback in an uptrend/bull channel/above MA's. No idea why you started shorting there though. Also wonder where your stop was. I can see a short on higher timeframe, but I guess your question was about the chart you posted. So explanation on third trade and stop would be appreciated.
Here is a 30 min chart and 15 min of 4-28 (post #561 trades) I will make a few comments on these two charts. Just look at the bear bars preceding the PB then look at the PB on both charts. Notice the difference in market pressures at the moment of the PB. Compare that with the selling pressures to the left. Do you think the probability is higher that price would reach my blue x PT before it will reach my first red X stop loss? What are the probabilities of it reaching my second red x SL before it does reach my PT? Also, look at the thick magenta colored horizontal lines. At the point of my last averaged down entry, price, had not yet retraced 50% of the large downward move since the open. Also notice the bar of my last short averaged down entry has a tail on top (selling). Would you hold or dump this averaged down position of 4 contracts? I would hold it! Odds favor it will reach my PT before it hits either loss. ok one more thing. Lets say price retraces and is about to take out my first red X SL. Should I let it be or should I slide my SL wider to the second red X? Well it is ok to do either i.e. take the loss or widen the stop. My premise is still intact. However, if I widen the SL I have to be cognizant that I am operating on LESS probability that price will actually go down to my PT (blue x) before it hits my widened stop. Because momentum is now starting to swing the other way. So, basically by widening my stop loss I have decreased my probability of having a successful profitable trade, even though my premise is still intact. What is the solution? Well if I am going to decide to widen my SL to the second red X then I NEED TO BE PREPARED TO AVERAGE DOWN SOME MORE, to be able to make the distance ”needed to be traveled” LESS that price then has to move to make this a profitable trade. In other words, I will be in effect bumping up my blue X PT towards where price is actually trading. By being willing to average down even more after widening my stop loss, I am basically INCREASING again my probability of a successful outcome from that previously “just lowered probability“ that occurred by widening my SL. Widening my SL is allowable AS LONG AS MY ORIGINAL PREMISE IS STILL INTACT and I am willing to use tactics to increase my probability of a successful outcome (namely averaging down even more!) However, just taking the loss at my first red x SL level is OK too then I can just look for another entry and double up on it. My decision made “live” would depend on my risk tolerance, and to some degree my mental and psychological frame of mind at the moment price is approaching my first SL. Either decision is a correct decision. The incorrect decision would be to widen my second level SL even more past that second red X. That would be a mistake because my original premise has, been by that point, been invalidated by PA. At that point I would for sure just need to exit and look for an entry to double up on and get back my loss quickly.
Hello Volpri, For some reason I was not getting your post alerts. I am back to following you daily now. Thanks for all the hard work you do.