I cheated and read some news as well before the open! I find it interesting that one set of traders overnight, the Asia/EU market often has a completely different idea of what the price should be. My feeling going into the open was that there were lots of levels in this quick rise up that were missed so we needed to go down first, but its just funny how you never really know and all of these huge price swings are just created by the damn traders trying to make the most money, so they let it go higher in order to be able to short at a better price, then let the price drop so they can buy nice and low... rinse and repeat.
Just a quick update today. I'm making myself sick with the realization that I'm doing wonderful post analysis, and yet I'm not making firm progress with testing rules for a trading plan that will work in real time. I am using SLA as the backbone, but just trying to figure out where I shouldn't take an SLA trade. I just cannot leave the roots of following price in real time and making decisions about what traders want... evaluating the imbalances between supply and demand. The worry is that that this real time thinking is subjective, so I really need to figure out what I'm looking for as rules to eliminate trades, and test how often I'm right to know if I have a statistical edge or not. On the 5 min chart, I note a hinge way early in the ON session, but the apex of this hinge seems to set up a well respected resistance level. A firm support level gets established at 4142. On the way up, we break past the apex and go to 4160 before the open. Now onto the 1 minute. A - We head down first and stop just above this DL that I've taken from the 5 min chart. We only drop 4 points below the open and respect this DL. Of course a long marked above this bar would have been an excellent trade. Its not exactly SLA, unless we can to consider it a RET above the 5 min DL, but after my link from last week, this really is more of a pullback, not a RET since price has risen quite strongly and that RET really is only after a BO. I should also note that this level is also the 50% level of the up move from the low at 42 ON to the high at 60 just before the open. I didn't exactly see this in real time, but its quite prominent when you look at the 5 minute chart. B - Here is the first RET after the SL break from the open. That swing high 20 mins before the open is a bit of a worry. (I know I shouldn't worry until price tells me to worry) C - Seeing this bar above essentially double top, I would very quickly think of being in a short now. D - The short doesn't go anywhere, and since the low to the right of C is in fact a higher low from the lows below B, I am changing my mind yet again to a long trade now. Is this bad? I don't think so at all. If I was really nimble and had taken each of these trades, I could very likely be out all of them for almost BE. I've been analyzing my past trades quite a bit in my head and my losses are due to holding on too much, as well as of course not letting profits run. There are times, like in a reversal, where you can and should get out right away if price just doesn't take off in the opposite direction, and this is one of those times where I think it makes sense to just get out once price comes back to you. E - Slightly HH. F - A LL here that respects the DL we can already have drawn in. (Its stupid to say that price is respecting a line mind you... as if the line actually has a say in what price is going to do!) Huge breakout after this low. G - Technically a RET after the big push up, and this is above the PDH, but I don't like this type of RET, nor do I like a trade just above a key level because these can be fought over a bit and stop me out. They can also penetrate a few points to make it seem like there are enough buyers to take it higher when there in fact aren't. H - Noticed the frenzy here... check the news.... never though MFG data could cause this... but good to know. This one is funny because at first the rise up seems solid, then its quickly rejected... but up it goes again. I - Forms a lower high here. How wonderful would a short below this bar be... didn't see it in real time though. In real time, I am just too enthralled with the frenzy up, and given the quick rejection, its hard to know what to think. I guess I have to train myself to not think anything and just act. J - Yet another LH here... a short below here would be even better, but I don't note it in real time. I figure we are still above the DL. K - Finally drop below the DL, so this short here should be a solid trade. L - I see this swing low from earlier, and sure enough, it acts as support here again. (I don't even have the DL extended in real time, but when I do it here for this chart, I can clearly see that we didn't drop below.) Going long above this bar could be a good trade. Its not an SLA trade once again, but one based on very good logic and following price. I should note that coming down to here is way below the 50% level of this up move. So what to think about this? I guess this means that the uptrend is over, but no reason why this couldn't be a wide range, so making a few points on the way up is more than possible... lets just not expect to make new highs since we dropped below 50% of the up move. M - If I was to wait for an SLA trade, this RET here qualifies. The trouble here is that the SL coming down would have to be very tight so as to break. Losing the lines, noting the support at the previous swing point, and seeing the higher low here is what makes this a solid trade though. SUMMARY Well, so much for a brief review. There for sure were really good opportunities today and many that I saw. The trouble is doing what should be done if trading with real money. Sigh... in due time I guess. I should also note that, as per my third chart, this whole day after the open has been one big hinge, and it seems like we are just breaking out of it and above.
Spent a good chunk of yesterday reading Wycoff's Day Trader's Bible. Its amazing how much of it still applies today. I found it curious that he always enters with market orders, but perhaps times are different so our stop limit entries is what is called for today. Anyway, the other part that I found interesting, or perhaps I just forgot from reading him before, is how much he talks about 50% levels. He fully expects price to retrace 50% of the move after he's in. So if he went long at 50 and price went to 53, he expects a retrace to 51.5 without this causing trouble if it doesn't go below. Anyway... moving along. A - Before the open, there is this range I outline, complete with the mean. (Tanget: I have also spent quite a bit of time going over some of Db's stuff over at TL where he talked more about S&R. To be honest, I found it all a little confusing. So many lines going everywhere! Its hard to make sense of how they are drawn. Swing points are easy, but there are just so many tiny ranges that then produce a mean, and with the charts he was using at the time that had a grid pattern, there were just so many lines going all over the place. Now these were higher time frame charts, so on a 1 minute chart, there might only be one of two levels that come into view... so I never did get a chance to explore how this would affect day trading, but man, figuring out these ranges and their means gets a bit subjective for me. Its like drawing trend lines... you can make them tight or lose, and hence can make them break if you want or not. So you either need to develop more skill and a sense for how to draw them, or you need something a bit more objective to use) Anyway, saying that, I focus on the ranges that I can see and here is one, so lets mark in the mean. (it does actually turn out to be useful) B - This is a no brainer here. We had excellent support yesterday at 42 that I outlined in prep, which is also the PDL as well, so although we poke below, we very quickly come back up. In fact, we even have a range up here, from 43-46. C - This first move up comes back down to exactly the 50% level. D - We come up some more and curiously turn around at the mean of the that previous range which now seems to be providing resistance. E - We retrace down to pretty much exactly the 50% level of this compete up move now from 41 to 51. O - We open here, and try up first, but this is quickly rejected. We end up forming a higher low, so I mark in a short below the first bar. This all happens very quick but it might fill on the way down. F - We only make it down this far. (Its beautiful how this all works when you get your levels right). There might have been a few points to be made here if you're quick to get out. G - So after that huge down bar closes, I can now mark in a long here. We have a solid REJ down at 42, but this entry of 48.50 is just so far away from 42 if we go down to test it again. So I might get filled, price might drop, and none of this would invalidate the trade unless we broke 42... so this is quite risky. H - I was also prepared for a short in case price came down again. We are in a downtrend after all, so if we break 42, we might have a great down move, and getting into a short above 44 might still give us room to get out in case 42 holds again. Price never did come down so nothing to think about here. I - So that first long from G would work, but here is the official RET. I found this one tricky because had I entered here, I'm always scared of double tops and no room to get out. Something about the action here also made me think that buyers just weren't jumping over each other to buy, there wasn't a huge thrust. As it turns out, the trade would trigger and drop back down into congestion. Each one of the next few bars has a lower low, and although price does move sideways, so not straight down, this doesn't look good. I note the 50% level of this up move, so we don't penetrate that, but all of this action after our entry is still means that the trade is in the negative at the moment. J - There was a big instinct to put in another long here. We successfully stayed above the 50% level, and the next few bars after the low just above 50% have a higher low. The trade would fill, we have a higher high, but come back down again. K - As we come down, we would go through the new 50% level of this up move. L - Not noticed in real time, but here is a hinge perhaps, given the lower highs and higher lows. It breaks out the bottom first before going higher. The trouble with this hinge is in happens in an area of consolidation, and even now you can see how it just looks like a messy trading range of some sort, not a perfect hinge. SUMMARY Ok.. I know I'm stopping early... but once again, I need to be making a plan. We are after all going up, but unless one gets into a long from the bounce at 42 right after the open, this is all quite messy. If you're watching a tick chart, and you see your level at 42 which I think many knew about, getting in at 43 or 44 with a tight stop is more than possible. It was an easy 10 points up, although perhaps once we broke the 50% level on the way down, only 5 points might be captured is this long was sold. I have been talking quite a bit about holding longer. Sure some days price might go completely back to your entry and you get out BE and make no money. But you know, often enough, price takes all day to make its move and somehow ends up 30 point higher and you wonder how it got there. So if the goal is to make money, letting some go to BE might be what is necessary in order to get those 30 points moves, and might be more profitable in the long run than just getting out each time for 5 or 10 points. This of course requires testing..... sigh.... Today would have been a good day to be in SIM to see how nimble I could be with all of this shit that I say I see. Could I really take that first short on the way down to 42 right after the open? Could I really quickly reverse and take a long? Could I add to the long once a proper SLA trade sets up? Could I hold the longs when the first 50% level isn't breached? Would I get out at "K" when the 2nd 50% levels is breached? Would I see the hinge and take the exit down, and perhaps quickly switch to long once we faked going out the bottom at "L"? I don't doubt that I wouldn't be able to do half of this. If in SIM, it might be easier to follow price since doing the right things is easier when loses aren't a worry, and not knowing what is going to happen doesn't bother you, so I'm not sure how well my simming match trading with real money. Sadly, my only excuse for not doing it is because if I see a really really good trade, I want to be able to take it with my real money so that I can at least make a bit of profit for all my hard work. I guess I'm very much putting the cart before the horse, but this is at least my honest answer, so hopefully pointing out my stupidity will help others. I really wanted to do just this week of SIM... then see if at the end of the week I'm actually up in points which would give me the confidence to see that I kind of maybe have a clue about some of the stuff that I'm doing. But 2 days into the week now, I still haven't ventured into my SIM account for fear or losing out on a good trade, but this is of course just hindering my learning and growth, and this ironically is actually hindering being able to put on that good trade. Sigh.... CONTINUED So as I was typing all this up and just casually glancing at the chart because it was all messy, a perfect opportunity presented itself.. which of course I missed. M - Here I note the lower highs. N - Here is a level of support after our series of higher lows getting up to here. P - We break through the support, quite hard, and this would be the first RET after this down move. Its a trade that would fill, but after such a quick thrust down... its risky. This is exactly why its risky.. price shoots back up. Q - This bar above just pokes that support level. After coming up this far, you absolutely have to be trailing a sell stop below these bars, especially once we hit that previous support level which now may be resistance. This is a perfectly set up trade, and although it might go against you for a minute, look at how the drop continues. R - We come down to the previous low at "F", and it looks like we have a nice bounce. S - If we tried for a long, one point above this bar, it would fill, but fails very quickly. This down move is just too strong so lets not mess with it. T - I note this hinge in real time. Sometimes price breaks through a bit, but it only widens the limits of the hinge as here. U - We drop out the bottom, and even come up to test the apex before dropping down lower. Sigh.. this sucks... such a good move... zero profits.
So as we drop down... we have huge airspace on the hourly chart... nothing to provide support until about 4100. Lets see if we get there by the end of the day.
Lest those who read this get confused about what the SLA is, there are no "proper SLA trade" setups here and haven't been since Halloween, except for two yesterday. SLA doesn't work well in a range, if at all, nor is it appropriate for scalping, and although you said you were not interested in scalping, you continue to pursue this course. You may be trying to assess demand/supply imbalances, but what you're doing has little if anything to do with the SLA.
I guess for me, when I mention the first SLA trade, it would be based on this SL breaking. Granted we are very much in a range, but once price rejected 42 and came up and broke whatever SL we could have drawn around the open, then this first RET I would think qualifies as an SLA trade. (I guess I'm wrong though ) Now if what you say is in reference to using the hourly charts, then this is something I haven't really explored yet as the stops just seems so wide. (although your PDF of course mostly uses the hourly charts). Its true that I don't want to scalp. I want to get into a move and then just do less, but this isn't always possible I guess until you get the best entry... so perhaps I'm thinking a few scratches and some re-entries are called for until you're in and price takes off in your direction. I guess that ever since I read a reply you made a couple of weeks back with reference to using 5 minute bar charts, and saying that this gets you into the move late, which I can of course see as well, I figured that focusing on the 1 minute chart was still the way to go, but of course making sure to be looking for trades at the extreme.
For me; that's more of a "trend line" than a "supply line". Depends on what you mean with "best" I guess. Some places are better, some are worse. If you want to catch a move that will be registered on the hourly then you will have to be nimble. If you want to catch a move that will be registered on the daily with the hourly, then you will have to be nimble, but not as often; your adrenaline will not pump as much, and it is easier to step away and regroup. When I relax and don't strive for perfection then it usually goes better.
Hey Roffe... happy to see that you're reading! Hmmm... interesting points. So a trendline then is more minor, whereas the supply line I'm assuming would be more of a macro view? The reason I mention the "best entry" is because for me, each entry after that gets further away from that extreme level. So this morning, once 42 was rejected, any entry higher than 42 is at a worse price. Price could come down any time to test 42 again without it exactly invalidating the long Sure you don't want to get in at 52 and hold to 42 only to see it broken this time and not provide support, thereby losing over 10 points, but what if we stopped at 47... or just break the 50% level and go down to 46 or 45 before coming back up. Hence, unless I get in just above 42, exits have to be made once price goes against you and break a previous swing low or some support level, even if this doesn't invalidate the rejection of an important level. So much of what I'm trying to see is at what point isn't the trade working, not just where price has gone against my entry. To be honest, I am a bit confused with what Db says sometimes. So many charts he had been using SLA on the 1 minute chart. Then a while back, couple of months, I had this great discussion with him about missing the big picture, which I absolutely see. So this got me onto making sure I'm aware of where we are in the trend in reference to channels and the swing points on the daily and hourly charts. But when it comes to looking for entries, this seems best on a 1 minute chart. So in a way, I'm not sure how there aren't any SLA entries on the 1 minute chart today, but if he means to say there are no entries entries on the hourly chart because were were in a range of about 30 and 70 then this I could understand. I did quite badly with SLA in real time because my lines were too tight and every move against me scared me. But the principle of waiting for a RET after a BO for example makes total sense. So in a way I think that what I'm looking at and how I'm analyzing price makes sense, even if it isn't strict SLA. This I would be fine with since I wasn't doing too well with a purely mechanical SLA approach anyway. But I wonder if he also means to say that my analysis is just spinning my wheels again.
Upon re-reading your reply... I realized I glanced over this too quickly. If you have the time to extrapolate, I would appreciate this. I am all for less of an adrenaline pump and hence would love an example of catching a move that registers on the daily with the hourly. Perhaps this is something like price rejecting a swing low that is evident on the daily chart, and the hourly chart in some way also sets up a long if expecting a reversal from the low?
What I'm saying is nothing new. You've heard it before, from Db and from others, here and elsewhere. It is just pure logic. You do not get as many opportunities with e.g. an 1 hr chart as with an 1 min chart, therefore you will be able to keep yourself calm easier, you do not have to be 100% concentrated for several hours a stretch, and it is easier to take a short time-out so you do not go fubar. My point was mainly that you seem to want to be able to catch all the huge moves with 1 min charts (or 5 min charts, or..). That will require tons of concentration and re-entries, at least if I would try it. Some locations are better than others, but still, you never know where it will turn. If you want huge moves go to huge(er) charts. On the other hand, if I recall correctly, I think you answered one of Db's questions earlier that you wanted to day trade. So. Make up your mind.