Just want to make the chart from today pretty. We have a classic mean reverting day. Double bottom, double top, 50% level being quite prominent as to the area where lots of trades hover around.
For May 12 Overnight, price was bumping against 3552 for hours until it took off to the upside, and bounced off just under 3570. The midpoint of this is 3561, but since price spent quite a bit of time between 3552 and 3558, I will also plot in the mean of this at 3555 since many trades happened in this area and this might provide a level for price to come down to if it comes down. We have a previous day high of 3552, the level which overnight has become "support" from the "resistance" of yesterday, and the low was 3510/11, which formed a double bottom and hence well tested. I observed a mean of 3525 yesterday around which price traded before taking off the upside. Its interesting how yesterday Niko pointed out the hinge in the daily chart, with the apex at 3550, and this is exactly where price closed yesterday. We are in an area now where the charts are quite cluttered with so many levels on the way both up and down. I know this threw me a bit yesterday. I'm quite disappointed with how I was shorting at the bottom of the move after open, and I bought into what ended up being a top, just because price had crossed a certain boundary/level. (perhaps not disappointed since I thought and still do that the trade was legit, but disappointed that I didn't take the 3rd trade which would have been a very profitable long) It wasn't until the chart was complete that I could see traders trading around the mean, and the double tops and double bottoms that formed as a result of them going back to the mean after venturing to each extreme. And of course they eventually went off to find a new mean, so just as I found something, it was gone. So for today, will be watching what price is telling me at the open, to see if traders are looking to go up or down, and waiting for a breach of the overnight high and low. I am finding the opening range to be quite telling as well, and a swing high or swing low is fairly prominent as a rejection that sets up a move in the opposite direction, especially when price fails to even reach a previous swing high or low to form a double top/bottom. Db says to not trade around the mean, only at the extremes, this is the basis of AMT. But I also see that once price bounces off a certain level, it has to get through the mean to get to the other side, and if a range is small for example, shorting below a higher low can be close to the mean on the journey down, so this I'm hoping is a case where the rule can be broken. Trading at the extremes is also a case of looking for the reversal, which is exactly what happened yesterday, although I guess I was trading as if it was a continuation after price broke a certain level. So figuring out if we have a reversal or continuation would be most helpful.
So not that great of a day in the end since I'm down 4 points, but it is at least helping me see things more clearly. A - Seeing as we broke just slightly above the overnight high and we have a clear RET, lets try for a long here, just a SIM trade. Wouldn't go far, but fairly certain I could scratch for no loss. B - Hit a high.. still waiting to see how the opening range is shaping up. C - Here we hit a low, and just now I am noticing how this bar opens and closes on a the high. Now it is true that just a few mins later we go lower, but for at least 3 minutes the REJ seems to hold. D - We have a higher high here, but it breaks down. This morning things looked a bit odd, so I stayed away from placing an actual trade because I just didn't know what I was seeing. E - Here we make a lower low. We also break below the overnight high, but 3568 is rejected fairly quickly. The move up from here was very quick, very unexpected. What should this be telling me? I am trying to figure out a rule for REJs right at the open. It seems that immediate ones just a few mins before set up good trades, but at the same time, can be broken themselves just as easily. We have a higher high at B and D, yet both break down. We have a lower low at C and E, yet we ultimately go up. Not sure how to put it all together. F - Another higher high here, which does ultimately hold. Was the slight bit of hesitation here because of the 3580 level? Who knowS. There is a bit of a double top at F, but the next bar breaks through and doesn't look back. G - Seeing the BO, seeing a RET, I think lets just plan to go long here with a SIM trade, entry around 84. Shame... this one ends up working well.. not for a huge profit, but never goes into loss. Will make some conclusions about this at the end. H - So finally a real trade is placed. There is a bit of a consolidation around this 88 level, which may not mean much anymore, but I place a stop to go long at 91. Get filled and instantly drops. Hang on for a bit, perhaps a bit of hope, perhaps to give price a bit of room, waiting to see if we can at least hold the lows of the bars. Finally get out for a 4 point loss. I have a skill of buying or selling at the worst possible spot, but will address this as well. I - This hinge is outlined by Db, but I didn't see it because my chart was too spaced out. When I compressed the bars, it made more sense. Price eventually breaks to the upside. Db does say most hinges end up breaking out in the opposite direction of the initial moved, but this one didn't, and from what I have seen, I haven't formed any firm conclusion. If anything, I think its best to just take the BO, perhaps after a RET, and if it fails, just scratch like any other trade. J - The formation of our hinge that began at 3594 which provides a level of resistance also becomes a level of support as the day progressed. K - For the next hour we are just stuck in a range, barely able to go above 98 but not below 94, and this gives us a mean of 96. We could have been inspired to go long at the break of the top line above 98 just past K, but this quickly failed and price returned to the range. On this one minute c hart, there is no RET, but you can see how there are RETs on a smaller time frame. At least if you follow the rule of waiting for a RET on the one minute, you would stay out of trouble. I do enjoy drawing all the things I see after the fact, but its certainly not helping my trading! CONCLUSIONS Well its obvious that I got into a trade at the worst time yet again. Its too early to form any solid conclusions, but my SIM trades seem to always go better than my real trades. The real trades happen after the move is already well established, and a continuation is I guess always less likely once everyone else also sees the move. I am also using the levels, waiting for a breach, but I'm not sure if this is helping anything. Rather, its just hindering more (my gut feeling is that it can be used very effectively once you know how). Overnight ranges I still like to plot, and its important to be aware of all levels I guess, but waiting to clear certain levels isn't making me any money, its losing me money. I just didn't see much juicy stuff today mind you, and all we really had was a move up about 30 points, but this move didn't really start till about 80, and it really started to consolidate by 90, so the opportunities just weren't as plentiful today. The good thing is that my one trade didn't phase me at all. I wish I put on all trades, I would be in the positive by a few points, but all I remember thinking when price was going against me was lets just wait a bit, and then get out. Nothing too drastic at all. If anything, I was already thinking if I should just SAR and go into short. I didn't, which is a good thing too, but being able to move on so quick is progress!
Prep for May 13 First I gotta say, its quite frustrating to be trading in the right direction like yesterday, but just buy at the worst place, the top of a crest just before a RET and have to sell after taking on a few point loss only to have price turn around and go higher. Clearly this means I need better entries, entries much closer to the beginning of the initial move. So we ended up breaking the high of 3604 which was quite prominent given that this level wasn't bought several times over many days. Overnight we hit a high of 17, which is also a top on April 24th. Our low overnight is 3607.50, but in the past few hours, 3609.50 stands out as a low. The mean of all this is 3612.50. Above 3618, we don't have much. Perhaps one zone of congestion around 38, and another top at 57, but there certainly is quite a bit of air space if we do break up. Going down, so many levels. Will try and not make this a distraction today. Just want to focus on the immediate action, trading in the right direction, and getting into a move early enough so that minor price swings aren't stopping me out.
A - Seeing the drop at open, a minor RET, lets me place a short here. The idea is that we are still a few stops away from the overnight low, so can scratch for BE, and if it breaks, we are already in a trade. Would have to scratch, but perhaps for even a point profit. B - This bar tells me a few things. It fails to go even above the opening high, and it drops below the low of overnight, but it does close more than halfway up. Place a sell stop below this bar in case it comes down again, but it doesn't. C - We continue up, and have a major REJ at 15. We probably need to wait for 2 more bars before this REJ is obvious mind you. D - So here we are, two bars later, and I'm thinking to try for a short here... still just a SIM trade. Taken from the 15 sec chart, but actually, it looks like its just one point below the low of the previous bar. Once again, we can at least make it to the bottom of the overnight low, and since we have a REJ at 15 going up, I'm making it a rule to trust the price action that is most recent, not the fact that we couldn't go down at B. E - Perfect trade here. REJ at 04, that 3604 which is so prominent. No trade taken. REVs are hard because the trend is down, so you expect it to continue. But a REJ at an important level cannot be overlooked. F - Here we form a higher low, but the bar is so large that buying above it means that we are pretty much buying at the mean, and we are practically 8 points already away from that REJ. We can although already draw a DL, and we find out later that this line works quite well. G - Good confirmation of the DL here, and that oval outlines the REJ bar, quite prominent. Once again though, we are right at the mean, so can we act on a trade above this bar based on the REJ? H - Here lets place a stop to go long. We have the REJ the bar before, we have our DL and also just a few bars before this we have a higher high from C. Yes we are once again close to the overnight high, but as I have seen from my real trading, these levels are messing me up a bit, so its important to watch, but no reason not to take a trade just because its there. Getting in early here, I can also scratch at BE in case it bounces off 17. (of course the best trade was still going long must sooner at 04) I - No reason to turn around here, but I will note that this excursion above the overnight high is just as far away as the excursion below the overnight low, and hence both are equal distance away from the mean. So the fact we head down towards the mean is of no surprise, given a Mean Reverting Market! J - So here we are, at the mean, but we also have a clear RET after our DL break. No reason not to take a short, other than of course we are trading at the mean. The nice thing is this trade is zero risk for a few minutes at least. K - Double bottom, overnight low. Back to the mean of course. Jesus, this trading thing is almost easy... in hindsight of course! LOL L - This certainly looks like a double top below the overnight high but.... M - Here we have a clear REJ. So now I'm starting to add it all up. REJ at 04. DB at 07. DT at 17, but also a REJ at 13. So it looks as if up is still more favorable, but it will be tough going. N - So now a REJ at 19... more to confirm it will be tough going forward. After this, the bars just overlap so much that I'm not sure what to do with it all so tuning out as I start to type my journal. CONCLUSION If the trades were taken as shown, I would definitely be a few points ahead, although this might be over trading. Mind you, if it ended up being a trending day versus a mean reverting day, then getting into a short or long early enough would allow me to just sit back and watch. The opening range I believe has a slightly different set of rules than at other times. Trading towards a mean just means that you will be in a trade sooner, especially if a price level is rejected, since you will have to go through the mean to get to the other side, and then it might break even lower. As Db said, SLA would be important today which allows you to trade into the mean. In fact, SLA seems to be doing much better than all the other stuff I'm adding or looking at. Hmmm.... ADDENDUM This cascade down offered so many opportunities to just short below every RET, and then of course there is the double bottom at 07, which forms with the previous double bottom at K, which was the overnight. Might just be a deep RET after the cascade went a bit parabolic though. Why I didn't take a long at 04 I don't know... its bugging me. I saw it in real time, he rationale for taking a long was solid. Maybe the entry was just iffy... no clear entry until much higher above.
Lets make the prep easy today. Hit a high of 3615 overnight, and have been coming down in the past few hours, currently at 3597. No sense in drawing in a mean since this isn't a range. And since I'm not doing what I should be doing when I'm outlining certain levels to watch for (like 3604 yesterday which was a perfect place to go long), there is no point in putting this much work into the prep until I teach myself to actually do something about it. Clearing up the bit of confusion about trading around vs. through the mean was a good read by Db. The critical thing that stood out for me was how he uses the information that price is giving him or not giving him to ascertain if the mean is in fact still in play. Since the mean of the overnight range yesterday wasn't having a huge affect on price as the opening progressed, its prominence was lessened and therefore the worries about trading around the mean didn't have to come into play. SLA therefore was more important yesterday than AMT, and as always, looking at what the market it telling you right there and then takes precedence. Including a chart with the overnight action and the levels just for completeness so I can review later on. Will try and focus today just on following price and putting on a trade!
So I'm changing up the colors a bit for today's chart because I want to make sure to differentiate between real live trades and my SIM trades. Blue and red entries are the real trades as provided by the platform, while the green up arrow is a long I'm thinking looks good, while a purple down arrow is a short I'm thinking might be good. A - 3 minutes into the open, I place a trade to go short at 3598. The funny thing is that on my chart, the bar doesn't even come down to 98, but one tick above, alhtough I still get filled. It instantly goes against me, I never see profit for even a second. Got my platform setup now to give me an automatic exit at 3 points loss, or a profit of 5 points. This is mostly in case of internet issues or sudden spikes. The idea is that I will change the stops once in the trade to either BE when it goes in my direction, and also change the profit target when it moves up since I'm exiting based on behavior not reaching a certain target. Being down $68 instantly doesn't phase me at all, I don't think my heart rate even went up to tell you the truth. I know these things happen so just keep looking forward. If I can learn anything from this, it might be that I jumped in too soon. I saw the REJ of 3602, and wanted to get into a short, thinking we had at least some room to get to 96, the overnight low, which is a legit trade. But I didn't give the opening range enough time to establish. B - REJ here at 3605... possibly due to that 04 level that has been prominent lately? This would be a better reason to short, but no real entry based on 1 minute bars. C - Here we have a bounce right at the overnight low, and green arrow placed one point above this bar to track how a long would work out. This of course is also the SLA entry as outlined by Db, although we don't have a RET here. Dammit, once again, the good entry not taken, the bad entry before filled and exited for a loss. D - We have some trouble here, hit a high, test again a few mins later with a lower high and drop down. E - Below this line might be a good short, but of course I say this just in hindsight. The lower high at D though is a good reason, and breaking below the line at 04.50 which provided support for a few bars is also good reason, so a short at 03.50 might be justifiable based on trader behavior, but nothing to do with SLA or AMT. F - Turn around here at 98, which was the mean of the little range just before open, but its a fairly obscure level that hadn't established itself over a long period of time. G - This REJ bar jumps out at me. My rule is to see how the next bar closes to see if it will in fact stay as a poke below with price going in the opposite direction. Once the next bar closes, we are already over 6 points away, so although the REJ of 3602 is confirmed, price is just too far away now. H - We have the same thing here as at D. A series of lower highs, but also a clear support ledge below. I - Here we can draw in a "support" line, with the idea being that a break below by a point can trigger a short, as tracked. It would be filled, tested 3 minutes later, so not sure if I would have held on, but after this, the drop would lead to a few points profit. J - This low forms a double bottom with F, but the rally up isn't strong at all. K - Because of the lower high just above the letter K, I try for a short here. Once again, we have room to get to 98, at F and J in case we have a triple bottom. In addition, we tried to go up a few mins before but couldn't, so the short is justified which is also a live trade. Its hard to see in the compressed bars, but its filled, instantly goes against me, and I'm out for only 1.25 point loss. Looking at the actual time stamps for the two trades, the first trade gave me a thrill for 26 seconds, the second trade gave me 36 seconds. All together, it took 62 seconds to lose $98 without ever being in the green once! I am of course not doing this for a thrill, and I'm not bothered one bit, just waiting for a better trade really. L - We have a bit of a rally and form a range between L and M for 15 minutes. If we try and take the short below 04, it comes back to our entry right away. If we try and take the long above 09, it also doesn't go far. Both of these trades might be scratched at BE, which wouldn't be so bad, and I think breaks like this are legitimate, with one caveat. The caveat is this whole damn day has been within the bounds of the overnight range. I'm not sure if I have even seen price stay within the overnight range before. It might break out one way, reverse to come back in, and break the other way. So I'm not saying that once it breaks it just keep going, but it does for the most part at least go to find a different level somewhere else. If anything, the traders who do their thing over night have a different idea of what value is than the traders who do their thing during RTH, hence why we see price differences between these two trading session times. But today, we are just stuck in this range. The REV at C, the overnight low, is I think the best and clearest trade of the day. How many times have I said this about double bottoms and key levels and yet not done anything??? CONCLUSION I feel quite good actually. God, I remember actually trembling when my trade got filled not even two weeks ago. I literally prayed that price would go in the opposite direction so I didn't get a fill! LOL Now, I see that getting filled just means price is heading in my direction and the chances of a making a few points are good. Sadly, these past few days have been a case of price moving against me right away. I'm down $98 today, down about $80 and $60 in the previous days, don't even remember the exact numbers now. All of these are small losses, but sadly they are losses for a few days in a row now. My chart reading is damn good though, and I especially like my explanations after the fact. The trick is doing this in real time. I of course especially like my SIM trades for the most part. If only I put those trades on, I would be very much in the positive. I also see that Db is showing SLA trades for the past few days, and this does in fact really help when we get crummy days like the past few. So I appear to be not much smarter than just simple SLA entries yet, but the idea is that a combo of SLA and AMT, along with some simple analysis of what traders are doing at the very moment will I think all combine to a winning strategy. I will keep placing live trades as its the only way to move forward. SIM trading isn't giving me "firm" data on how I trade. The losses are still small, and eventually there will be some winners, so its still full speed ahead!
Hello KP Just to tell I am following your journal with great interest - and sure you doing a hard job today. Thanks for sharing your journey to profitable trading. I think I myself are in the same level as you - trying to do the right thing- and struggeling a bit though. Fantastic that DBP and other experienced traders is on the sideline with good advice and encouragement. I am actually studying the SLA technique and looking forward to give the futeres trading another go after blown a small account... My plan is to implement a strict money management plan in my day trading. I am wondering why you not force your self into, let say 5 trades pr day at least. I know this can be costly if its all loosing trades - but if you get scared after two losers in a row you, maybe need to get up riding on the horse again. And get some confidence??! What do you think? Best from Pjort and once again thank for sharing.
Thanks for the post... at least someone is reading my journal! Forcing trades is a really bad habit. Trades should only be taken, first, according to your trading plan, and second, ones that have the best chance of success. According to AMT, this would be at the extremes. According, it would be the RET after a nice break. And when you're new, you practically want to trade everywhere! LOL... Often each day there are only one or two good trades, and the rest are either cause you are chasing the market, or because you got out but want to get back in. For sure you need to keep taking trades if your last ones got scratched if the opportunity is really there, but this is a balancing act. So much of trading has to do with being comfortable with the unknown, yet knowing how to identify that an opportunity is actually presenting itself. At the end of the day, it becomes obvious where the good trades were. Hopefully I will soon be able to spot this in real time as well and put the trade on.
Before I get into today, I've been thinking about yesterday, and that second trade bugs me. Even though in post I noted the double bottom at 3598, I just didn't see this in real time, and so taking my second trade, the short, was just bad as I was shorting only 2 points above an area that traders showed they were willing to buy at. No wonder my trade went instantly against me. Doing a post analysis is tricky because you don't know if the trade didn't work because it was a bad trade, and hence you should learn from this and not do it again, or if the trade was in fact legit, and there is no lesson, its just the statistical advantage for the trade didn't work out in your favor that time. This trade in particular was bad, and the bottom where I sold, was in fact the trough of the RET, a higher low, after the double bottom, so no question here about what to learn. PREP MAY 15 We have an overnight high of 3606 which looks very much to be the level of that apex from that big hinge that formed yesterday. Perhaps it should be a point or two lower, but close enough I would say. We have a low of 3589, and although this isn't exactly a range, the midpoint at 3598 certainly looks like it is a mean of much of the overnight action that was often within a tight range, so I will plot this on my chart. The level of 3604 has been prominent, but perhaps its getting old as price just goes right through now, but I will keep this on the chart. Following the great discussion at TL in Niko's journal, the idea of taking just one type of trade that you know very well and mastering this before you move on has been discussed. If I was to do this, I think I like double tops and double bottoms at key levels. These are easy to spot, if you are looking for them and don't miss them of course like I did yesterday, and they also either work or they don't, and you usually know this within 1 point. But of course I am a bit impatient, and I would also like to just try and keep going forward with the SLA more so, although as Db points out, the DT/DB is in fact a RET itself so a legitimate entry. I don't think I can just stick to one type of trade for now, but I am certainly processing and evaluating all of this info for deliberation.