Thanks... it certainly makes a lot of sense when you look at trading from the point of view of the trader who wants to trade, and if many don't want to trade at one price level, they quickly find another one that works for both parties.
Drats, didn't get my homework done over the weekend, was just too busy, but I will have lots of time later today. So for today unfortunately, I won't be able to add in what I learned from going over last with just just straight SLA. PREP FOR MAY 19 The rally into the close of yesterday I was unfortunate to miss since I was just watching casually, but since the whole day ended up being a hinge, we were bound to eventually break out of it one way or the other. Overnight, we hit a high of 3590 and are a low of 65, but it not exactly a range. Will check again just before open to see what the last hour did, but it looks like right now were are in a tight range of 75 to 78, so lets see if we break out of that before the open. I have my previous day highs and lows plotted in, and am very aware of the hinge that ended up being practically the whole day yesterday which has an apex of roughly 3560. The airspace that was pointed out yesterday is getting filled in now actually as a result of the overnight action as price has pretty much stayed in that level. From the point of view of the hourly or daily, we are still in that huge hinge. Any progress up or down and pretty much halted and reverses and we are heading mostly sideways. So for today, all I plan to follow, as last week, is the opening range, seeing what levels are rejected within that range, and hopefully getting into a move on a RET that is the classic SLA enty. Its only the deeper RETs that will be a worry as has been discussed on TL. I just don't want to hold for a stop greater than 3 points max, yet in some instances, there are cases of RETs that are bigger than this on the way down, even though the direction of the move hasn't changed, just the price spikes against you more than 3 points, thereby stopping you out of the trade before continuing in your intended direction. A quick re-entry is of course necessary, but I will have to really do some backtesting to feel comfortable with how often this happens and what the best course of action is. (The attached 10 min chart is a bit cluttered, but my 1 minute trading chart is a little cleaner... I know enough to not let these levels distract me though, they just provide some feeling of not being in the middle of nowhere, and of course for trade opportunities should price stall or appear to be reversing)
No trades taken today, but I have an excellent reason. I didn't have time to do my homework over the weekend of going over last week with just straight SLA, so I just wasn't prepared this morning. I have been intensely curious about the opening range, call it the first 5 minutes or so, and although I am of course trading via SLA, I am looking for entries that are somewhat quicker than just straight SLA. Db did say in a recent post that a double bottom or double top is in fact a RET, so taking a a trade off this might look as if we didn't wait for the RET after the move changed direction, since its already built into the double top or bottom, or rather, that the double top of bottom is that RET. So since I didn't have this work completed to see how my opening range entries stack up against straight SLA entries, I just felt I wasn't prepared this morning for getting into my trades, although I would have had another good day. A - Before the open, I want to track this short which comes from a series of lower highs. It wouldn't trigger here. B - We follow up with a REJ at 78, still before the open, and since this is just below the midpoint of the overnight action, it seems like a solid enough reason. Now this trade would have been placed after the next bar starts forming, after it hits the high at 77 and comes back down. Its because this forms a lower high, lower than 78, that this trade would be placed one point below the low of this bar at B. It would trigger, drops quickly, but 3570 is quickly rejected. So if taken, a scratch for BE could be made. C - In this oval is where I was seriously considering a long. Although we had reasons for a short before the open, at the open, traders rejected going down. A long one point above this at 77 seems appropriate. This bar below C hits a high, but closes a couple of ticks below. We see the next bar open at this same close, but then drops one tick lower and then goes up from here. This is in fact our RET, and would be clear on a 15 second chart. I could think about a what if scenario, what if price forms a double top at 78, but we just rejected going down at 70, and more important, we can't look at what might be, we just have to look at what is. This is fact is the type of entry that I am always looking for, where price just takes off. The midpoint doesn't provide any trouble (blue dashed line), nor does the prominent level at 80. And these of course can't be reasons to not take a trade anyway. If traders are showing they want to buy, that is all we should be looking at. D - By the time we get here, we have already rallied 10 points from where my entry would have been, and almost 20 points from the bottom. So now this entry worries me. It is the classic SLA entry of waiting for the RET, but 3 bars before this failed to go above 87.75. Nevertheless, lets mark in the entry at 88.50 and follow it. We do hit a low of 87 on the next bar, a bit worrying since its 1.5 points against the entry price within only a minute, but it doesn't last there long so this was a good entry. We eventually have a DL break, but its such a steep line that a break is expected. E - Here I see the potential for a long above this bar here at E. F - Here I also see a potential for a short, and since I see a short, if any longs are still in play, they need to be exited, and hence, perhaps even reversed right here. The long at E wouldn't trigger, but the short does on the next bar at 91.75. Price only moves 3 ticks against and eventually drops, but it doesn't go far. In fact, price comes up against 5 minutes later. G - If we are follow the SL down, we see another short could be placed here at 87.25, but it would never trigger. By the time price does come back down to this level, it looks too choppy so I stop looking for trades in this area. H - There is in fact an SLA entry here for a long, but I don't even mark it in because I'm not considering it. It does work, but only for a few points as price moves mostly sideways, and I certainly would have exited later as the REJ at I looks prominent. That is actually all I have. I know that price slowly crept up for another good 10 points, but I wasn't watching all that closely, nor would I have placed any trades. The ledge at J did jump out at me, but we are getting close to 11, and I am clearly not taking any trades today. In conclusion, if trades were placed at thought, the first short would have been exited for BE, at most a point loss. The second trade, the long, would have been good for maybe 15 points, and perhaps the third trade, the short that does trigger would have been scratched for BE as well. I will do my homework tonight and come up with some solid ideas for tomorrow.
Ok.. so I did my analysis for last week. Not so much an analysis, but perhaps more of a mechanical approach following the SLA method. I didn't always wait for the RET mind you, I know I would have wanted to get into a trade at a good price, but I tried to follow it the way I would if I was trading SLA in real time. The purple and green arrows represent where the short or long would be placed, and its then usually filled on the next bar. The black arrow represents the exit, which means having to buy back the contract or sell it, hence the arrow in the opposite direction. I tired to stick to 2 point losses. I really have no inclination to test if 2 is better than 3, and I'm sure when in the middle of the trade, I wouldn't be as rigid with my rules. Furthermore, some trades are at BE, but I'm fairly certain that in real time, if my first trade was a loss of 2 points, and my second moved forward 5 points but stated coming back, I might close at +2 points such to cancel out the previous loss without waiting to come all the way to break even. I think when everything is said and done, the trades that work, just work and take off, and for the ones that don't, there is no point in figuring out where the sweet spot of profit vs. BE is. I found it a bit difficult to get into the groove because I found myself wondering what I would really do. Forward testing is more my style, where I just plot the trades on the chart and follow them, even if they are not in fact taken. So the total as you can see for 5 days is (+1 -1.5 +5 +20 +14) = +38.5 My commissions are roughly a tick for each round trip trade, so lets assume 4 trades a day, that is one point... so lets take off another 5 points for the week in commissions and call it roughly 33, but as with the trades, I tried to be realistic and use bad exits, so lets just round this even further down to +30 points for the week. This would give you $600 of profit, and the biggest drawn down was I don't even think $100 (-5 points), and hence even a $5,000 account would be plenty. (This account size business is for the yahoos arguing in some other threads. Of course when you don't know what you're doing and don't have a profitable and tested system your $5,000 will vanish quickly. But with a system that is tested and that works, ie. SLA... your account could be up 10% in one week.) Now all of this of course required trading by the book, and even there I wasn't following the rules too closely, trying to be faithful to what I would do the way I would see it. But what this teaches me once again is just to put the damn trade on. More importantly, its not to stop. Yes there is a rule in SLA where once you are stopped out twice you wait for price to go somewhere else first, but this would have to be an extremely tight range. Many trades might only be picking up a point here or a point there, but my gut feeling is that its almost better to take them because then you get into the big move at the beginning. What I am prone to is sitting out after the first loss or second. I don't want to be over trading, but I think in my case, I am under trading. When I am stopped out because price didn't do what I thought, the trade in the opposite direction might be setting up, or even the re-entry for getting in again, in the original direction, might set up as well, and these have to be taken for the SLA system to work. If I stop after the first loss each day, this is a sure way to reinforce bad habits and negative feelings. One scratch means absolutely nothing.
PREP FOR MAY 20 Tight range overnight, 3607 to 3621, midpoint of 3514. The ride to 3621 was just a poke, the more prominent high is actually 3617/18, that is the level that has provided much more resistance, so I will keep this in mind. In terms of the hourly and daily, we really are just moving sideways. We left that long term hinge that developed with an apex of 3550, but we are having trouble getting past these levels around 3620. Tried many times on multiple days and just can't do it, but at the same time, we keep having a series of higher lows, so something will have to break soon. (blue lines in the chart mark the overnight range... dashed blue line the midpoint. green lines are previous day high and low, and red lines show previous levels of importance. looks a bit cluttered, but my one minute charts is cleaner)
Not that great of a day as I'm sure most people agree. Was ready to take solid trades after my SLA exercise gave me confidence to put on trades, but nothing presented itself that was obvious, although I did track a few that I thought would be good. A - This is just a RET following the SL down, still during pre-market, but lets follow it. We end up forming a double bottom at 09, and almost hit this level a few times before the open, just before our SL breaks. So is this fact good enough to set up a long? I'm eager at the opening range to just use RETs on a 15 second chart.. but I do hesitate today. I don't draw it in, but going long above the first bar at the open isn't a bad idea, we have a tiny RET, and if taken, getting out for BE is very possible. B - Right around here I can't help but want to look for a short. The market establishes it can't go up, so lets get in on this ride down and see how far it goes. We are still a few points above the overnight low, so we got room to get out for BE if it doesn't go below. (this is a work in progress of course... my aim is to make SLA work for me first as my primary source of income, and then I can explore more "exotic" entries... in this case its simply a REJ of 15, so quite legitimate I would say, especially since its in the opening range) C - So we break below 09, we also break below 07, our overnight low. You can clearly see the RET in the combination of the close of one bar and the opening of the next one that breaks 07. So let me just try for a short here to track. It ends up going not too far, but once again, I think BE is more than likely. D - Because of this failure below C, a long above this bar is something I want to track as well. Here too it works for a few points, but comes instantly back against me. I really don't know if this is chasing, or if this might work for the opening range to get set up in a move that eventually works, but I'm forward testing you can say. By now of course we have upper and lower levels we cannot cross, and even start to form a hinge with an apex of 10, which is roughly the midpoint of the tight range in the 30 mins before the open. We break out the bottom, but now I'm no longer chasing as much. We do drop below 3604 but come back up. Hitting the high of 09 here makes me think to go short right around at E. I call this a test of the hinge apex, and this trade is worth a few points for sure. F - More up and down action forms another hinge and we break out the bottom again. Although we can think of all this as following the SL down that we can draw from the high at the open, there is just no way to get in, and SLA trades just don't work as well in this environment. G -This is practically a triple bottom, and reason enough to go long above the bars that form the second or third bottom, and as we can see, the buying pressure certainly meant lots of traders were willing to buy here. H - I have a long shown here, a result of the RET I see between these two bar and just thinking its the first RET above the reversal at the bottom. We are also at the apex of that hinge, so maybe bouncing off of it and back down could have happened as well. Its one of those places where a long or short is justifiable. From here on, its just all chop. We have a mean of 07, the overnight low, and I drew in all the SLs and DLs just to illustrate the mess we are in. The few trades I was thinking of taking I think do work, could have brought in a point or two, and could have been closed mostly at BE I think if need be. So I will keep trying these, using REJs and failures as justifications and see what the long term results might be.
PREP FOR MAY 21 Not much of a change from yesterday in the whole grand scheme of things. We ended up making it to a previous high, just shy of 3624 from a week ago, and then dropped back down. So on the hourly/daily, we have an inability to go higher, yet we keep having a series of lower highs. Overnight, we are bound by 3593 and 3610, midpoint of roughly 3501.
A - The open is rather slow. We establish a low at A, and then a high at B. C - We come back down to C, a higher low from A, and this should already have me thinking. Back up to the levels of B, can't seem to break 08.50. D - This is now a third time price reaches this level and backs off. E - When we hit these lows, of particular importance is that we don't go back down to the lows at C. In fact, we can start drawing in a DL, and since we have a DL line, we can look for a long one point above the levels at B and D. I have shown what is actually happening on the 15 second chart insert. This makes it so much clearer. We see that we have a series of higher lows, A C E, and can't break B and D. This makes a good case for looking for a breakout above these levels, so lets try for a long at 09.50. Now because I'm too busy thinking this is where I should go long and put in my cute little green arrow, I don't actually put the trade on, which in fact ends up being the best trade of the day. Seeing price blow past me, seeing it BO above the overnight high, I now think of how else can I get in. What you see is an actual trade taken at F. We have a clear RET because this bar drops to 12, and I put in a stop to go long at 14. The RET is there, just not shown because of the way the one minute bars are packaged together. (on a 15 sec chart, the RET is clear) We don't make it far and see trouble at 16. A few minutes of going back and for makes me move in my stop from the automatic 2.5 points to just below my entry. I can see price is struggling, and I was ready to close myself manually at break even, but I got hit with a 2 tick stop, which is just fine by me. This illustrates the need to get the first entry. If I was long from 09, I probably would have sold as well to protect some profits since 3 bars of bumping up against 16 and not going further is enough of a warning for me. G - We ultimately hit a low at G. I technically have a short opportunity here, not marked though, but I don't take it, it didn't go anywhere anyway and would be a scratch. H - Here is an official entry for a long, not taken either. Hmmm.. not sure why. Plenty of room before we reach yesterday's high, we even cleared the top of the previous swing high at 16, so its just a case of not following rules. I - We curiously break out above 23/24, but clearly don't make it far. The short is never set up properly on the one minute chart, and even fanning the SL after it is broken the first time, although it does provide an entry which, not shown again, would be scratched. I drew all of these SLs and DLs in real time because I saw that after I went over the charts with straight SLA, I just didn't know how I would draw them in. So now I've got lines going all over the place, which is a clear indication of chop. J - I drew in the S&R lines to illustrate the range that could be setting up, and the poke below here at J is just a fake breakout. K - We can draw in the SL though, and we see we have a break, and a RET right around here at K. This would be a good area to put a long. Not only do we have a DTDB from the failure to go lower after our BO from the range, but we also have room before we hit the levels of 21 at the top of our range. We are of course trading around the mean of this range though. In this case it works. Waiting for a BO from this range puts us right at this dangerous level of 23/24, so taking a long here is tougher, and would be scratched if the entry was above 21. L - Clear triple top here at 24.75. The drop doesn't go far, in fact the previous level of resistance at 21 is now support. Is this a case of TDTDB? M - Since we refused to go lower after the triple top, higher it is. But it doesn't get far here at M, and once again we are setting up a range. CONCLUSION That opening range is so important. I hunted down the first long but I didn't quite take it. I am happy I got into the move eventually, and I am happy I got out when I did. Practice and controlling the losses is key to long term survival before the tide turns and consistent profits roll in. Once again, if I just continued, with the second long, there would have been a few points of profit today I think. Oh well, rinse and repeat!
For the next few days I am unfortunately busy first thing in the morning, but was able to join the session 45 minutes after the open. This posted chart is just a review of the day. The recent bounds prior to the open are marked in blue, with the midpoint in a dashed blue line. As has been the case these past few weeks, traders open up trying to figure out if they are going up or down. It took 15 minutes to establish the hinge and offer a BO. Any SLs and DLs that we draw are broken at the open, so best to stay out. Of particular note is that the mean of this hinge is practically the mean of the pre-market range. A - This first legit trade sets up on a break of the hinge. I do feel as if its a bit of a hindsight trade, but going down seems certainly harder than going up because of the much higher lows. Once filled, it goes instantly up and we can draw in a preliminary DL. B - For almost 15 minutes, price follows this DL up quite nicely until we have a break. Given how difficult it was for trades to decide if they wanted to go up or down, its best to just exit a trade for some profit, maybe 4-5 points, as opposed to finding out if this is a trending day or a ranging day. My immediate difficulty is just getting good entries, and I feel as if taking a few points profit will do more for my learning curve than trying to capture a big move. Each big move has lots of consolidation areas and lots of possible re-entries, and I don't want to find out too late that the day will in fact be a range day and price ends up back at my entry. I am perfectly happy making 3, 4, 5 points, and putting trades on without hesitation, knowing that a 1 or 2 points scratch I can make up as long as I keep taking appropriate setups. C- Here the short sets up as well. It would fill on the next bar, and only go one point against you before dropping lower. I am not wanting to add more complication to my trading as I clearly already have too much going through my head, but all to often I see that an exit of a trade is likely a good re-entry as well for a trade in the opposite direction. All trades today, if the exit was a SAR would lead to even more profit. D - Here are D we have a break of our SL and exit for about 6 points. We draw in a very steep DL, but this is broken, and no long is triggered anyway. E - This long here is a bit unfortunate, but it has to be taken given the rules of entering one points above the RET. It would instantly go against me, and the exit would be right at the line break. Now I should also note that there is a slightly different way to draw in the DL. If the lows at G and H are connected, we have a DL here as well, with a RET, and a fill for a long, which is also scratched. This long would be filled at a lower price, and hence perhaps the exit would cost less than a full 2 points. But this just illustrated how drawing these SLs and DLs is a bit of an art form. Its easy at the end of the day to see which swing points to use, but in real time, its a whole different ball game. Its of course up to the trader to find a way that works for him. After this, we have a slow and steady climb, but many entries, one point above a trough, we be scratched with only a 2 point stop loss since the waves are so large. So you would keep getting stopped out, but the fact that price is still rising would be apparent as well, making you wish you got in lower and just held. Cant think like this in trading though. I - Reaching the high here, we have a huge spike through the high at the open, and although we doesn't take off instantly once we break this high, it doesn't drop much further either. We can draw in the lines for the range, and although not shown, price did eventually go for even higher values. CONCLUSION AND REFLECTION I need to do some reflection. I have started to read the other good book that Mark Douglas wrote, The Disciplined Trader, as I find I need to work on my psychology. On the one hand I know what I should be doing but don't, but at the same time, when right in the moment, I'm not exactly sure what to do and the hesitation makes the good trades fly right on by. I also see that I don't really have a firm system, the all mighty trading plan. Sure I'm following the SLA approach, but I keep also looking for entries during the opening range before any lines can be drawn in, and I pass by on solid SLA entries because of some other nuances that I introduce on a whim. I want to get in on further RETs if I miss the initial entry, but I also see the problems of entering after the first and best entry is gone, so I hesitate. I guess what I thought was that I could practice my entries, make a few points here and there, and slowly learn as I pickup coins from the floor that I thought would be easy enough to get. But even going for points isn't working out too well so far as I'm hesitant to put on a trade after the first one goes bad. I don't really have firm rules in my head to know exactly what I would do when something presents itself. On top of all this, I use entries based on one minute charts, but also like to look at the 15 second chart and use that if it should so suit my cause. This is clearly a mishmash of stuff and completely against what Db advocates in having a solid trading plan. In hindsight, my SLA trades work out well, and even on days where its all scratches, a few points up and a few points down generally lead to at least BE days. But in real time, I get myself a bit confused with how tight I should be drawing in the lines, once again going back and forth between using different justifications. On the other hand, I have also seen that if I just put on the trades that I am tracking in real time, I would already be doing quite well, so perhaps the mishmash isn't so bad, its just that it needs execution. I've gotta solve something here though as I'm not exactly moving forward. I'm fortunately not moving back either though, and all those guys making a killing every day are at least not taking it from me!