So it looks like we broke out of the range by the end of the day yesterday and made it to 3800. Going long after the double bottom at 81 would have been a good trade, but impossible to hold through the constant up and down that followed before the little rally at the end that got us to 3800. PREP FOR JUNE 9 Overnight, price has traded between 92 and 99, but I wouldn't exactly call it a range because each extreme was only tested once. I don't have a good weekly chart available to me because of my limitation with available data in my platform, but the most recent chart that Db posted would show that we are still in overbought territory seeing as 3780 was our upper limit a couple of days ago, and so today that high could be perhaps 3785 or so. We don't have any reference points to use if price goes higher, but on the way down 3776 really sticks out, then 3749 and 3740, and if we go any lower than that, 3725 looks good too. I spent quite a bit of the weekend going over older posts from the original Ghost thread, especially the discussions between fortydraws and Db. Its really important to keep reading these posts, to see what is important and to teach myself how to see. Attaching the 10 minute chart which shows the levels I am watching. If we do drop, once again, below about 76/70 to 55, we have a price level that we moved through very quickly, so we would either fill this in, or drop quite quickly, which of course means that if you are short already, the profits would be quick and easy. But I am trying to not lock myself into a bias either way.
So closer to the open, we have price trying to break through 93 but can't, and then each bounce higher goes not as high... so a series of lower highs. From my very new perspective, when I see a level we cannot penetrate, but each attempt to go in the opposite direction fails miserably, the level that cannot be initially penetrated is. If it was more of a range, this would be a different story with each high and low level tested equally, but here we have a case of lower highs. Anyway... lets see what happens.
PHEW... SURVIVED A MAJOR TECHNICAL GLITCH!!! So even though we are still in the middle of the session, I think I'm done for the day. Had a major issue where I couldn't get out of a trade. Kept getting the message "GOT Exceeded - Cancelled by system". Tried shutting down Multicharts and putting an order through Trader Workstation.. that didn't work. Finally shut it all down, with an open position, and restated, after which point I was finally able to exit... for a profit thank god! Spent over 10 minutes on hold with support, and as it turns out, apparently the server is overloaded with orders (volume seems about average today), and it was explained to me that the exchange asks IB to do this to protect their systems. So it seems after even shutting down my platform it wouldn't have helped, it was just coincidental that it worked for me, because essentially the issue is the order couldn't be handled by the server. So I had to just keep trying. Turns out this does happen, not weekly, or even monthly, but I guess every few months. Phone calls were backed up, apparently other scared people. In conclusion, not much I can do about this I guess it sounds. Had nothing to do with my platform or myself. I trade from a notebook computer with a multiple monitor setup, so the notebook would at least provide backup power. Have a cellphone at the ready to use for internet in case my home internet goes down. So I feel I have a sufficient amount of redundancy built in, but there is not much I can do about a problem with the server trying to connect to the exchange. As shown in the attached picture, I tried many times to get out, and it took probably over 10 minutes as I wanted to exit my initial short about 3 or 4 minutes after placing the trade.
Ok.. so here is the summary now. Didn't take any more trades, partly because of the server problem earlier, partly because we were in a range the whole time (although I am looking to trade ranges), and partly to also protect my little bit of profit. (yes, this last reason is the worst). A - So I think I'm going to be a bit patient and wait for the first 5 mins to see how the opening range shapes up. Although my blue lines and dashed blue line show the range of the entire overnight session, the few hours leading up to the open has price in a tighter range. Here we hit a high at 98, observation being that we failed to even make it to the overnight high. B - Here we hit a low, bounce off the overnight low. I so want to trade these reversals. Stops would be really tight, one point tight, so risk is well defined, and I think as long as I take each one, the profits will more than outweigh the losses. This might mean that I am scalping, but all I am really looking to do is to get into the move as soon as possible, so a scalp would result if price comes back to my entry, but as long as there are reasons to stay in the trade, I would hope to ride the trend. The rules say to wait for a RET, (I would wait to see this in a tick chart), and to not trade in a range. But my inclination is that once fear goes away, getting into a move sooner can be profitable and leads to less stress down the road, at the other end of the extreme. Anyway... will really have to test this. This REV is much better here at B mind you because it is a level of some significance, not at A which is still short of the outlined levels in prep. (I am trying to keep in mind though that overnight levels are reached with much lower volume, so the levels established by the opening range might perhaps be more important) C - This lower high forms, but of course by the time you are sure, price is almost at the other end. Observation being though that we failed to even make it to the previous high, so now I for sure am hunting that short. We can also now start to draw in our hinge, which is even more confirmed a bar or two after C. And since we can draw in a hinge, I also draw in the apex of this hinge with the blue dotted line. D -I take a short here. Truth be told, its not the best place given the REV at B, but since its a hinge and price dropped out, and since we had two chances to go higher but didn't (at A and C), trying for a short has a reasonable chance. (Although in trading, the best chance is probably better than a reasonable chance. I have to keep telling myself though that what looks like support or resistance might not be so when price gets there again) (This is a perfect example of how I am so indecisive, I can talk myself in and out of every trade... I'm so politically correct looking at both sides! ) E - This is where I am trying to exit my trade now. I held on while price came back up to test the levels at D again, but noticing this second hinge forming, I think its best to get out for a couple of points profit just in case the hinge breaks to the up side. This is where I ran into trouble with my exit order, and was forced to hang in there. I also have the apex drawn in here for this hinge as well. F - We go even lower, and I think, ok, great, my trade is worth more money, but its really time to get out now... nothing I can do about it. Price comes back up to test the apex, and we drop again. I should point out that this level isn't a huge surprise. I didn't outline it in my prep, but I was fully aware that this level was roughly the mean of all the action yesterday (88-89), so turning around at 87 wasn't unexpected. G - I call this a double bottom, although its one tick higher. I notice after I reload my charts, things move a tick or two actually, which is not too comforting, and I have seen this too in that some trades get filled even though price doesn't appear to even have hit that level. Anyway, not much I can do about this, just like not much I can do about an overloaded server. As it turns out, my short is finally exited somewhere around here at 89 which is very close to the bottom indeed. Thankfully that worked out this time. H - We have a quick rally up to H, busting through the apex of the previous hinge at roughly 91. We don't quite make it to the apex of the first hinge at the open, but you can say we form yet another hinge. Days like this are a bit messy, multiple hinges, and trading ranges, but somehow we also have a move that does go somewhere which is unfortunately well disguised. At the end of the day you can see it goes up, but not so easy in real time. This is perhaps the main reason why I want to trade ranges. Eventually price does leave and then you are in the move from the beginning. If one doesn't know how to trade ranges mind you and keeps losing 2 points each time then this might not be too good, but if you follow the action after this point at H, the range is quite lovely, and although barely 6 points wide, I do believe money can be made. I - The exit out of this hinge leads to nowhere, which does happen in that it just leads to a range. You could even call this a FO where price leaves initially out the top, but then the move out the bottom is stronger. J - We hit a low here, noticing its higher than the lows at F and G. One point above this bar would be a good entry for a long. From here on in, we are clearly in a range, but enough about that. Lets notice though that each low is just a tick higher, whereas the tops of the range are pretty much in line, if not a tick higher in comparison. K - Here I think, ok, lets follow what taking a short here would do, place one stop below the range to get in short, and a stop at one point above the range. We would fill, but of course it goes nowhere and would have to be exited at a loss of 2 points. Its important to keep in mind though that ranges will eventually break. So if I am going to trade ranges, I have to trade each extreme from the outset, knowing that I will lose on the last trade, but if its a range, it should be give me a few opportunities on the way up and down. If I managed to get 4 points in each wave lets say, just taking them mechanically at what I think will be the top and bottom, call it 94 and 88, so taking trades at 89 and 93, I do believe that I could have captured 4+4+4+4=16 points, and lost 2 on this last exit. Just thinking out loud here of course since I clearly didn't trade it this way. L - Another short op comes up here, although the RET is in the 15 second chart so this would be entering very soon. Nevertheless, if waiting for the better entry after the RET, this would happen 5 minutes later and get filled as well. The level of 94.50 that initially provided R is now S, but the short does break through this S here. M - Our short wouldn't go far, and although we are back into the previous range, we just cannot go below 93. Looking at this as a whole, we have lows at F and G, then a higher low at J, and each low is slightly higher. The big picture here is that we are going up. N - As we continue up, we hesitate a bit at the opening high here, but its only a 2 point RET before we continue even higher. Then we break the overnight high, and even yesterday's high. Its still not worth more than 15 points mind you, but I am not that greedy, even 10 points is plenty once I get comfortable trading even just 3 contracts. SUMMARY - Up +$76
I just can't help myself with analyzing the action today. Perhaps I am going overboard, perhaps I am seeing "bunnies in the clouds" as Db would call it when you're looking for stuff that actually isn't there, but here we go! A - Obvious range here from the morning. B - This is the mean of the range. C- Price makes it way to this range, with the mean of D which will more than likely provide further congestion for price once we get here again. E - Notice how at the end of this range, price keeps making a lower high on each bar, showing it might break out the bottom, which it does. Also note the break is strong, and the move continues. F - This high matches quite well with the previous high before the move up, but I mark this in as a double top for the action that happens later. G - Here I draw in a small SL to show price is unable to make new highs. H - Here we see price is unable to penetrate, and this is exactly the mean of the range from the open. Here the mean acts as support, but as illustrated by the line at G, it appears to be only a matter of time until support gives way to the pressure of the decreasing highs. (it could of course also bounce off, but my observation thus far leads me to believe penetration is the more likely outcome) I - Seeing similar behavior, we hit a bottom at 83, and each little rally up falls short, so I'm expecting a further drop below 83. Clearly this doesn't happen in this case. This is also why already being short from higher up is the best, so your only decision is when to get out, but you're already in profit either way. J - This line I drew in green, it first acts as resistance, and then support which I see happens very often. Once price breaks through a level that was difficult to break through, if price comes down to this level, it isn't easy to penetrate again (hence support acting as resistance and vice versa). K - Here too we have a series of higher lows, so although we have trouble getting through J and L to go higher, traders just aren't letting price go lower. L - Here, that mean is now acting as resistance, and when it is broken, it breaks first force. M - We hit a high here, forming a double top with F. N - Here we can see how earlier this level acted as support, then a mean of the little range that followed, and now once again as support until price ultimately breaks through. (this dashed green line might be pushing it though as this level is somewhat random and not well established) As we near the end of the day, we are once again settling very close to the mean of the overnight range where we started at roughly 3795. These mean reversion days seem to have lots of similarities... now its just a matter of taking advantage of them. We have gone roughly a similar distance both up and down, give or take a point.
Shame that I wasn't around yesterday when price was starting to drop from the range at the top. Not sure if I would have pulled the trigger and sold short, but it sure seems easy on that EOD chart. I came back after the move was well established, and I have this fear of getting into a move that is already well under way because it can turn on me at any time. Perhaps taking a short below every congestion area might not be so bad since those drops are usually swift as well. I have to realize that there just isn't ever going to be the obvious trade that will just scream easy money right here! PREP FOR JUNE 10 All we have been doing overnight is slowly coming down from the mean of yesterday at roughly 94/95. We have a bit of a bounce at 84.75, a double bottom at the moment, but this doesn't appear to be in a hugely significant area. 3783 is our low yesterday, so this is less than 2 points away, but I find these important levels are tested often to within 1 point. At any rate, I do have the previous day high and low already drawn in on my chart so I will be aware of this area when price gets close. It appears as is, closer to the open, we are in a range of roughly 84-90, with a mean of about 87, but even this range isn't all that well established. The general trend is down, but of course anything can happen at the open.
I should also note that a DL I have drawn in on the hourly just now is breaking. I have been surprised that each day for the past few days now we have made a slightly new high, but we are going a bit sideways now. In contract, the previous DL that we had drawn in that also broke and resulted in price going sideways did have a breakout about this, as in the attached chart, so anything can still happen. Just trying to keep the big picture in mind.
Mean Reversion strikes again! (more on this later in the review) A - 3 minutes into the open a valid SLA trade comes up that I didn't take. Why? I sure hope its not cause of that blue level I have outlined, which is the range from the pre-market (higher blue line at 93 is the overnight top of the range). I think its mostly to do with belief. I just didn't believe that it can go up since it looked sluggish. A bit of tough love for myself here. It doesn't matter what I believe, nobody knows whats going to happen next. The valid setup is there, so I gotta take it. Price barely even moves against me. On the next bar, when we are still at 33.25 which would have been my entry I'm considering getting in where I should have, and before you know it, price blows right past what should have been the entry. I really have to switch off this belief system of mine. Its absolute crap, doesn't help, and my rationale for taking trades is not that bad. Perhaps a little reckless in some instances, but positive for the most part. This does end up being a solid trade, but time to get over it and move on. B - We stall at 3800, and on the 15 sec I'm noticing a short op. The entry is still below where price is, but it would be hit 2 mins later. This entry might stop me out for a loss as price moves against me over 2 points. (Not a valid SLA trade mind you, DL not broken yet... but I didn't even have it drawn in at the time, just showing it here for illustration) C - Seeing the bounce at a lower high, I think to enter short here as well, based once again on the 15 sec. We are in a bit of a range by now, so perhaps we should wait to get out first, but this short looks decent based on another REJ, the lower high I mention which that happens below 3800. D - The valid SLA short would be around here, which would fill, and then have to be scratched fairly quickly. Db did point out to me a week ago about a similar short that it isn't the best since we are already in a range by now, and this might be the case here as well. After here, the range becomes quite obvious. We have a series of lower highs, perhaps even a hinge (not drawn in RT.. just shown here), but it all ends up being a range. E - Shorting here, just below the range on the drop out the bottom would have to be scratched, but we clearly cannot even reach the previous highs. F - Getting back up to here is a surprise, especially cause its quick, but price fails to go higher. I'm itching to trade ranges and reversals, but since I can't even make the safest trades work yet, I better keep that for later. G - Here would be our first official SLA short.. still don't know why I didn't take it. I think I'm actually scared of the SLA entries because I see how once the move is in full swing, a RET can easily stop me out, and yet price moving against me over 2 points doesn't yet nullify the validity of the trade, just like here. Entry at 91.25 does get to 93.50 at the highest, so even though the SL is broken, its just a poke for mere seconds, and price then continues down and the SL can eventually be fanned. The green dashed line comes from the mean of the range yesterday... just wanted to add it in today since it had a fairly big effect yesterday. H - Because I'm still trying to figure out in my head why I didn't take the SLA short, I miss this double bottom here. This is in fact the bounce that would cause the SLA short to perhaps be scratched. Its funny how I see the SLA trade one second, and mere moments later, the DB presents itself completely making me think of going long now. Price does come back down mind you, and the SL can keep getting fanned as mentioned. I might not be a good trader yet, but I see the importance of being extremely nimble, and able to switch your frame of mind from long to short in an instant. I - I see no significance of this bottom in RT. It is still above the overnight low, but the bounce is fairly obvious after only a minute. J - Here is an SLA long. We have a clear SL break and a RET. Funnily enough, it would be at 91.25 again. With trading, you gotta be ready to change your mind on a dime. Granted, it has been more than 10 minutes when the short presented itself, so a long 10 minutes later isn't exactly turning on a dime, but it is still ironic how its a constant up and down, with traders really being clueless about value in an economic sense as not has changed much in the world over those 10 minutes! (all that has changed is the feelings of those traders K - We have a bit of hesitation here, and ultimately that long would have to be scratched, although we do get a higher low and continue going up. (meaning that a scratch is necessary since price is on the down move now, but a re-entry is also necessary after seeing the higher low. Or perhaps staying out is valid as well since it looks at the time like it could be a range.) L - Right about here is where it hits me! That level of 93, the overnight high, seems to be showing price moving above and below equal distances. We got to 3800, 7 points, and down to 86, also 7 points. Then when I look at the range yesterday, 3803 to 3783, 20 points, with a mean of 3793. This 3793 is the mean of all this now as well... and its still having an effect today! So now.. what to do about it.... M - I am itching for a REV trade here. We can't seem to break 98.50 and I think that's as high as we will go before we drop down. The idea would be to just take a short, at the very top, which would be going completely against the trend, but with tight stops, I think it can be done. N - We bust out just a little higher and by about 99.50 I'm thinking awesome, a short at an even better price! Our ultimate high is 3800 thus far, so a stop at 3801 would mean only a 2 point loss if the short is taken at 99 but price shoots up to 3801. I see how shorting below there bars can easily stop me out as well, and more dangerous in that the loss of 2 points will be taken yet the trade won't be invalided yet since a 2 point loss won't even get to the high of 3800 if the short is taken at 97 for example. So if I believe that price will drop, why not short higher up instead of lower down? It is true that shorting lower, you at least have price already moving in your direction, but the price risk is higher, and your stop would still have to be around 3801, and this would not be a 4 point loss. Isn't this funny? The guy who wants to "believe the trade", who wants to see it working, is now thinking of taking a trade before there is any confirmation, just so that he gets a good price! Price in this instance only got to 99.75, and although the drop wasn't huge to just below 92, the trade would net some points. I think the context here is huge. We have a mean reverting day it seems, we have difficultly getting past 3800 that is well established, so it makes sense we will be going back down to the mean of 93 again. The trick with these REVs is that they will fail, but if you take each one, your wins will more than outweigh your losses, especially if you take the short and long if trading within a range. This isn't a game about being right, its a game about making money, and if I can develop a system that trades ranges with tight stops and my trades net more profits then they lose, why the heck not? Sure a nice trending day is nice where you get 20 or 30 points, but these past few days, heck, half of all days out there are kind of like this, so you either learn to recognize this and stay out, or switch up tactics to take advantage of it. O - We dip below the mean now, and come to rest at the mean from yesterday and head back up. Not sure where the short from the REV would be exited, but perhaps I would have made at least 5 points. P - So what to do here... take that REV trade again? I'm not sure if it helps, but I'm attaching the 15 sec charts to show what's going on. Clearly here, I would be stopped out at 3801 during that little spike, only to see price come back down. I would perhaps short again, but price refuses to drop much lower. I am of course thinking that come on, this can't work again, its too obvious now. Perhaps my clue should also be that we only got to the mean on the down move before this, we didn't make it all the way to the bottom of 86 as before. But if I make it a rule to try a REV only once, and the first time it fails I leave it alone, this might be a good rule, because after this first fail, we settle into a tight range anyway.
(continued from previous post... was told it was too long by the system) CONCLUSIONS I'm kind of disappointed that I didn't take any trades. I don't want to lose my $70 I made yesterday... what a joke of an answer! The first long was a solid trade, and REVs maybe I should stay clear from for now, but they just look so juicy. I need to either add it to the plan or not. Clearly I don't have a plan yet, I'm still just playing around, but I should be taking at least one or two trades a day. One of the things I also see over and over again is that when fear stops me out, there is usually a much better place to exit a trade anyway, closer to break even, and by waiting, I am also sometimes staying in long enough to see the trade is working. I don't want to go against a hard stop loss rule and hang on just to wish and hope, but I do see that for many of my real trades that went nowhere, over half would be profitable if held, or at least exited for a better price. Of those that maybe would take a 4 point loss versus an initial 2 point loss, these I think would be compensated for by the greater profit. I still remember the day where I recklessly shorted 3 times with a market order, stopped out for a 2 point loss each time, and price just kept moving in the direction of the trend I was at least trading in. That loss of 6-7 points would easily have been a gain of over 10, and I think I would be in less of a protection mode than I am now. Overall, I am down about $300-$400, which is nothing, and I fully believe, as Mark Douglas suggests, that you need to just take some money and call it tuition. I have absolutely no problem going down maybe $1000 before I start to re-evaluate what I'm doing and a proper analysis of where I'm at. But its obvious that when its time to put a trade on, I am not wanting to lose. Perhaps just like a for a broken heart, you need a bit of time. I know how what I think and feel is wrong, so over the next few days and weeks, I will give that belief less energy and it should melt away. Oh ya... and Happy 4 Month Anniversary To Me! (I opened up this journal on Feb 10... so 4 months down... and 2 to go... given that Db says that getting this in 6 months is possible.)
Yesterday was quite an interesting day I would say. Although price didn't move that much, I would say it was almost predictable. Once I figured out that it was mean reverting, the moves just made sense. In the later part of the day, the steady climb up I picked up on, but it was difficult to find a place to get in because of the deep retracements. The thing that stood out for me though was the constant series of higher lows. The highs perhaps dipped lower, making it look like there were hinges forming, but the lows just kept climbing up. In a way, I figured that we would hit the previous day high of 3803, but of course if I felt so strongly about this, I could have easily bought some contracts and walked away. Anyway, all I mean to say is that I was somewhat in tune with what the traders wanted, not the minute to minute action, but just the general trend. PREP FOR JUNE 11 We have done nothing but drop overnight. I have never seen quite the move overnight I don't think, and the range is even greater than what we managed during the entire day trading session. Its funny how the guys who trade during the hours that are outside of RTH have a completely different idea of value compared with all the traders who trade during the RTH. Its almost as if you can put on just two trades a day, one at the beginning and one at the end of the day, each being in the opposite direction of what just happened. What I mean by this is that yesterday for example, we slowly climb up, and then overnight drop. Then on other days, the overnight session is a steady drop, and when the market opens, those traders bid the price up. This would of course mean that we should see a climb during the day today, which I'm of course not putting my money on because this drop seems serious, but I can't help but notice this lack of correlation between what happens overnight and what happens during the day. Anyway, onto the specifics. We have a drop from 3803, and hit a low of 3779 just a little while ago! Looks like we might be forming a higher low at 3883, perhaps its a sign the downward trend is ending so I will have to followup just before the open. The 50% of this would be 3791, which is already an important level from yesterday and the day before. We have a very solid area of resistance now at 3803, if price ever gets up there again. Looking at the hourly chart, the low of 3779 sticks out, its the mean of an area of congestion from the 6th.. as show in the attached chart. Its amazing how this stuff just works! Anyway, on the way up, we would have so many levels, and its not that far anyway to 3803. On the way down, below 3770, there isn't much again as we have that area of airspace I pointed out days ago, so 49 and 40 would be the next levels to watch. Being short from 3803 is the trade of the day, but not much I can do about that now. I will try hard to not have a bias, and would enjoy the ride up to 3803 again if it happened, but I can't help but think this is going to drop some more. It all depends of course on what the traders at the open want.