I had another poster private message me with some good analysis of a 5 minute chart on a day when I was getting chopped up. I don't look at the 5 minute chart enough, but at the end of the day, everything seems so obvious as price is "smoothed out". The jerkiness is gone, and the trends are more apparent. I could handle being wrong more than I'm right if my loss on each trade was 3 points but I made at least 10 each time!
Reading this again, and going to my chart to try it out reminds me once again of why I couldn't make SLA work for me. I just couldn't draw these lines properly enough, or rather, there are so many combinations as to prove random for me. I could essentially make the lines do what I wanted them to do, draw them in such a way that could have them tell me to take a long or short. A solid trend line that connects major swing points that are obvious is usually no good because once its obvious, price is completely somewhere else. And then of course the trend lines that I draw that hug price too much get broken all the time. I can of course draw them so nicely on a hindsight chart at the end of the day when the important swing points are obvious, but in real time, I might get something like this attached chart... yikes! Horizontal levels are at least less ambiguous, and everyone agrees where the previous day high and low are, as well as the overnight ranges. I would like to be able to define intra-day ranges as well, since once price leaves these it really does tend to go some other level, but this once again gets difficult because I don't know if I should include the little spike that breaks through a range but quickly comes up, or use the level at which price bounces off the most. So there is a bit of an art to this.
You can't fan your lines on an uptrend unless you get a higher high, or in a downtrend a lower low. Some of the lines on your chart are fanned incorrectly. Db used to hit us on the hand with a stick for doing that
Oh yes, absolutely right, and I see exactly the one I messed up. I actually did this more as a sketch to be honest so didn't follow it perfectly from left to right so I'm glad you pointed this out. In no way was this meant to be an illustration of how a trading chart would look like, just to show how someone as crazy as me could do it if he was so inclined to want to see a down trend or an up trend and find a line that would suit!
I agree the TL's change to fast! I have also been using horizontal S/R from anchor charts. These seem to create some fast moves. Not always though.
I'm quite pleased going into today given all the work I did yesterday. Things are really starting to come together. I went over lots of old material, looked more at my old charts, and I'm fairly certain I will have put together something very soon. My eyes are really opening, even though it was right there all along, I just couldn't take advantage of it and hence I think something clicked. More on that later though.... PREP FOR AUG 12 So the best trade thus far is already gone. At "A" we have a REV from just below the previous day high. This was at least a 10 point move down to "B", and now A and B form the limits of the overnight action. Taking this REV trade I now have lots of confidence in after doing so much studying these past few days, and what I really like is that its obvious where the entry would be for me and at what point the trade isn't working. Trading at the extremes lifts so much weight off my shoulders because I'm not worried about having to give price room and end up just taking a bigger loss before price does actually do what I thought it would do. I also see now how giving price a bit of room is important once in a profitable trade, but not right after entry, because if trades are taken at an extreme, the trade working or not is more obvious. The climb up to "C" is pretty much exactly the mean, which would also be 50% of the down move. On the included chart I compressed it so that you can see the entire overnight action. Look at how price just revolves around this mean in the earlier part of the chart before it takes off to test the PDH. The PDL is far too low so this might not come into play today unless we have a huge drop, but I do have another level outlined at 3901 that I got from the resistance level yesterday which then acted as support. Anyway, not sure if I'm going to be taking any trades today until I've got a firm trading plan, but if it looks too juicy I just might, especially if we make it up to the PDH once again, which is now also the overnight high and hence twice as juicy!
Today, almost 20 minutes in, although I didn't take advantage of it, what I am looking at now worked absolutely beautifully. Thanks for the vote of confidence! Will of course put it all in my review... but I almost feel like charging for it cause its absolute gold!
Here we go! A - So I can draw in this SL from the overnight as we came down from the PDH. The reason why I mention this is that after NoDoji taking the time to go over one of the days last week, it got me really thinking. I liked the way she drew in her lines, but what really caught my eye was the price action she was mentioning that happened outside of the lines. Here we have price breaking out above the SL. B - Now we have price coming down to test and although it penetrates ever so slightly, I can see how going long above these bars might be a good trade which is worth at least a scalp of a few points because price stays outside of the SL. C - Now I wasn't even awake yet for what was going on at B, but I did wake up right around here. So this seems like a nice higher low to use for a DL. D - Here the break happens, and its a solid move down. Mind you, I shouldn't say solid since it was quick, so the chance of a retrace are good I guess, but it certainly was quite pronounced. F - So here is what I'm watching now. We drop below the overnight level that was identified thus far, which we get from the level at E. I would expect a REV back into the overnight range, but this clearly didn't happen, so no way would I trade that given price going straight down. The drop at D was also decisive, so I'm not sure if this overnight low can stop the selling. G - But here is the thing. I now have this level at 3901 outlined, and you can see the bounce just once tick above this level. Since I can still get in fairly close to this level, and since this isn't a huge penetration below the overnight low, I think a long here makes lots of sense so I take it. Remember, I was favoring the REV at the overnight low, but traders wanting to come a bit lower to 3901, if I have my level right, could be justified. You see an exit fairly quickly. First, there was hesitation. Second, I'm starting to think that maybe the level at 3901 isn't all that important, and this bounce could just be a test of the overnight low, and then a continuation of the drop since I was really favoring that short given that strong move down. Anyway, I'm out for +$6. H - So now I'm shorting here. We have the bounce from the overnight low, we go below this level at 3901, and I think things looks good. It goes against me a bit, but price comes back down to "I", but then goes back up again. So here is the thing. My stop would actually be that overnight low again at roughly F. But this short is entered far too low given that that level is almost 4 points higher up, so I hold through the climb up to J and I'm happy to exit at K for a tiny profit again. I'm now at +$12. L - Getting very close to the open, we see 3 bars here that cannot penetrate the overnight low.... what I in my mind had as the overnight low! (but I'm getting ahead of myself here). At any rate, this makes a short below here seem logical, but being so close to the open, not doing anything. O - So here we have the open... marked 30 seconds before the actual open. The next bar has an entry of this bar just a tick higher, so the open is for sure right about here. M - We drop down to here and we see two bars that try to go lower but can't. And then it hit me! I started my day way too soon. What I have marked at the overnight low at E and F isn't the overnight low anymore. The real overnight low is at "I", and what we have here is the slightest penetration of the overnight low level and a bounce back up. This is exactly where I should be taking a long on a RET in the tick chart. I am attaching that chart, complete with the real overnight low level marked. You can see the penetration and price coming back up, so a long at roughly 3899 is a solid trade, and so close to the OL that in case price comes back down, an exit could be made for less than a 2 point loss. This is what you call trading at the extremes! N - Here would be an SLA long which is just as good. Its above the opening level, just slightly above the resistance of L, but honestly, none of this matters as the best trade was down at M. I should mention that I didn't take the trade at M because the realization of the correct OL was happening in real time and my brain was just a second or two too late. I could have maybe gotten in a point or two higher, but this would mean a bigger loss since the stop has to be below 3898, and lets not forget, the trading plan isn't complete yet. I'm not sure how to go about testing these entries on a tick chart since I don't think my platform can reload tick data, but having gone through all the charts I have in my book, 2 months worth now, its obvious that something happens at these levels and if the bounce is on the one minute chart, its even more clear on the tick chart! P - Now this level here is the actual mean of the overnight after the realization that the low was in fact lower than how I had it drawn in for my prep. The dotted line just slightly higher is where I had it drawn in for prep at roughly 3910, but this is no longer correct. Q - So up we go, and although there is that slight hesitation around N, this is an easy 10 point trade when your eyes are finally open to what is happening! Now here we have another RET and a possible long. The DL drawn from the bottom is just touched for where this entry would fill, and although it goes higher, we can see the DL is clearly broken minutes later. And this right here is what has always scared me about SLA. It is a valid entry, but the earlier SLA entry is better, since it worked, and price has now come up over 10 points from the bottom. I do think we can make it to 3917 again to test the overnight high and yesterday high, but there is no guarantee, and this long would be in the middle of nowhere. Price does make a higher high later, but not before a significant drop, so this long at Q is very much a scratch for a few points loss. R - So all the action prior to this which before I would try to trade is now a "no fly zone". The mean outlined at "P" should be able to provide trade opportunities perhaps, but I don't see any. I can see that price when it comes down to the swing low here at R that allows me to carry forward this swing low is roughly an equal distance away from the mean as when price made it to 3914, so the mean is nicely on display, but isn't something I can trade from. Anyway, bringing forward the previous swing low, we see price break through, but then it turns back up, and then back down, so even here is a bit tricky. S - Now this one hurts. Once again, back down to the overnight low, and even though I'm typing all this up, I see it. We get to within 2 ticks and price just takes off. I could already have any order set up to buy 2 ticks above the level, but sometimes price only comes down to within a point of this level, so not low enough to trigger, and because it moved so quick, I might not even get a fill. Who knows, and this is the trouble with sim trading. I might assume I got my trade and count my money, but in live trading, this might not actually be the case. Fuck.... this trade at least 5 points... god I want that money, I've been working hard! Lets see where it goes. T - So I could draw in a DL with this higher low here. U - And this could be an SLA long here and it fills, but once again, the DL does break 2 minutes after the entry would trigger and I'd be out for a little loss. V - In contrast, if I did blindly buy at 3899, just assuming a bounce and exiting at the DL here, this is worth 3 points in actual fact. W - So we come down again, but my confidence in a bounce yet again is not as strong. Since we didn't get far above the bounce at S, there really are not that many buyers, so getting a chance to go long again here is less likely I would say. X - Yet again, just the slightest penetration and a bounce, but the highs are all lower, so lets see if a get a clear signal to short. Y -Drats. I tried a short here, thought the buyers were all exhausted and held on for quite a few minutes just wishing and hoping until I couldn't take it anymore and exited for a loss of 1.5 points over 5 minutes later. Sure enough, price drops on the very next bar. Wow... what a drop its turning into... frustrating. Z - I'm back to gambling! Took another short here, and out for a tiny profit before I could slide my exits to make a bigger profit. So now I'm at -$6. Such a shame, the short at the top was the right idea and worth a nice amount! ZZ - Well... I'm an idiot! Took one more random short, of course caught a bottom, held on just wishing and hoping and praying and took almost a 5 point loss. I thought we could make it to the previous day low and hence had a target in sight. We never did make it to the previous day high mind you, so maybe this will also be as low as we go. Still happy about today, but these random entries are exactly why my account is down almost $2000 so this has to stop. Looking back, I now see that 3886 is a high from two days ago, the line popped up on my 5 minute chart but I didn't see it on my one minute chart. Gosh.... how utterly stupid of me, but I think going forward, I know what to do. So I end my day at -$100 exactly!
My gosh.. I really am a moron! Looks like we have now nicely filled in that gap where price dropped so quickly. In addition to the stupid random entries, I see that what I'm not doing is that when I'm wrong about a trade, I just sit and watch, which I guess is fine, but at the same time, being wrong might very well be setting up a trade in the opposite direction. For so many minutes while I held onto that losing short I could see that a long was in fact a legitimate trade but I just couldn't let go of my short.