So the game plan for tomorrow will be to simply use the SLA. I spent quite a bit of time this weekend reflecting, reading old posts, and especially mine from my own journal. Reading some of the old stuff, its amazing how much makes sense to me now. Looking forward there is of course still so much to know, but when I look backwards, I can see how far I've come. I am slowly working on what I think is my fear. Of course the way to solve it is to develop a plan that I have tested and that I trust. Since I am not there yet, I will just borrow one that works and has been back tested. So I will try to stick with just the SLA for Monday morning. I have seen that by looking for too much confirmation of a trade, the price risk gets too high in exchange for information risk. Pouring over so many charts, its obvious that the SLA method gets you in the trade early when it does eventually take off, and if it doesn't take off, the losses are minimal. (As Db commented up above, the confirmation is in the fact that price comes to your stop one point away from the crest or trough) I will tally up the points gained or lost for the exercise and present the chart with each DL and SL as I saw it. I reserve the right to make some quick decisions on the go, such as perhaps not getting out of a trade if the line isn't broken with force, but the idea is to just follow the SLA without even caring what price does. I will trade through chop or ranges, both since it will be good practice with focus, but also so that I'm in the trade when it eventually takes off.
Ok.. here we go. First picture is the overview. I discovered lots of things doing this exercise. First is that using 30 sec charts leads to lots of work, but also earlier entries. This might help in chop to be in and out earlier, and also to catch the bigger moves sooner. But its lots of work. I definitely refined my technique as I went along. I found it difficult to not notice all the other things now as well, but this was good news. The opening really helps get you in the right frame of mind, or rather, the right side of the market I think. As Db said before, the best moves sometimes happen over night. This was clearly the case before open today, but since I was just using SLA, I only used the most recent info. Usually my charts are quite compressed, but with trying to really see what's going on, I found into the session that I had to really zoom in there so its spread out over 3 charts. On the first we have a SL drawn in, A, from just two swing highs. I never quite know how to start, and I don't show the first point of this line, but you can see the top of the spike where it touches. So after I drew this line in, about 7:40 on my chart (just add 1 hour to get NY time as I use the exchange time), I just waited for a RET shown at B with the first down arrow go go short. Didn't trigger and we have a SL break. So then I drew in my DL just above B, with entry at C, which also doesn't trigger. (The blue arrow should be more to the left, I have no idea why its drawn like this now. Also, I see here that I am not waiting for a RET after the SL break, just waiting to get in on a possible up move. Don't ask me why, it took me a while to get into the groove, and this all still before the open) So then I draw in a new SL just below C, and a possible entry at D which is triggered for short. Now looking at this action, its clearly range bound, and just after D we have a higher low, but I didn't know this at the time of placing the short of course. It would have filled at 39, which is pretty much as low as it got! LOL Scratched at 40.25. (my scratches aren't shown... no good way to draw them in with my software). The break of the SL is shallow, but that higher low makes me think F-it, and also the formation of what looks like a hinge here, practically shown with my SL and DL line. This is clearly not the place to be taking a trade. So we are at -1.25 points. So we have a new DL, and we even fan it once the action starts to go up. Looking for ways to get in, I wasn't in the groove yet. Finally see a RET and I buy at E, 43.50. Moves against me right away but only touches the line so I hang in there. Makes a HH, but now goes well below the SL, so I'm out, lets say 42.50. Another point lost, -2.25 total. Well, price just keeps going up, no real SL to draw, so lets fan the DL and call that first break of the DL a RET, and we can get in again above the low of the trough, so a buystop at 44.50. Looking ok for a bit, but break the DL line again and out at 44. Total now is -2.75. Lets draw in a SL now. Not sure why I am short at only 43.75 at G, but that's what I drew in. Should have been lower to be away by 1 point from the top of the crest. Well that gets broken soon as well, so let say out at 45. Total now at -4 points. I am driving myself a bit crazy now. These are such small moves that on the 1 minute can't even really be seen. But I like how the 30 sec charts shows the action better, so I'm gotta try to stick with it. Getting me in a trade sooner is more info risk, but less price risk. Since I don't know much, who cares about the info. Even when I have info I don't know what to do with it. So more info just makes me hesitate more. So I figure focus on getting a better price and let that guide me. So now we are well into the open. Lets move to the next image. After our loss on the short at G, we now draw in a DL after the high of H comes down to form a higher low. The high of this lowest bar is at 46.50 so we place a buy stop at 47.50 and get filled a few bars later. Technically we should have placed the stop sooner, but I wasn't thinking fast enough. Reading how to do this and thinking you understand it is way different than actually doing it in real time. Thank god I have the lines to tell me what to do!!! We now fan the DL once it takes off. We break around 61 so lets get out. After this move and the clear hinge I would think it best to see where it goes, but rules are rules for the SLA. And of course I'm thinking lets get some profit. So after a 13.5 point move, we are at +9.5. We form a bit of a DT just before I, but since we broke the DL and have RET, we have that short which triggers at about 63. My SL is drawn in with using the next SL further away so perhaps we could have been out sooner, but lets call this a loss of 1.5 points because I know I wasn't thinking and reacting fast enough. So we are at +8. Next we draw in a DL and put a buy stop at J and its not triggered. We are clearly in a tight range here. Our DL is broken again, but forget about drawing more lines right now. The low between J and K forms a nice DB and support. The top between J and K has that nice rejection on top. We get to around K and I figure I should start drawing my lines again. When I draw in the up arrow at K to go long, I can't justify it now. Price is coming down from that Rej a few bars earlier and we haven't hit the higher low yet. So I'm not sure what makes me think to draw in the DL. But its there, and putting a buy stop 1 point above the highs of those bars in the trough would get me filled at 64 a couple of bars later. Price starts to move and we fan the DL to make it steeper. We have a break at, lets call it 70. I am trying to be generous here by making the fills be not so good and taking into account hesitation and lack of speed. So I'm always choosing a price that should be the worst possible to make the numbers not looks so good. In this case, price never went below 70 after the break, so I'm calling this to be the exit price. So we are now at +14. We start to draw in a SL, once againg using these tiny micro lower highs. The RET at L hits a high of 69.50, so we place a sell stop at 68.50. Now technically, my SL as breached just before this, but I'm gonna be a bit loose cause we just couldn't get above 72. When we hit the high of M, I draw in a new SL from L to M. No idea why, I just figured now is a good time to make it better. This does keep me in the trade longer. Not sure if this is fair as there is no rule for this, but did it so I gotta report it. SL is broken at around 63, but once again, lets call it getting out at 64.50. I like to see price penetrate the line by a good point. So this is a profit of +4 which brings us to +18. Now we draw in a DL, we see a RET, and we put in a buystop at 65.50. I know this is hard to see in my pic, but on my chart, I was zoomed in way more by now since I was getting into the grove of micro trading! (not the smartest thing I guess, but was just following protocol with 30 second charts. I should redo this exercise today using a 1 minute chart and see where that gets me) Shortly after N, saw price drop quickly below the DL, so out at 64, and we are at +16.5. I continue to confuse myself in that I'm not sure what I am calling a valid setup or not in terms of what my RET has to look like in order to trigger a trade. At any rate, I put in a sellstop at O at 61.25, which does eventually trigger a couple of bars later. Price does poke a bit trough the SL, but this doesn't worry me too much. We do have a solid break though, so the high of this bar that broke it is 61, so I'm sure I would have been out by now on a market order. This is a gain of 0.25 points.. sweet! Total now +16.75. New DL line now, with a RET so a buy put in at 62.25, one point above the high of the lowest bar in that trough, but no trigger. After this it gets a bit messy. Price moves quick, so can't draw in a DL after the SL is broken. Eventually I get a SL at Q, but also broken. That Rej at the bottom of 52 is quite nice. Anytime I see this, I pay special attention, and it almost always leads to a good trade in the direction of the rejection for at least a few points. But this isn't in the SLA plan. We have DL at R, but its kinda random looking at it now cause there is no higher low to really connect. We can draw in the SL, but its sooo steep. We do have a valid RET though, so we take a short at 55.50, one point below 56.50 which is the top of that crest. It gets filled on the next bar, but goes against us right away. This is easily a 3 point loss as price moves quick. So we are now at +13.75. Instead, we go long at T now at 58.25. I quickly see the DL now, so if I hadn't bothered with the SL, this could be a trigger for a long since we have the RET. This is of course the problem with trading chop. It looks both like a long and a short depending on how you look at it. Darnit, it fails as well, hits 56.50. If I did get out, I have a loss of 1.75 points, so now my total is +12. But the price quickly reverses, so depending on when i hit the market order to get out, I might have gotten a better price. In fact, if I hesitated just a bit, this trade starts to work. But I can't remember now, and seeing as I drew in a new DL, I think I was out. So the new DL is drawn, we have a RET, and a buy stop at 62.25 which gets triggered. DL breaks quickly and we are out, roughly at 61.25, so another point lost. That's a total of +11 now. And done! Next post will have just a bit of a conclusion.
Over the last week, I was posting my updates of everything I saw, and I think I was doing quite well. The rejections jump out at me, the swing highs or lows, especially how they relate to other swing highs or lows, are also apparent. Hinges I have also grown to love, and trading ranges can be a bit of a nuisance, but I figure wide enough ones can be traded. Ultimately though, it seemed like what I thought was a good trade, I still didn't take. Sure I didn't have a plan formally written down yet, but I just wanted to get my feet wet, to see how I would react. But when it came time to put on a trade, I could barely pull the trigger as I made excuses for why the trade won't work. I am clearly not comfortable swimming in a sea of uncertainty, but I fully understand that a statistical advantage will show long term profitability if executed well. So I needed to get over this barrier and see what is the worst that could happen. Following the SLA, although without using real money, did produce a great result, and at no time was I down huge amounts of money. The chop would have sucked me dry, but it seems like every day there is at least a 15 or 20 point move which could clear out some loses from chop. Getting in at the open is critical, catching that first move, and it usually setups up right before the open from what I have seen in my limited experience. When I am actually doing it, I can see what I really don't know, even though I thought I did. I will naturally continue this, but its hard to see how one would lose money. I was trying to learn so much, to understand it well, and I'm sure that will come. Staying away from certain trades even though SLA might tell you to take them would of course be extremely helpful, but it just isn't necessary. You will be out soon enough on a break of the SL or DL, and when the move comes eventually, you will already be in. I really noticed this one day last week where we spent the first hour in a range. When price eventually broke through it was tough to believe. But had the trades just been taken according to SLA, I would have been in short in the middle of the range, and rode it out the bottom and all the way down. Too much thinking made me not get in, and at the end, you are baffled how you miss a 50 point move! Anyway.. enough babbling. Sorry this was so long. Will try and condense for tomorrow.
Totally unrelated to SLA, I just cannot stop seeing these rejections. I am trying hard to see them everywhere, not just where they appear to work. If my definition of this rejection is a price penetration of more than 1 point that is above or below any preceding action, then a long or short in the direction of the rejection very very often leads to a profitable trade of at least a few points. Take the bottom one as an example. The preceding action stops at 51, spike forms down to 49.75, quickly reverses, and price doesn't penetrate 51 again. So the idea is to go long right away for a 3 point move (who knows what would work out best, leave that up to testing). I am willing to bed that if the stop loss is automatically one point, and yet the target is 3 points, I bet that even if you are only right half the time, this still leads to a profitable trade. And I think after rejections like this, the hit ratio of being right is much better than 50/50. This is strickly a quick sclap trade for lunch money! Ok... back to SLA, where the big money is! Coincidentally, this image of price action right after my analysis stopped finally broke out of tight chop and there were a good number of points to be made on the way down and then back up.
I gotta laugh at this. So I came back to see how the day ended. Left my charts open with that illustration I made for the Rejection example, and specifically those lines I drew in to contain that spike on the bottom. Here we are, hours later, and those exact levels contained yet another rejection of this level.
Mar 18 - Death by a thousand cuts! First image is the overview, second and third are more zoomed in views. A - Pink box shows range from the past hour or so, still about 45 mins before open. Will try and only take trades that lead out of this range. B - SL forming, lets try a sell stop at red arrow, not triggered. C - Since price moves up a bit, sell stop also moved up to trigger 1 point below the top of crest, still not triggered D - Looks like a good area for a sell, but this new SL couldn't be drawn until we made the LL, the low just past C. E - We now have a new SL, bit of RET, sell stop at E is triggered at 55.75. Moves against us right away, but follows SL down, then breaks SL. F -These ovals will be exits, either potential or actual. No idea why this one is so high, was i sleeping? Clearly should have gotten out for roughly BE. But it eventually triggers, and out for -1.75. G - Markets opens at the low and starts moving up (before G). Draw is initial DLs, buy stop at blue arrow, triggered at 61. DL is broken, but for some reason I don't exit. Hard to know why now, but perhaps the movements of the ticks showed strength going up, and even though price dropped, it was perhaps for just a split second. I could have also had my sights on the previous low that wasn't breached so I stayed in. Right at G we have series of higher lows, so still hanging in. H - New DL breaks, give it some room, but out at 68. Running total +5.25 I - Draw in SL, see RET, draw in sellstop, not triggered, and SL quickly breaks. Although price does hit red arrow, the SL broke so the trigger would have been cancelled. When price does go below I we can fan our SL, but after this there is no RET that would have triggered. What would have been the RET ends up breaking the SL and we have a DL forming. J - New DL, but don't see a RET on the way up, each bar is higher than the previous. DL breaks, goes higher, so we fan it. K - Buystop set, not triggered. Technically there is a RET just before this one that would have triggered a buystop, but I wasn't fast enough given that I had to fan this DL. Luckily this didn't happen. L - DL breaks again, but as we go up to M we can fan it again with the swing low at L. M - Enter buystop, not triggered. This ended up being the top, price came down, breaks DL, so we start thinking SL. N - We have a RET, and draw in the SL, sell stop entered at N, triggers few bars later at 74.25. Breaks SL slightly, but price moves even higher, so out at O at 76.25. Running total +3.25 O - Just after O we hit a low, so draw in DL. P - Buystop here triggers at 77.75, breaks DL soon thereafter, and out at Q at 75.50. Running total +1. So this or course is chop, and a range now as well. Sadly had we not exited at Q, the trade starts to work, but hey, that break of the DL was strong, and right after we were in at P, price was quickly rejected. R - Draw in new DL, wait for RET, enter buystop at R, triggers at 80.50. S - DL break, tried to be a bit more generous with price, but out at S at 82.50. Running total +3 T - So the exit at S in unfortunate, but a break is a break. Once it was obvious that price formed just a little ledge and then continued higher, I am eager to get back in. I have a new DL, or rather, a fanned DL. Here at T there was a clear RET, entered buystop, and it just so happened to trigger on the same bar. So it looks like I didn't wait for a RET, but it was there. Now granted, this isn't the way I have been doing this in the past, but its an obvious upmove, obvious RET, just not shown here clearly. So triggered at 86. U - DL broken quickly, but hesitate to exit. Put in a stoploss order mentally at U. I don't want this to be just another ledge that takes us out right before it goes higher. So in this case, I am going to let the DL line break go on longer, and we still do keep making higher lows. Its a steep DL, so a break is expected, even if the break is only sideways action. V - Since we go higher than that high at T, we fan the DL, but we have another break here at V. Still not getting out because of the same rationale as at U. W - The exit is placed at BE and it does trigger here. The action didn't look strong anymore, so I felt confident with this exit and it proved to be good. Running total, still +3. X - We now have a SL and RET, sellstop at X triggers at 83.50, what a shame. Y - Break of SL, give it just a bit of room, out at Y at 85.25. Running total +1.25. We make a LL, fan the SL. Hesitation to enter a trade now as its quite choppy. Then we have a break, new DL, but once again, going to just sit back and wait. Conclusions to follow.
So much for less talking! So today was not as good. The upmove is obvious now after the open, should have been good for 20 points, but instead I got a not so great result. Would have lost money if you add in commissions. I tried to also do this with a 1 minute chart, but just couldn't keep up, and don't have time now to repeat it, even though the chart will be in hindsight. My feeling is the 1 minute might have reduced the chop a bit. I also notice that I have no time to really think. I'm watching the lines, and not having enough time to analyze the big picture. The positive aspect of this though is that my losses are kept to a minimum, and I am absolutely seeing that fear is melting away. If the trade stops working, just get out. I could have more trades that move against me than trades that work out and still be ahead. A theme that keeps coming up in my head is that its more important to be in sooner and get out right away if its not working. Waiting for too much confirmation is a higher price risk, and points to ego as I have been reading. Tomorrow I will try with 1 minute charts and see what happens. On the one hand, it means I might not be in moves fast enough, on the other hand, it might keep me out of moves that would cause me to lose a couple of points too often. Ultimately, if I just watched the price action and not have drawn in the lines, I would have more time to think, and could spot the ledges better and give price a bit more room to breathe. Today this would certainly help. When I look at a clean one minute chart now, there is almost no reason to get out anywhere (first RET is a bit deep though, but still less than 50%). But given my beginner brain and instincts, I might have held on too long to losing trades if price hadn't moved so nicely up like today. The lines are showing me the way though, and I feel really good about my progress. I am seeing the price action, and the lines are helping me eliminate fear. So its just a matter of putting it all together.
Using one minute charts today. Guide for chart is: Red down arrow - sell stop placed Green up arrow - buy stop placed Black up or down arrow - trade exited Will try hard to use lines, but also step back and look at the bigger picture of what price is doing as I do want more freedom. A - Before open, price had settled in a very narrow range before open, so waiting for a break to either side was ideal. When it did finally break out of the bottom just before the open, getting in was difficult. There were no RETs in the one minute chart. I saw one on a 30 sec chart, but not the one minute. I had wanted to get in before one of the bars "closed", but since this isn't in the rules, I couldn't d that. I therefore do wonder if its appropriate to just get in, especially since we were waiting for a break of the range, so falling out the bottom is what we were waiting for. My gut would be to just put in an order a couple of points outside the range so we get in and then closely watch. B - We eventually get a RET, set a sellstop, and filled at 94.50 C - Break of SL line, but mostly from sideways action so lets wait. D - Price got too far away now, so we are out. It looked good with the lower highs of the bars just after C, but this trust up gave me what I needed to know and got out. Incidentally, since we had a break of SL earlier, and a RET, we could have also bought here and made it a SAR. At any rate, Out at 91.50, total of +3 E - Another RET for that new DL, so in at 93. We now retrace more than 50% of the down move, so this shows he down move wasn't strong. F - Price makes its way back into that range from before open. Placing a stop to get out at 99 in case price goes below this. Tight DL is technically broken, but since its so steep, we need to give price room. G - 99 is hit and we are out. Total at +9 Drawing in a DL and a SL now, but I am for sure waiting for a break of this range before doing anything. H - Same problem as before. can't get in anywhere. Before the bar closes I can see the RET, but then price drops even lower and my RET essentially is filled in. Am I am to break this rule of only using a RET that is apparent after the bar is closed??? (This is added later: funnily enough, I see on the 30 sec chart that I have a RET, and a stop could be place to sell at the exact bottom of where price actually ended up. So i would have sold right at the bottom of this move and surely lost 2 points or so before getting out... phew!) I - Sell stop is finally place at 93.25, but shortly after this price breaks the SL so not triggered. J - So I have a DL now and a RET, but do I really want to be buying just below this range/price level around 3700 that has been a problem all morning??? Buy stop set at 98 nevertheless as per the rules. Shortly after this price breaks the DL so not triggered. K - SL is drawn, waiting to see if price breaks below the low at I, which is does, and with some force as well. Waiting for a RET, and once again, although I see them by looking at the price bar moving up or down or using a smaller bar interval, no way to get in yet on this one minute chart. L - Sell stop finally set at 88.50 and triggered, but i'm nervous because of the low earlier at 88.25 that ended up in a reversal right back to the top. Going to watch this one close. Would have been good to get in just below the swing low at I. M - Stop set to get out at BE of 88.50. Prince started to hang just below where I got in, and the past few bars are all overlapping. This could be just a pause before continuation of the down move or it could be another bottom. Have to wait and see. N - These lows that are much higher than the bars just before is worrisome. And just a bar later, we are out at BE. So total still +9. Curiously again, we had a break of the SL, and the bar right at N is technically a RET, so where my exit at BE filled on this bar, this was also the bar to go long, so I could have made it a SAR. Now I am waiting for another RET. O - Buystop set at 93, but then we break our DL, just slightly though. When price came down though, I mentally removed the stop to get in so it wouldn't have triggered when price shot up again. Now that I see the rejection of 94, this looks ok. Had I been filled, price is going sideways now a few bars later so I would just wait and see. P - That rejection of 94 seems to be holding and price breaks out lower to 92, certainly not signs of strength. Ok.. done for the later, too much to do. Good day to end up with +9 points. Not too many trades taken, and although the 30 sec charts could have gotten me in sooner on some traders and hence have gotten a few more points, I also see that it kept me out of selling right at the bottom of some moves. I feel overall better though, not as rushed.
March 20 A - Drew in a couple of SLs, both end up getting broken, so looking for a RET for a long. B - RET happens, buystop entered at 66.60 that gets triggered a few bars later. Although the DL was broken at first, this was just slight, and can be fanned once price does take off. C - Great to be in long at open since it goes up right away. Seeing the hesitation though, I put in a sell stop to get out in case price drops below 71. Drawing in DLs at these steep angles doesn't paint an accurate picture I find so I'm just watching the action more so until a swing low is made to better draw in a DL. The stop comes within a hair or triggering but doesn't. D - This lower high looks troublesome... and sure enough, price drops, so out at 71 for a profit of +4.5. E - Our original DL isn't broken here though, so not drawing in a SL yet. F - Another lower high... not a sign of strength. G - Now we have a break of the DL, draw in SL, see a RET, and enter in a sell stop at 65.25 which does trigger 2 mins later. This looks like its going to be lots of indecision though, but lets see. Curiously, this is pretty much at exactly where price was at the open. H - Out at 62.50. Its a shame because I was starting to worry about my short even further down with the 3 bars at the bottom that made a series of higher lows, but I was waiting until the line broke. Even then I still held on, hoping, because watching that right tick, price looked like it just wanted to go higher. Total is now +7.25. I - I could have placed a buystop here, we have a RET after the break below and a DL, but I'm just not feeling it. And wow, how good my intuition is since price is dropping just as I type this. I guess if I had to write what gives me this impression, its a combo of thinking the initial upmove isn't strong with regards to context on the hourly and daily, so although the long was taken at open, I didn't think it would be a huge rally. Then the short stopped working, which was a shame. And now at I, we are at the open again, so it just looked like too much indecision and my SLs and DLs are bound to be broken often in this environment. J - This bar here looks like a huge rejection of price, right at the level at the open. Seeing that price is rallying nicely after this, this should be of particular importance. K - Good opportunity for a long, but not taken, still a bit shaken from the quick drop down to J, so in a bit of disbelief at how price could rally so quickly so soon after the drop. Wow, both longs had they been taken as per rules would have yielded a nice profit. I am simply too tired today though so just watching now. 7 points profit would be great though, if trading 10 contracts of course!