I am a trend trader in daily chart. each time when I see intraday up, I view the market is going up. or vice visa. that caused me trouble. I know some guys use divergence indicators to judge reversal/pullback. take an example, GLD (gold), I see it is trending up in daily chart. fundementally FOMC's bond buying QE3 will push it higher. like yesterday, I saw it dropped in the pre-market, kind of thinking it will correct. sold some CDE in the low (or support), also EGO. late prove it is just a little dip pullback to add more for longs, while a trap for short selles. most guys like to buy pullback in an uptrend, leg up, then buy in the little dip. I feel I can not do this, I feel the trend is revesing. it really baffled me. actually I am thinking buying SPY in the dip, or in the pullback range, when I saw GLD dropped, I started to sell, while not buy. I feel when I have an view about the market, it is not easy for me to shift toward opposite view. actually I realized this mistake, I should sell my puts and buy some calls, but I just freeze.
1) You may need to shorten your time horizon from daily to intra-day. 2) Try to focus on the breakout from a congestion range in the time frame you're trading instead of being predisposed to one side of the market over the other. 3) You may need to trade a market whose volatility more closely matches your temperament.
Trading pullbacks in a trend is very counter-intuitive. If you trade on "feel", it will feel wrong every time. I suggest you start a spreadsheet and compile a lot of statistics surrounding each major with-trend price swing you observe on charts in your time frame. Record stats for % of pullback, levels at which S/R was established in relation to previous price action (things like previous resistance becomes support and previous support becomes resistance, trend lines/parallel channel lines, moving average crossovers, etc.), how much retrace occurred (adverse excursion) once price turned. Next, develop a real basic plan based on this info using the patterns that occurred prior to significant price swings back in the direction of the trend (this is all assuming there IS a definable trend). Now, apply the rules you created for entering a trade based on the price pattern(s) to every occurrence of the patterns(s), and keep a spread sheet of the results for a period of time that encompasses varying market environments (trend and range). Analyze the price action surrounding the losing trades and create filters to help you filter out low probability occurrences of the pattern(s) you believe you want to trade. The filters will likely be things like the size of pullback price bars, the depth of the pullback, major S/R chart resistance in the way, scheduled news announcements, strength of the trend (strong with shallow pb or wide and channeling with deep pb), etc. Once you've done all this, chances are good you'll have something concrete with fixed rules and setups that place the odds in your favor, and you can then trade regardless of what any of it "feels" like. Trading pullbacks in a trend feels totally wrong to me. There's no way I'd do it without having done all the stuff I recommend above.
nice! +1 ... the only thing I'd add is that all the above would be quicker, easier and more significant (statistically speaking) if you can automate the testing...
I use them for two things: 1) When the shorter average is above the longer one we are in a buying mode and I look for pullbacks to buy. And vice versa for shorts. 2) I use them as a kind of support tool for price. When I see a pullback, I would like to see the pullback to come close to the shorter average or even 'touch' the average. When it is not close to the average, I do not like the pullback.
I have so many examples in my mind, it is hard for me to reverse my view. I feel I am sturborn. several weeks ago, I was thinking to buy FSLR 27 calls (FSLR after earning, thrusted almost doubled,obviuosly in the chart it is going up). then one day it dropped 5+points, almost removed all gains after the earning runup, all puts of 25/24/23/22 printed more than 10 folds gain. those days, everyone here may notice USO. before the drop, the trend is going up, the chart seems to say we are going higher. but it suddenly removed all the runup in months. the worst is I have other examples, just the opposite. recently I bought some ZLC puts, when it dropped to 5.4 (this is a puulback, late confirmed it), I bought puts of 5 of course just 0.05 cents. I thought it will drop to my EMA. but it refused. my ZLC trade is a loser. I did a ZLC trade since I did buy some puts of PPHM, when it ranup to 3, I bought some 2.5 put , late I covered it at my EMA 1.8, that is a winner. it doubled+. this PPHM trade encouraged me about ZLC trade. those things made me feel at loss what to do. I know it is just odd. but still want to improve the odd, do not want to bet blindly. I easily let my holding control what I look and think. Pullback/reversal really hard to disgingusih, if dip shallow, I kind of think it is a pullback (several daily bars, a little tilt down). if dip hard, I kind of think it is a reversal, often so quick, so hard to catch. I was stuck with CDE/EGO puts this week, that is why I am early and write posts. GLD/AGQ everynight dropped, then somehow in the opening it jumped back. CDE/EGO puts of 9/21 this week, that made me nervous. this night silver/gold all dropped good amount, my expectation is silver to 33under, gold to 1750under.
Do you have a clear and writen trading plan? Setup, trigger and exits? If you do have such a plan, did you confirm for yourself that it works in realtime? If you confirm that you tradingplan works, did you make a profile of your believes about the market and do you know yourself enough to understand that this is something you can do? Or are you going to doubt everytime you see a setup and a signal to act? If that is the case, you need to work on your tradingplan and what you believe about yourself, the market, and so on... There is nothing wrong with having a loss, as long you follow your writen tradeplan.