Sure, but he says that we should be looking for volume drying up as markets make new lows. On that chart you posted you pointed out how volume was increasing as markets were making new lows, indicating that sellers were being 'washed out', right? You then pointed out that as prices turn, where are the sellers? They have all sold; therefore there is less selling pressure and prices are free to go up. If I have that wrong, please correct me immediately. You said "If you see a volume surge as price is falling, you know you're near the bottom". He's saying "If you don't see a volume surge as prices are making new lows, you know you're near a bottom" Not trying to say you're wrong in any way. Also, you did not say 'As price is making new lows', you just said 'as price is falling'. So maybe you look at new daily lows differently than you look at each swing low. It's just something that caught my eye because I had just finished reading your posts. Make sense?
Yeah, makes sense. This is also one of the reasons I take that initial partial. We could easily go to a new low and at that time I'd be looking for that low to occur on lighter volume. This is one of the ways I solve the dilemma between, does the market bottom in a V-shape or a double bottom, lower low shape? Obviously you don't know the answer to that ahead of time so I take the V-bottom and if it works I'm good. If it doesn't then I have that partial to protect me while I add at the lower low.
PTF Thanks very much for sharing your approach and for all your time. One question I have is your timing. I know you say that timing is least important and diffacult to get just right, but it looks like you take positions before the move you are attempting to acquire has shown itself in terms of a price reversal. In other words it looks like you are trying to catch that falling dagger just as hits the floor. Is this true? Are you in fact aiming at the extreme in the move to enter your fade? Or do you wait for something like higher low (on a long entry) on the 1 mintue before wading in? Or some other method that signals that move you are fading has exhuasted itself and begun to reverse? Thanks Again
This is my way of solving the dilemma created by randomness. Will the market reverse in a v-bottom or a double bottom, or even a triple bottom for that matter? You don't know so will take the trade when I believe the v-bottom is beginning. On that bottom I was a little early but I have a plan to handle that situation. On the top, I was actually late on the limit sell I had parked to I took it with a market order instead. Yes, I do try to catch the falling knife but I'm aware of the difficulty and risks of trying to do that. I've been trading the fut's for a long while so I have a degree of confidence that can only come with time and successful trading. Occasionally, that knife will cut me but I will manage that risk, relative to the size of my account. It's just a risk I'm willing to take to avoid missing a perfectly good trade. Buying down and selling up has just been what has worked for me. You'd certainly be justified to wait for at least some sort of turn.
I have only skimmed this thread and that quote may be out of context, BUT I would think that your stops get hit a lot with that strategy. I also missed which Index Future you are talking about, is it YM, ES or NQ?
I'm trading the ES and there are occasions where I've had to stop out of successive trades before something like the 3rd or 4th trade will be the winner. I've gotten pretty good a nailing the tops and bottoms of the markets so this doesn't happen as often as it used to. How does Buffett put it? Know what your competencies are and invest (trade) within them? Or something like that......in other words, just know what you're capable of doing and keep doing it over and over.
YM MINI DOW UPDATE: I entered short at 13,368 (12:01 EST) as the days trend was down. Trailing Stop set at 20. Got stopped out 13 minutes later at 13,380. Minus 12 ticks / $60.00 plus commission. Market then finishes around 13,322 without me. This is the first time I implemented the Trailing Stop feature and I will have to reevaluate it, looks like a 25 trailing stop would not have been hit.
25 point today, 27 the next day. The worse thing you can do is to trade the next day using what worked the day before. You'll always be chasing, just be careful!