A simple price action approach

[NoDoji]

Quote from Zr1Trader:

Do others like using limits on the trendline or do you like the market to show signs of a bounce off the line before entering? I see the OP likes waiting for signs of life before entry, Close below line followed by a close above.

I've always run into problems clearly defining an entry approach that I find would work best for trend line trades. I like to see a long shadow cross and snap back though a trend line. Haven't done extensive testing on this approach yet. Looking forward to the thread and testing different ideas.

This is how I trade successfully day after day, so I definitely like this thread

Because I know the instrument I trade quite well, there are times when I'm very comfortable using limit orders at key levels with very small stops and other times when I wait for confirmation off the level and use a stop order on a bar break in a smaller time frame (using a 1-min bar break while trading off the 5-min chart, for example).

Choosing one way or the other depends on the research you've done into the instrument(s) you're trading to determine the expectancy of each method under varying conditions, and how to place survivable protective stops

I find that using limit orders during periods of consolidation (flat range, drifting channels, triangle formations) works very well to get me positioned at ideal entries for the eventual breakout, and I'm happy to scalp smaller profits in the meantime.

When price is more volatile, making wider swings, but honoring trend/channel lines, I will watch for S/R at the level, and get in on a more confirmed demonstration of S/R holding there. The 1-min chart generally displays a second test of a key level and invites an entry by forming a price pattern in the micro-scale that is similar to what you'd look for to signal an entry in your main trading time frame. This is the "signs of life" method and it generally offers a higher probability of success.

 

[1a2b3cppp]

Quote from metal:

very nice, baro-san. This is exactly what I'm talking about only I was keeping it very simple as I gently introduce the concept.

metal

wait seriously? I thought he was tooling you with that post. I mean look at those trendlines at the bottom; they don't even go anywhere or connect to anything

 

[1a2b3cppp]

Quote from metal:

Yes, now that we made a higher high our trendline is drawn using the last swing low before that high

o rly?

 

[crazyAtrader]

This is my area of expertise so allow me to lay an easter egg to those willing to do the extra work as the OP is on the right track.

It is worth your time identifying and extending the channels inside inverse and head shoulder channels in addition to what you suggested; especially if the patterns are not horizontal, and you'll see a world of price action open before your eyes.

Crazy A

 

[metal]

Instead of "last swing low" I should have said "next highest swing low". That is, the higher low above the previous one. Hope that makes sense.

Quote from 1a2b3cppp:

o rly?

 

[NoDoji]

Here is a price action trade I took late today in CL (oil futures). There was a wide symmetrical triangle formation on the 5-min chart (my intraday trading time frame). I wanted to be positioned in advance of the breakout, noticed a signal that the breakout was likely pending (failure to test the upper trend line of the triangle), but just in case there was still a secondary push to test the upper TL, I did not short the initial 5-min bar break for a test of the lower TL; instead I watched the 1-min chart for a "confirmed" pre-breakout entry. The 1-min 20-period EMA is a mobile S/R level that often signals early entries in a pivot zone.

For all the price action naysayers here on ET, the setup for this trade was announced in real time, and this trade was called and managed live in real time in the "CL Redux" thread today: http://www.elitetrader.com/vb/showthread.php?s=&threadid=178741&perpage=10&pagenumber=2173

Please ignore the fact that I exited on minor TL support instead of holding for my Call of the Day target.

 

[baro-san]

Quote from NoDoji:

Here is a price action trade I took late today in CL (oil futures). There was a wide symmetrical triangle formation on the 5-min chart (my intraday trading time frame). ...
For all the price action naysayers here on ET, the setup for this trade was announced in real time, and this trade was called and managed live in real time in the "CL Redux" thread today: http://www.elitetrader.com/vb/showthread.php?s=&threadid=178741&perpage=10&pagenumber=2173

Please ignore the fact that I exited on minor TL support instead of holding for my Call of the Day target.

Nice trade!

Using OP's trendlines this is what I see (thick red arrow corresponds to your trade).

<img src=http://www.elitetrader.com/vb/attachment.php?s=&postid=3182178>

 

[Zr1Trader]

Quote from NoDoji:

This is how I trade successfully day after day, so I definitely like this thread

Because I know the instrument I trade quite well, there are times when I'm very comfortable using limit orders at key levels with very small stops and other times when I wait for confirmation off the level and use a stop order on a bar break in a smaller time frame (using a 1-min bar break while trading off the 5-min chart, for example).

Choosing one way or the other depends on the research you've done into the instrument(s) you're trading to determine the expectancy of each method under varying conditions, and how to place survivable protective stops

I find that using limit orders during periods of consolidation (flat range, drifting channels, triangle formations) works very well to get me positioned at ideal entries for the eventual breakout, and I'm happy to scalp smaller profits in the meantime.

When price is more volatile, making wider swings, but honoring trend/channel lines, I will watch for S/R at the level, and get in on a more confirmed demonstration of S/R holding there. The 1-min chart generally displays a second test of a key level and invites an entry by forming a price pattern in the micro-scale that is similar to what you'd look for to signal an entry in your main trading time frame. This is the "signs of life" method and it generally offers a higher probability of success.

Appreciate your input, I would like to test, and practice a type of trend line approach on a "technical market" such as CL , or 6e . I notice those markets seem to abide by the trend lines in a more clean cut manner. I'll have to come up with some consistent rules before starting. This thread looks like it could have some promise of constructive discussion. Reminds me of Schizo's " unholy grail to success thread"

Regards

Zr1

 

[metal]

Nice trading, NoDoji.

Here's my hindsight view of a 5min CL chart. Trendlines are partially art and you sometimes have to draw several until price starts respecting one. Once that happens you are safe to clone the line into a channel:

metal

 

[Zr1Trader]

Reason's for discarding an approach like this before are because of price sometimes respecting the line very well and other times not so well. Through my observations it seems like a failure to break the trend line (slightly penetrating the trendline faking in shorts, then a reverse back above the trend line causing shorts to cover while new buyers hop on the bandwagon as well) is when the good profit opportunities arise. For instance look at the attachment.

Just some observations from my end not saying anything is proven from data ect...