A simple price action approach

[bigsnack]

Hello everyone! I hope I can make a useful contribution to the thread. I use trendlines on a smaller timeframe tick chart, and I have a fair amount of success with them. I trade the ES mostly, because I use the NYSE TICK for a little bit of directional bias.

I personally have not done well buying TL's alone, but I will use my directional bias to trade TL FAILURES, and that has given me better success.

In the attached chart, you can see the dominant TL that is in play, and the failure of every counter-trend trendline is a chance to enter the market. Volume and the TICK help me, but they aren't necessary, and I'm omitting them at the moment since this is all about price anyway.

 

[Zr1Trader]

When I was new to trading while in SIM, before I read any books on trade or money management, all I did was trade the failures as you described bigsnack, actually worked out well at the time for me and I thought, How could trading be this easy? That was the only logical entry I could see on the chart at the time. Then after going live I had the usual shock of reality with emotions lack of detailed plan ect so i kind of just discarded that method. Question to the rest, Xpurt, Nodoji,metal Do you trade these countertrendline failures also as either entry or adding to existing positions? Thank you bigsnack for the chart, and thank you to all who have productive contributions to this thread.

 

[bigsnack]

Quote from Zr1Trader:

Do you trade these countertrendline failures also as either entry or adding to existing positions?

I am looking forward to hearing from the other contributors, but I will give my .02 real quick as well.

Using these for entries is all about the elusive money management. A system like this can be made or broken based on how you manage your risk. Instead of leaving it like that I can give you a specific example:

1. Let's say you've ID'd the trend as down
2. You then ID that a bullish counter trend TL has just broken.
3. Now you have a setup, but what is your entry trigger? They should be 2 different things in my opinion.
4. I have a maximum risk tolerance of 6 ticks on the ES. This forces me to be picky with my entries.
5. At this point I look to ID the price at which I will decide that bearish trend is toast. What price proves to me that the bears are done for and the bulls are taking back at least temporary control?
6. Once I've done this, the goal is to enter the market within a window that allows me to stay within my maximum risk tolerance, but also allows the ES to move all the way up to the bearish "line in the sand" price. Ideally you want to enter AT that line in the sand price (if tested), so that your risk is as low as 2 - 4 ticks.
7. A perfect example was NoD's mention of placing limit orders at failed support that should act as resistance. A strictly defined stop within the maximum risk tolerance.

Thoughts?

 

[ES.Dreamer]

Thread is a breath of fresh air with input from people that have obviously been studying the markets for a while.

Albeit it's only the beginning.

Couple of additional tips I would like to suggest.

Mark the dominant trendlines with a specific color, this is your main market direction, without clear direction, you have no business taking trades, for the trend to be your friend you actually need a trend to be present, otherwise you have no friend.

Mark the counter-trend lines with another color, this is your secondary signal, I will come back to the primary in a bit.

Mark the return lines with another, this is the one parallel to the dominant one, your exit point, what completes the channel. Market loves to trade in channels.

Here's what to do:

Dominant trendlines give you direction but they aren't very precise, lot of choppy action due to stops so the touch can be erratic, you think it's breaking but it's not, this is why you need the counter trendline for entry confirmation.

Don't anticipate a fade at the dominant trendline, let it "break", let the market take you in, most likely it's a fake because of the strong dominant trend, otherwise, there would not be a dominant trend line in the first place, it exists for a reason.

Your entry confirmation, when the counter trendline breaks *and* price is once again on the trend side of the dominant-trendline, stop goes above-below the counter move high-low. You need confirmation because trends do end, don't be a hero.

Your exit, the return line, unless the dominant trendline is "broken" once again, then you exit your trade and wait for a new counter-trendline to once again break.

Sometimes you will be kicked out in noise, make sure you don't let this discourage you and you are prepared to re-enter as long as the conditions are still valid.

Pretty simple, just needs to be done and do not ever fade the channel's trend or dominant trendline, don't let the temptation of counter-trading interfere with your trading-plan.

Don't pay anyone a single cent to trade profitably, all you need is strong discipline, patience and the above and you are set.

Oh yes and capital, lots and lots of capital

ESD

 

[bik]

Quote from NoDoji:


Limit the losses when price fails to provide follow through...

This is the part I've been struggling with. I set a stop loss one tick below the signal bar, but not sure when to bring it up to break even, and then end up with many small losses. Can you add some comment on how to tell when price is not following through? thanks.

 

[Zr1Trader]

Quote from bigsnack:

I am looking forward to hearing from the other contributors, but I will give my .02 real quick as well.

Using these for entries is all about the elusive money management. A system like this can be made or broken based on how you manage your risk. Instead of leaving it like that I can give you a specific example:

1. Let's say you've ID'd the trend as down
2. You then ID that a bullish counter trend TL has just broken.
3. Now you have a setup, but what is your entry trigger? They should be 2 different things in my opinion.
4. I have a maximum risk tolerance of 6 ticks on the ES. This forces me to be picky with my entries.
5. At this point I look to ID the price at which I will decide that bearish trend is toast. What price proves to me that the bears are done for and the bulls are taking back at least temporary control?
6. Once I've done this, the goal is to enter the market within a window that allows me to stay within my maximum risk tolerance, but also allows the ES to move all the way up to the bearish "line in the sand" price. Ideally you want to enter AT that line in the sand price (if tested), so that your risk is as low as 2 - 4 ticks.
7. A perfect example was NoD's mention of placing limit orders at failed support that should act as resistance. A strictly defined stop within the maximum risk tolerance.

Thoughts?

I like your point about the signal/trigger being separate from your entry signal. I currently just use 1 setup and have a pattern signal along with a separate entry signal to minimize risk on entry. On top of that , one needs to have a plan of action for possibly trailing stops or exiting after other signs that the trend is over. You are absolutely correct that MM and trade management have more of an impact than most will ever know.

I'm hoping to add another setup to my arsenal and it looks like this thread is helping me do just exactly that. I will just need to test for a while and work out all of the details on my own.

Thank you for elaborating in the above post.

 

[NoDoji]

Quote from nakachalet:

do you mean to say that you execute 25-30 trades a day with your 5 min chart.... is that what you mean, pls?

(1)....if i may ask.... which product or products are you trading so frequently, pls?

trading in a group using skype sounds like something really new....

(2)....what is it like, pls? if you have the time. thx much as usual.

Yes, 25-30 trades a day between 8:30 and 2:30 eastern time trading oil futures using a 5-min chart for trend/plan and a 1-min chart for range trading, entries, and “fly fishing” (positioning in consolidation until a breakout occurs). Also, unless there’s big airspace to a next S/R level, I trade trending moves in pieces rather than holding through significant retraces. This is why I have so many trades.

The Skype group was 3-6 of us discussing price action and setups on 6E, CL, and ES. A couple of us were heavily focused on refining CL trading strategies. Several sets of eyes watching the same thing and sharing various interpretations was immensely helpful.

Quote from Zr1Trader:

Question to the rest, Xpurt, Nodoji,metal Do you trade these countertrendline failures also as either entry or adding to existing positions?

I’m usually positioned before the countertrendline failure. The failure is my signal to hold the position for more. For many, it’s the trigger to add to the winner, but I’m an all-in/all-out trader, so I hang in there until a level fails to break, take my profits and wait for the next setup.

Quote from bigsnack:

4. I have a maximum risk tolerance of 6 ticks on the ES. This forces me to be picky with my entries.
5. At this point I look to ID the price at which I will decide that bearish trend is toast. What price proves to me that the bears are done for and the bulls are taking back at least temporary control?
6. Once I've done this, the goal is to enter the market within a window that allows me to stay within my maximum risk tolerance, but also allows the ES to move all the way up to the bearish "line in the sand" price. Ideally you want to enter AT that line in the sand price (if tested), so that your risk is as low as 2 - 4 ticks.
7. A perfect example was NoD's mention of placing limit orders at failed support that should act as resistance. A strictly defined stop within the maximum risk tolerance.

Thoughts?

My thoughts exactly.

Quote from ES.Dreamer:

Couple of additional tips I would like to suggest…

ESD, awesome post, every bit of it.

Any career trader here can recognize the others immediately. Anyone who actually trades for a living has no doubt about who on this thread trades live and profitably. It’s clear as a bell.

 

[NoDoji]

Quote from bik:

This is the part I've been struggling with. I set a stop loss one tick below the signal bar, but not sure when to bring it up to break even, and then end up with many small losses. Can you add some comment on how to tell when price is not following through? thanks.

Can you post a chart or two with some examples of your trades, listing your initial stop and minimum profit target zone?

I believe that when trading in the direction of a well-defined trend, you should leave your initial stop and target in place. If price comes very close to target, then maybe move the stop to b/e.

If trading in a range or trading pullbacks in a wide channeling trend to scalp some additional profit, I move my stop to b/e the moment a price level fails to break that should. So let's say there's a wide channeling uptrend and price hits the upper channel line. If the channel line holds as resistance or overshoots slightly and retraces back into the channel, I take my long position off and prepare to sell short for a ride to the LTL. I watch the 1-min chart for a signal, put on the short trade if indicated, and if price can't break through, say, the previous bar's low with a bit of conviction, I move my stop to b/e quickly and prepare to flip long for a channel breakout.

 

[ES.Dreamer]

When the channel begins with a dominant trendline just copy and paste to the lower pivot to obtain the return trend-line, that's easy that's channel 101.

However...

Not all channels begin off dominant trendlines, many times you can get a heads up and project them before they are actually complete, illustration will show you how, along with several different ways to enter based on developing price action, always with the trend.

I'm only scratching the surface here but there's gold underneath, it's up to you find it.

ESD



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[ES.Dreamer]

Quote from NoDoji:



ESD, awesome post, every bit of it.

Any career trader here can recognize the others immediately. Anyone who actually trades for a living has no doubt about who on this thread trades live and profitably. It’s clear as a bell.

Ditto with yours, enjoy reading them.

ESD