A simple price action approach

[wrbtrader]

Quote from Daal:

...traders using different ways to 'interpret' price action or trendlines and how to trade them will virtually guarantee that some of them will be winners over a certain period of time...statistical evidence that trendfollowing works in intraday data...

First of all, I don't like it when discretionary traders (those not using automation or mechanical trading systems) give the impression or state that their profits is exclusive via their trade method alone and everything else is none existent (not needed). Hopefully, that's not what you interpret from NoDoji.

With that said, everybody has some sort'uv short-term luck or short-term unlucky. Therefore, one evidence (not statistical) would be long-term profits. Simply, NoDoji will know for sure in about 10 years from now that it wasn't short-term luck if still profitable.

As for statistical evidence, any consistently profitable discretionary trader (not using an automation system) must know that profits aren't exclusive via the trade method alone. The following are very important in determining short-term profitability or long term proftitability...a discretionary trader's trading plan:

* Market experience
* Discipline
* Money management
* Position size management
* Proper capitalization
* Stress management
* Proper broker platform
* Proper trade workstation
* Proper at home trade environment (retail traders)
* Trade Method with edge

My point is that your question...the way it's stated...implies that the trade method is the "only" variable that determines profitability. Yet, I do understand if your question was stated as such if NoDoji or others prior have implied the other variables I've listed above have "no impact" on their trading results.

Regardless, intentionally being redundant, its still an incorrect assumption to believe discretionary traders profitability is determine via the trade method alone in light of the above listed other critical variables (together it's called a trading plan) to the equation that also determines profitability...critical variables that on any given trading day will have more impact on trading results than the trade method itself.

Therefore, if you need statistical evidence, you're approaching this the wrong way considering in theory nobody can provide statistical evidence involving many of the above key variables in a trader's trading plan except for a few variables.

If you don't understand or think it's something to debate...here's a pizza analogy. To properly test (look for evidence) about a trader's profitability...it's flaw testing/research to only taste the sauce to determine how good a pizza will taste while ignoring the other ingredients in that pizza. Simply, to test or look for evidence involving a profitable discretionary trader...you must eat the pizza with all it's ingredients (the entire trading plan as a whole working together) and not one ingredient alone.

In contrast, if NoDoji was using an automation system, mechanical system (computer codes)...that's when you can ask for statistical evidence and ignore (in theory) all those other key variables I mentioned.

Mark

 

[jack411]

Quote from macattack:

I need some help.
Here's a typical trading series for me.
Down 47 points.

How do I avoid this?
They look like decent entries to me; if I didn't take one of them it would be the one that takes off for 100 points. I've got plenty of screen time, but it still feels very random to me.

If I take what looks like a good entry I get stopped. If I avoid an entry because it doesn't look quite right it goes 100 points without me.

Some days I can do pretty good, but more often than not I work myself into a 47 point deficit just like this example shows. Not a fun way to start the day.

Hey mac,

like Xspurt said, check out some stuff on PA. Here is a journal you should def read if you haven't before. Starts with the basics of price moving in waves, etc. Your chart looks just like the ones used in that thread. I only marked a few things on your chart and didn't get every move. I'm at work. I don't want to get off topic and drift away from the TL/Channel stuff discussed here. Just wanted to give my quick interpretation on your chart and a link to that journal -
http://www.elitetrader.com/vb/showthread.php?threadid=113456

btw - this is a pretty fast chart so the countertrend (shorts) trades marked would be scalps

 

[1a2b3cppp]

IMO, don't use Heikin Ashi candles. They will show price values that price never actually touched. In other words, you may be drawing trendlines based on incorrect prices.

 

[jokepie]

Use HA only to detect exhaustion of pull backs on a long term( higher time frame) trend to manage position.

 

[Zr1Trader]

Just got back from bringing my gf to taylor swift concert last night , oh joy. Anyway, took this trade on the 5 min yesterday after I saw it cross back over the hourly trendline, Low risk , High reward! still waiting for touch of target trendline.

 

[dv4632]

Here are two channels I drew on the 5-min euro chart last night. The red one drawn across the highs and copied down to the low. The yellow one drawn across the two lows and drawn up to the high on the left.

This is what things looked like around midnight eastern time.

 

[dv4632]

And here's how things played out. I was watching in real-time until around 3am or so.

After price broke out of the red channel and started climbing it found resistance at the yellow channel for a short opportunity (first red arrow).

To be honest... the second and third trades are hindsight trades because I wasn't there when they presented. So can't say I'd have got them in real time. But a break back into the red down channel, and then a rejection off the upper red line.

The other trade I saw was the 4th red arrow, another break back inside the red down channel following a lower high.

There were lots of other direct hits on the channel lines though I don't know if they would make good trades. Today may have just been a lucky day where the lines worked really well.

 

[NoDoji]

Quote from FreakofNature:

Why not just short the resistance line you had in the first place, no reason to enter in the middle of nowhere when you can do so at the good looking extremes. Not only is your stop very much unprotected your reward is inferior.

You had it as resistance, so it should resist, why wait for the market to tell you what you already know.

If it does not resist you take a stop, if it fakes you out, you re-enter with a stop at the swing high.

If your resistance level is really good it will at the very least produce some sort of reaction in your favor, and on that reaction your reduce your risk by adjusting your stop.

Sorry very much dislike the confirmation approach.

FoN

I’ve been trading the confirmation approach for about a year now and it’s been the best thing that ever happened to my trading.

My example posted was to show nakachalet a clear setup and trading plan using a 5-min time frame that allows plenty of time to plan and react. With this method you always wait for a bar to close before trading and let the price action itself sweep you into the position in the direction it’s moving. The fact that traders want to sell lower than that big red bar tells me they think it’s going lower and I want to trade with the majority, not fight them. I have no problem with losses on a trade that fits my plan. If I end up selling a low tick and taking a .10 loss it was well worth it because my research has told me that more often than not setup X results in price move Y and I trade all setups all day to place these odds in my favor.

As for entering in the middle of nowhere, I found this trade to be just the opposite. At that point in time a break of the low of the 6:00am bar tells me buyers won’t be too interested in stepping up until either the 20 EMA or the previous resistance zone hold as support. Anyone buying that space between is trading in the middle of nowhere.

Because that opening bar is so large, I treat the trade as a range breakout trade (it’s a clear range in a smaller time frame). This means my risk is small (.10) and price will break the next support level with little retrace and worst case shouldn’t retrace more than .05 into the breakout zone. This means my stop is not only very survivable, but sensible.

How do I know this? Because I have over 100 pages of spreadsheets covering months and months of daily post-market analysis with the details of every valid setup from my trading plan (20-25 trades a day) and how they play out. I probably know more about survivable stops, high probability setups, how to handle breakouts, how to avoid traps and play off them, etc. with CL in a 5-min time frame than 95% of retail CL traders. I’ve done my homework and paid my dues.

You wondered why I didn’t short the resistance line in the first place.

The 5-min trend was up and the resistance line from the overnight session is now a key breakout level in an uptrend. I don’t fade trends. I will short resistance in a down trend. I’ll be positioned long for the breakout in an up trend. In fact, I was long from 97.51 leading into the pit open and when the breakout failed, I took off the trade @ 97.71. Normally I short a fbo right away but was not quick enough on my feet and missed what I considered an ideal counter-trend entry price. Price really dropped fast off the fbo.

I then went long again off a 1-min setup looking for a retest of resistance (third time’s a charm) and scratched the trade when price failed to even get there. At that point I’d drawn the LTL forming the ascending triangle that now appeared doomed to break downside and I traded the plan presented on my chart.

I’m a trend follower and the trend was my friend until it proved otherwise at which point I played a confirmed counter-trend play, confirmed by way of a failed breakout of R, followed by a lower high (very clear on a 1-min chart, which I use to “see into” sloppy 5-min price action). I was not ready to concede the uptrend was over for the day, but a deeper pullback to either the 20 EMA or previous R was very likely and worth the .10 risk to find out.

 

[IMTSU]

Quote from FreakofNature:

Why not just short the resistance line you had in the first place, no reason to enter in the middle of nowhere when you can do so at the good looking extremes. Not only is your stop very much unprotected your reward is inferior.

You had it as resistance, so it should resist, why wait for the market to tell you what you already know.

If it does not resist you take a stop, if it fakes you out, you re-enter with a stop at the swing high.

If your resistance level is really good it will at the very least produce some sort of reaction in your favor, and on that reaction your reduce your risk by adjusting your stop.

Sorry very much dislike the confirmation approach.

FoN

I see no problem with what NoDoji was doing or with the confirmation approach. She traded according to her interpretation of the PA and there is nothing wrong with that. Actually, I have more of an appreciation for what what she does (and traders like her) than I do for the people that trade bootlegged lines on a chart with 30 point stops.

Quote from NoDoji:

I’ve been trading the confirmation approach for about a year now and it’s been the best thing that ever happened to my trading.

Good stuff NoDoji.

 

[nakachalet]

Quote from Daal:

NoDoji,
considering that a high number of traders using different ways to 'interpret' price action or trendlines and how to trade them will virtually guarantee that some of them will be winners over a certain period of time, what kind of evidence do you have that this is a sound method to use for the long-run instead of short-term luck?

By that I mean statistical evidence that trendfollowing works in intraday data

in terms of statistical record....

if you ask me, i'd ventured to say there is less than 1% of traders here who keep stats of any kind in consistent continuous manner.... of longer than 6 mos....

and for those 1% winner who do keep their win-loss record on a consistent basis.... most, i dare to guess, are on auto recording as each trade is logined and logouted per computer recording keeping....

these folks are just too occupied and preoccupied to do other things not directly having anything to do with their bottom line.... this we all know and understand....

i've asked the admin to open up a new thread for those live traders who wish to post, after market hours, to have an opportunity to do so, if they wish.... so perhaps others who would like to follow, could perhaps.... see some differences and pick up additional tips....

but there has not been any response yet since monday.... keep my fingers cross.... lol

<on the other hand, perhaps.... most do not care much anyway, one way or the other. in the trading profession, spoon feeding just does not work in the long run--is my humble one man opinion....

take today's cl trade.... just how does one teach others to reap 100 tics profit per contract, not once but twice, both on the way down and on the way up.... but this is a very unusual day in oil.

on the other hand, i do believe there are a small numbers of traders who are eager and anxious to learn some workable trading methods.... so they may adapt for their own use.... but they just do not have enough knowledge or resources to figure out just WHERE or HOW to do that.... HOPEFULLY, THIS NEW THREAD would provide a place where other traders could compare notes....> sorry, talking too much.