A simple price action approach

[JoshDance]

Quote from NoDoji:

The year of statistical analysis I did for my chosen trend-following setups with my defined trade management rules demonstrated a 70% success rate. This is strictly using a 5-min chart.

NoD, was this back testing? I'm curious because I have had difficulty back testing anything discretionary due to the variables that exist every day that do not show up in historical charts--for example, was price moving in a "lazy" way or was it enthusiastic? That spike of movement and feeling of "building up" that often precedes a breakout is just not present in a historical chart.

I find intangibles like these that aren't shown on a historical chart make it such that some of the best trades I've had, are not trades I would take based on just the price bars on a historical chart. Does that mean I am too lenient with what a "setup" is and need to more strictly define them? Can you offer any advice on how you performed your statistical analysis and were confident enough in it to trust its reliability?

 

[ammo]

Quote from jokepie:

I personally, let market show me sup/ res. In my experience the best trades are the ones where these so called supp and res Break. I try to keep an on just the price action. There is too many things out there to be worried about. Keeping it simple helps my decision making faster and easier.

i use tl's and mp,and watch correlating markets,from the large chart down to the small,no indicators..pretty simple

 

[NoDoji]

Quote from JoshDance:

NoD, was this back testing? I'm curious because I have had difficulty back testing anything discretionary due to the variables that exist every day that do not show up in historical charts--for example, was price moving in a "lazy" way or was it enthusiastic? That spike of movement and feeling of "building up" that often precedes a breakout is just not present in a historical chart.

I find intangibles like these that aren't shown on a historical chart make it such that some of the best trades I've had, are not trades I would take based on just the price bars on a historical chart. Does that mean I am too lenient with what a "setup" is and need to more strictly define them? Can you offer any advice on how you performed your statistical analysis and were confident enough in it to trust its reliability?

It was daily bar-by-bar backtesting. End of each day I would scroll my chart to the right edge so it looked exactly like it did at the time and trade each appearance of my chosen setups. I'd track on a spreadsheet the number of ticks the initial move from entry went for or against me; the max heat on the trade (unless stopped out for a loss), the result of moving a stop to b/e after a fixed number of ticks or leaving the trade to stop or target, SAR setups, survivable or non survivable stop placement and the result, and so on. I did it every day (and still do at least a couple times a week) for many months.

The intangibles are not important to me. I was either talking myself out of, or taking myself out of, way too many trades by assessing the "feel" of the price action instead of just trading my defined setups. I wanted to trade mechanically, without emotion and without thinking while trading.

I have trades that come within a tick of my stop and take off straight to target (or better). I take trades where the chart looks like crap but technically it's a valid setup (the one I posted the other day, the short of that big red bar, is a good example). I've missed proper pullback entries and watched price excitedly approach the breakout level and I've chased entry right into...pure resistance at the high.

So I now prefer to just trade the chart, not the feel of real-time action on the DOM. That was screwing me up. I wait for a bar to close and then I place the order. Sometimes I do use the 1-min chart for entries, but I wait for the bar to close. The only time I don't wait for a bar to close and trade with a stop order for my entry is when I place a limit order at a key level with a very tight stop in case the level doesn't hold.

 

[ammo]

Quote from jokepie:

Good one.

PA at support and resistance marks those areas ...right.

yes ,i see em as targets

 

[JoshDance]

Quote from NoDoji:

It was daily bar-by-bar backtesting. End of each day I would scroll my chart to the right edge so it looked exactly like it did at the time and trade each appearance of my chosen setups.
...
So I now prefer to just trade the chart, not the feel of real-time action on the DOM.

Thanks, good info--did you plot support and resistance levels that were longer term as well, if you use those in your trading? For example, I can zoom out the 5m to the max and still not necessarily see the S/R from longer term charts--which means synchronizing all the charts I would use (I have 15m/60m/240m for longer term reference--do you find these are more of a distraction by the way?). I certainly don't mind doing the work but want to be efficient about the way I test.

I don't use the DOM for anything but placing and managing orders, but I do have the time and sales up. Do you find that to be a distraction for you personally in trading?

 

[NoDoji]

Quote from JoshDance:

Thanks, good info--did you plot support and resistance levels that were longer term as well, if you use those in your trading? For example, I can zoom out the 5m to the max and still not necessarily see the S/R from longer term charts--which means synchronizing all the charts I would use (I have 15m/60m/240m for longer term reference--do you find these are more of a distraction by the way?). I certainly don't mind doing the work but want to be efficient about the way I test.

I don't use the DOM for anything but placing and managing orders, but I do have the time and sales up. Do you find that to be a distraction for you personally in trading?

I note S/R levels off the 60-min and daily charts. I also note where previous S may become R and R may become S in a pullback.

I find that focusing on the 5-min and 1-min chart together and talking to myself about what's happening keeps me alert and on the correct side of the price action. I have the 60-min chart in view, but I only look at it following a strong price swing to see what the bigger picture looks like.

I found the DOM to be a distraction because when I saw price move a certain number of ticks I was inclined to move my stop to b/e instead of focusing on the chart and determining if there was any valid reason to move my stop. I now force myself to focus on the charts until a bar closes, at which point I can make a decision about whether to move a stop or target, leave them alone or prepare to stop-and-reverse.

 

[nakachalet]

Quote from NoDoji:

I note S/R levels off the 60-min and daily charts. I also note where previous S may become R and R may become S in a pullback.

I find that focusing on the 5-min and 1-min chart together and talking to myself about what's happening keeps me alert and on the correct side of the price action. I have the 60-min chart in view, but I only look at it following a strong price swing to see what the bigger picture looks like.

I found the DOM to be a distraction because when I saw price move a certain number of ticks I was inclined to move my stop to b/e instead of focusing on the chart and determining if there was any valid reason to move my stop. I now force myself to focus on the charts until a bar closes, at which point I can make a decision about whether to move a stop or target, leave them alone or prepare to stop-and-reverse.

which markets are you actively trading at the momemnt, pls? thx

 

[MrPowerBallad]

Quote from nakachalet:

a 6E chart below your euro chart

If you don't mind me asking -- how are your bars colored, especially the blue part? Is it related to bid/ask info? Don't think I've seen bars like that before. Thanks.

 

[ES.Dreamer]

Quote from wrbtrader:

[BI have read that most futures trading instruments only trend 20% - 25% of the time. That implies that someone using a trendfollowing method or trying to catch trends will have a tough time at it 75% - 80% of the time assuming they're trading every trading day.

Mark [/B]

You kind of need to specify the timeframe when making general statements like that as it is not valid across all charts.

ESD

 

[dv4632]

Just thought I'd throw this out there. I don't want to push it and try counter-trend stuff, but this is 6e trade idea jumped out at me early this morning.

On the 4h chart it looked like we had completed a measured move down, so I suspected a retracement up was possible.

In the lower chart, a 1-hr down channel. Looked like possible inverse H&S. Price had been holding above the lower channel for 4 hours so seemed like support. My target on a long was the 50% retrace of the last leg down. But I wanted to see a higher low on the 5-min first.

First idea for a long was after 4am. I put in the purple 5-min downtrend and blue 1-hr downtrend as possible resistance points where I might consider taking the trade off depending on what happened if price got there.

The trade ended up working, but I'm not even simming these ideas. Just watching, observing, making mental trades.

My biggest weakness is overcomplicating things. So I have to keep myself focused and avoid falling into analysis paralysis. These channels can be subjective and I'll sometimes find myself going overboard with the line drawing.

It may also be better if I stick to one timeframe, instead of drilling down to the 5min to manage an entry on the 1hr. I can't help but want to do that. The thing is, doing that gives me two sets of lines and channels. For ex, if I'm taking a long off the 1hr maybe I shouldn't be concerned with that purple 5-min downtrendline.