Birth of a trader

[frank8800]

Quote from FirstDegree:

Could you show me an example of a place where you're having trouble with the pivots, with the price "snagging" you? I'm having trouble visualizing exactly what the problem is that you are having.

Here's an example. Some examples are harder to see, because the entry bar retraced for a stop out, then continued onward, so just looking at the chart doesn't tell the true story.

Perhaps there was some indication that this would fail. Perhaps it's just statistics and for every failure there are 2 winners. Don't know.

 

[frank8800]

Quote from NoDoji:

This is an excellent setup and I'm not sure why you'd "only" take it in sim. Strong, long overnight trend up, a period of consolidation in a range that never broke support, buying at the NYMEX open, and a well-tested resistance zone for the breakout.

cuz I'm still a learnin'

 

[FirstDegree]

The 2nd was premarket. I don't trade premarket so I can't really comment on that. I have maybe a tiny sliver of confidence in premarket. I definitely wouldn't do it in live trading.

(2nd referenced candle) The more optimal entry would be to buy 1 tick above the high of that doji, as a pullback looking for it to break the highs and continue. If not, once it starts getting close, just move your stop to +1.

But like I said it's premarket. Leading up to that failed breakout the volume was pretty low so I never trust anything.

I don't have an expert opinion on that 3rd reference. It was during the RTH. My only explanation is that there was such a strong run up that you'd expect it to lose some steam. We would like to see a nice chain reaction popping us up each resistance level, but it's about due for a pullback. It wasn't the HOD, just another resistance level that it couldn't break through at this moment.

I actually went long at 84.33, which was a break of the bar 2 bars before that big green bar. Pullback into the EMA, strong looking reversal off the LOD with some room to run. I liked the break of the pivot high rather than the pullback hammer bar because it was further confirmation that it was moving and I perceived that I would have more time to manage my stop. As in, not much room between the hammer-ish bar, to the pivot high-ish resistance. That really isn't a pivot high, but I think you understand what I'm referring to. (I hope that makes sense).

I wish I had a better explanation for these failures other than my poor excuse for why I couldn't give you an explanation.

I think we'd have to evaluate more situations.

 

[NoDoji]

Quote from frank8800:

Here's an example. Some examples are harder to see, because the entry bar retraced for a stop out, then continued onward, so just looking at the chart doesn't tell the true story.

Perhaps there was some indication that this would fail. Perhaps it's just statistics and for every failure there are 2 winners. Don't know.

In your first example, price was trending down all through the wee hours, then finally reversed and made a run up. The bar you call a false breakout was the 6th bar in a strong run that reversed a long down trend and broke up through the 20 EMA. That leg of the move was tired and you shouldn't expect the 6th up bar to break a 4th previous resistance level without a pullback first.

Second example, the pullback off the previous run up was a full retracement of the move, leaving a virtual double bottom of 84.17 and 84.18. This tells you that you either have a wide range forming, or a potential lower high coming to start the continuation of the previous down trend. When price comes all the way back up to test the 84.66 bar high (which sold off hard), and you played that as a breakout, you'd expect it to break with conviction through next resistance of 84.72 or you'd exit quickly at b/e.

Third example, you refer to that run up as a strong uptrend, but in fact it's nothing more than a full retracement leg of a strong breakdown off a failure to pierce that upper range resistance @ 84.72 earlier. So now price has simply established a VERY wide range, instead of a plain vanilla wide range. Placing a buy stop at 84.72 or 84.73 for a breakout after a massive 7-bar retracement of a massive breakdown is really a low reward play. If you were silly enough to wait through that entire move up before going long, you'd bail immediately @ b/e or a small loss when the there was no follow through whatsoever.

Breakouts are best played as part of an established trend or out of a narrow range or channel. Otherwise you are buying the top of a wide range or selling the bottom of a wide range, which is the opposite of what you want to do in a wide range or channel.

 

[frank8800]

Today I abandoned moving my stop to BE+1 on most trades and just let the trade go. The result was poor, meaning had I continued moving my stop quickly, I would have done better. As it was, I came out +7 ticks on 7 trades.

Obviously my stop out trades weren't great, but I still can't help feeling that moving to BE quickly isn't a bad idea. But 1 day doesn't tell the whole story, and as I get better at this, perhaps things will change.

There was a slight downward trend to the early morning session, so I was leaning short. However, there did appear to be some strong support around 86.50 from the 2 hammers around 01:00 and a higher low at 04:00

Trade #1
Price had been rolling over and descended below the EMA. When the 05:30 bar hit bottom and started it ascent, I put a buy stop above and was carried upward. The next bar continued upward and I had +9 ticks and was sorely tempted to move my stop, but left it at -11. The bar reversed and I was stopped out. -11 ticks.

Trade #2
The bar that stopped me out was a strong down bar, and I went short at the bar close. This trade wasn't too smart, since I was aware of the strong support at the 86.50 area, which is why I went long on the first trade. Right idea, poor timing and decision. Never had a chance to move my stop. Full stop -11 ticks.

Trade #3
Price failed to move higher and started back down. The 05:55 hammer failed to move price higher, and got a close under the EMA. Placed a sell stop 1 tick below the open of the big green bar and got caught in a downward tidal wave. I had 22 ticks MFE in the trade with a hard stop of 25 ticks, and left everything alone rather than lock in something. Really poor trade management. -11 ticks.

Trade #4
Still trying to impose my will on the market. -11 ticks.

Trade #5
As price started to climb back in to the early morning range, I decided against putting in a buy stop at the most recent pivot high at 86.91, but instead place a buy stop just over the morning congestion. Was filled on the next bar for a nice trade. +25 ticks.

Trade #6
After the big run, the 07:20 bar formed an inside doji (rare!), then another doji making LH and LL. Placed a sell stop at the bottom and was filled for a nice trade. +25 ticks.

Trade #7
As price resumed its uptrend, I again decided against putting a buy stop at the most recent pivot high, but instead waited for price to push through that, then placed the buy limit order at 87.37 and was filled. Once again, poor trade management caused me to sit on my hands as MFE approached 21 ticks. This time I decided to outsmart myself and move my stop to BE+1 where I was taken out, right before price resumed its climb. Had I just did what I had been doing all morning, it would have been +25 tick trade.

So doing the arithmetic, if I would have been consistent in my trade management, I would have come out +32 ticks by capturing the full 25 ticks on the last trade.

Had I moved to BE+1 like I usually do, trades 1 and 2 would have been +2 instead of -22, trade #3 was just stupidity for not taking something away (would have BE+1 at a min), and trade 4 would have been a full stop anyway. That leaves me +43 ticks. A slightly better result.

 

[FirstDegree]

Trade 1: Below the EMA. You're basically fading this move, buying against the downtrend. With price right underneath the EMA I found it in my best interest to not take any trades in the other direction. It's not often that price busts right through the the EMA to make it worth your pain. This isn't exactly the right application of "getting carried into the trade."

Trade 2: You mentioned support at 86.50. The idea of buying support isn't exactly just buying that price when it hits it. Again that's just fading the move. You want price to confirm that it's actually holding there. Just the fact that it stalls or bounces at that level doesn't suggest that the support is going to hold. Often you'll want to see a reversal signal such as this doji. The problem that you had in this trade is that now you're basically chasing the price down.

Trade 3: This is where you want to lock in your b/e. I would have rather seen you short at 86.59, which is a break of that shooting star after the hammer. This gives you time to manage your trade as it should test the low of that hammer. You would have gotten +25 if you entered at 86.59.

Trade 4: I actually like this short. It's a nice pattern, internal double bottom with the close near the lows. My problem is that there seems to be a lot of support here in the area of your first couple trades and then this NYMEX opening bar. You could enter, but manage it tightly. Maybe a loss is unavoidable here. Also, I had upgraded my Ninjatrader to the new version so I was screwing around trying to get my charts back up and running.

Trade 5: I liked a long at 86.76, but the pattern was on the 1min. Your trade worked out so that's all that matters.

Trade 6: I shorted this at 87.15. The bottom of that doji. The 1min was setting up very nicely. It looks good on the 5min, but is easier to see on the 1min. I was suprised at how fast this dropped. It actual caught me by surprise. I managed this one terribly only getting +2 when I should have gotten +20. Nice Trade.

Trade 7: I can't really comment on this one because you got in on a buy limit, which to me is awkward. I liked a long at 87.33. If you moved to breakeven after giving it a chance to move you wouldn't have been stopped out, or been stopped out if you didn't move your stop. You could have held on for your target. I would have taken +20 as it was easier. +25 would have just squeeked out at the end before a pullback to the EMA.

So I guess just a few things to think about.

 

[Picaso]

Quote from frank8800:

Obviously my stop out trades weren't great, but I still can't help feeling that moving to BE quickly isn't a bad idea. But 1 day doesn't tell the whole story, and as I get better at this, perhaps things will change.

I realize having four losers in a row sucks, but no matter what system you use you're bound to come across a bad beat like that (and with trend-following systems others much worse) every once in a while.

Take a look and play around: http://www.verticalsolutions.com/tools/pl_forecaster_pctwins.html

As you say 1 day doesn't tell the story. With any strategy, sometimes if you move your stop to BE after X ticks you will be stopped out of good trades and with that same strategy if you don't move your stops sometimes you will take full-stop losses after being a couple of ticks from your target.

Try backtesting for your particular strategy and see what the numbers are, but to have even a rough idea, you will need to compare data for at least a month or 100 trades or so.

What I have found is that after having the market move in your favor X ticks, being stopped out at a loss has a psychological price on top of a monetary one. So what I do is after 20 ticks I move (automatically) my stop to BE, no exceptions. Before those 20 ticks, I try to let PA/TA dictate where the stop should be and/or when to move it.

 

[Handle123]

I am unaware how you record your trades, but my observations say most of your loses occur before 7:00 your time on your charts. I have for years kept records of my trades in 30 minute increments to see patterns of losses.

Buying new highs/selling new lows as one of NoDoji's patterns works, but I have found that the moving ave is like a rubberband, the farther from it to do a trend trade, less likely it will work out.

And when there is no slope in the EMA tells me no trend, especially if EMA is cutting thru the bars. Almost always there will be a thrust of price in one direction out of chop, then price will come back to EMA as first pullback, i.e. Dec 2, pullback on your chart at 0800, volume picks up on that bar-good accumulation, buy above the highs. The next pullback at 8:55, I did not take cause of the double top that had formed, however, 3 bars later formed a higher low on the 9:10, cheap trade to take.

Might want to consider doing counter trend trades after a few years, learn what makes the trend trades profitable before venturing into much tougher areas of picking extremes. This will reduce your overtrading, and force you to sit on your hands.

 

[frank8800]

Quote from Handle123:

I am unaware how you record your trades, but my observations say most of your loses occur before 7:00 your time on your charts. I have for years kept records of my trades in 30 minute increments to see patterns of losses.

Buying new highs/selling new lows as one of NoDoji's patterns works, but I have found that the moving ave is like a rubberband, the farther from it to do a trend trade, less likely it will work out.

And when there is no slope in the EMA tells me no trend, especially if EMA is cutting thru the bars. Almost always there will be a thrust of price in one direction out of chop, then price will come back to EMA as first pullback, i.e. Dec 2, pullback on your chart at 0800, volume picks up on that bar-good accumulation, buy above the highs. The next pullback at 8:55, I did not take cause of the double top that had formed, however, 3 bars later formed a higher low on the 9:10, cheap trade to take.

Might want to consider doing counter trend trades after a few years, learn what makes the trend trades profitable before venturing into much tougher areas of picking extremes. This will reduce your overtrading, and force you to sit on your hands.

Interesting that you should notice that. I used to keep a histogram of my trades in 1 hour increments and noticed that early morning trades were more often failures than not. I questioned the validity of this info because at the time I was compiling this (Jan - July), I was experimenting with different instruments, indicators, and time frames. I think I'll recompile that this week and see if the trend continues. I've been more or less consistent with my instrument and time frame the past several months (I have used smaller time frames to get in/out of trades).

My experience of trading the extreme break outs is not good, and I attribute that to a profound lack of experience and skill. NoDoji made a detailed analysis of a chart I posted a few days ago showing an example of what I thought was a failed break out, and I've been studying that, trying to digest the info. I intend ask some questions about her conclusions, and hopefully she will reply. She's been a fantastic resource in my struggles, but I don't want to wear out my welcome.


Taking only with-trend trades is good advice. What I find myself doing is focusing on the chart bar-by-bar, and becoming less aware of the bigger trend. I am also not considering the target of my trades or doing a quick risk/reward analysis before entering. I had thought about putting that skill off until later, but now I'm thinking that might be a mistake. Analyzing past counter-trend trades usually causes me to think, "WTF was I thinking?"

There is so much work to do, it is almost overwhelming. Besides studying charts and sim for hours a day, I've also been spending time programming NT to back test patterns (as you have recommended on numerous posts).

Thanks for your thoughts.

 

[DoubleTop]

Just thought I would share with you my charts for Dec. 2. I had the privilege of trading over Skype with Frank. I'm trying to share with him the use of my "zones". These zones help me trade extremes while reading price action.
I try to only take a couple trades a day. I still new to CL and have only been reading it and sim trading for the past 3 days. I sit on my hands a lot this market wipes a lot compared to my normal ES.


Trading hours from 6:30am PST time to 9am PST.
Blue Tags = positive trades.
Red Tags = negative trades.

Only hickup that I made on this day was trade 2. I didn't trail my stops close enough and thought that price would go back down to my bottom zone; giving back about 20+ ticks. Plus I was talking to Frank at the time.

NoDoji, what kind of trader did you call me the other day? A pivot trader?
Take care all