Birth of a trader

[FirstDegree]

Quote from frank8800:

Thanks FD. I'm only beginning to dip my toe in the water of trading break outs. Today I watched the DOM as price hit them, and it happens so fast, I'm not sure how many times a 10 tick stop would survive. It all depends on where you're filled.

I know a lot of my trades are counter trend, but I'm not focusing on that exclusively - it just looks like it. My preferred method of entering a trade is with a limit order, and I frequently don't get filled. The past few days I have been experimenting with using buy and sell stops instead of limit orders. That's been going better, and now I'm trying to wrap my head around what a good pullback looks like.

Today I was patiently waiting for that pullback, and when it happened, I didn't recognize it.

10 tick stops do survive on the extreme breakouts that are real, true breakouts. There is no heat on the trade. My first HOD breakout instantly went at least +8 ticks before I even put the stop at -10. Then I just put it at +1 and let it ride, where I eventually put my target at +20. If it's not a true, strong breakout, it'll feel like you just ran into a wall going 50 mph. Then you just want to minimize your loss with a 10 tick stop.

If it looks like it happens so fast, it's because it does. You just have to have the order in and prepare for the best. Ideally you want one tick above the HOD, one tick below the LOD. There is no "depending on where you get filled" because that is how you do it. I guess I don't know what you mean by that.

Also, I didn't mean you're only looking for counter trend trades, but I have noticed that you find yourself getting yourself into counter trend trades. I think subconsciously your signals look best to you when they are coming in a counter trend way, if that makes sense. I don't know, but maybe that is what is happening just based on the dynamic of the behavior of crude oil in comparison to your trading strategy?

Just in a direct sort of way, don't trade counter trend at all. Recognize the trend and only trade in that direction until it tells you it's done. Then wait to see what happens. Usually on very, very strong trends price will continue in it's direction until it gives you a solid reversal signal, such as a big hammer or a shooting star/rangy mess. And how do you tell exactly what the trend is? Lots of big green bars, or lots of big red bars. If it looks like a mess, then it probably is a mess. Look at the difference between the early morning mess to the late morning breakout trend.

Check out my journal that is somewhere lost in the Journals forum and just scan my charts to see the signals that I like to look for as far as pullbacks and whatnot. It could help you start to see what you need to look for.

 

[Handle123]

When I see high volume at lows, very seldom trade Sells, just like reduced volume at the highs, I seldom take longs. And when I do counter-trend trades, unless there is support/resistance on hourly bars, I let more than a couple bars go past for counter-trend trade, between 9:10 to 10:05 offered a few opportunities of selling the triple highs.

One of the ways you can at least be trading in right direction is waiting for new high/lows for the day session before looking for a trade. When the 20 EMA is flat, that is chop and breakouts very seldom work, notice how the EMA is cutting thru the bars?

There was one good retracement of two lower highs for a long and a couple of NoDoji's buying high of the day for very easy money.

When in chop, buying at the low is safest entry 89.80 was perfect support, especially after high vol on 7:05 bar. Risking 11 tics on these types of trades is cheap risk, but when doing breakouts, often have to risk more as price might test recent formed pivot.

 

[frank8800]

Better today - more relaxed. I think trading only 1 setup is the way to go for me. I still noted other setups, but wasn't tempted to trade them. I just recorded the stats.

Only 2 negative things: I missed a valid trade on 6E because I was annotating a chart and thinking about something else, and I didn't take 3 6E long trades because a resistance level was too close. They were winners.

CL had dropped from the overnight high, but started climbing back up around 05:30. I plotted a resistance level around 91.60 - 91.75 and watched as CL churned through that over the course of an hour. I didn't want to take any trades under or in that area, and by the time CL poked through and had a valid pullback to the EMA, the oil report was right around the corner.

Trade #1
Finally got a pullback to the trend and a place where I felt I could enter. This was very near the HOD. Placed buy stop at 92.21 and was filled on the next bar and price soared to the HOD in a matter of seconds. I strongly resisted the urge to lock in 10 or more ticks and left my stop at BE+1 where I was stopped out. +1 tick.

I moved my stop way too soon on my 6E trade and got only 1 tick Once I conquer my fears of entering ALL my setups, I'll work on holding longer. Baby steps...

 

[Handle123]

When I see rising price and lower volume, no way am I going to be doing a breakout especially so far away from 20EMA. The HOD produced a very nice H&S pattern to sell.

 

[NoDoji]

Quote from frank8800:

Trade #1
Finally got a pullback to the trend and a place where I felt I could enter. This was very near the HOD. Placed buy stop at 92.21 and was filled on the next bar and price soared to the HOD in a matter of seconds. I strongly resisted the urge to lock in 10 or more ticks and left my stop at BE+1 where I was stopped out. +1 tick.

Ha ha! OK, that makes four of us I know went long there, and one of us put in a 15-tick hard target and actually made some coin on that play and I wasn't that one. I got 2 ticks out of it, because I held the damn position, certain it was going to 92.57, then took a break and missed the first decent short opportunity of the day.

 

[frank8800]

When I got in this morning and fired up my platform, 6E had just formed a nice pullback entry. Since I hadn't gone through my morning ritual yet of checking the news, marking up my charts with S/R lines, and reading my plan over, I opted to pass on the trade. 10 minutes later when I was ready to trade, 6E had just made the last red candle for the next 75 ticks.

By the time the next pullback occurred, price had made a new HOD and volume was dropping off, so I opted to not trade. Same story on the next two pullback opportunities: new HOD and decreasing volume. No 6E trades today.

CL was whipping around all morning. The 5 min bars were about 20 ticks each, so I went to the 1 minute chart.

Trade #1
When CL was poking down at the overnight low pivot low of 91.42, the 1 minute chart had a nice pullback to the EMA. I placed a sell stop at 91.40 and was filled. Since I was on the 1 min chart, I scaled my target back to 13 ticks and it hit easily on that 20 tick bar. +13 ticks.

I wasn't very comfortable on the 1 min chart, but kept watching and made 2 more trades for +14 ticks, but in sim.

 

[frank8800]

Inspired by over 2 months of winning sim and the success of my Passed Trades log, I decided to take each pullback trade today regardless how marginal. Picked a bad day to grow a pair, 'cause my first 3 trades were losers.

Made 2 mistakes: Got a little confused switching back and forth between the 5 and 3 minute charts. Usually I only trade off the 5 unless the bars are big and whippy, which was not the case today. It's painful to look where those trades were placed on a 5 minute chart.

My other mistake was a lack of concentration. This being Friday, I was trying to get some office paperwork done while trading. There are some very obvious pullbacks on CL that I didn't even see until way too late.

I was watching CL make a slow, painful ascent. The 05:35 bar failed to make a LL, and the 05:40 and 05:50 bars formed a double bottom, so I'm thinking there's some support here. The 06:10 bar confirmed that.

Trade #1

The 06:35 bar was the 2nd push down in the pullback, and broke the previous pivot low and broke the previous double bottom by 1 tick (false break out), then found lots of buyers that pushed price back up. So far so good, but here's were I screwed up the entry. I waited too long to switch to the lower time frame and missed a survivable entry by a bar. Ironically, I was filled at the exact high of the next bar and stopped out. Got 1 tick of slip. -12 ticks.

I got sidetracked and missed the next entry, but that probably would have been a BE+1 trade.

Price started pushing up hard again, and this time I switched to the 3 minute chart right away. A double top formed at 07:06 and I was waiting for one more bar down to enter, but never got the chance.

Trade #2

After the 07:12 bar closed down, I started trailing a buy stop 1 tick above. I was filled and stopped out on the next bar, ironically at the highest tick again. -11 ticks.

Similar thing happened on 6E, although I was filled on the next to the highest tick of a bar. My stop was tighter, so I only lost 9 ticks.

Since I hit my daily loss limit, I switched to sim and had 5 BE+1 trades on 6E and 1 BE+1 trade on CL. Today was my single largest 1 day loss ever, and my worst week ever. The weird thing is I don't really care. Not sure if that's a good thing or a bad thing.

Going to go home and smoke a cigar. This weekend I'll spend reviewing my journal, the trades I took, and studying my Passed Trades log. And sim, of course.

 

[NoDoji]

Quote from frank8800:

Made 2 mistakes: Got a little confused switching back and forth between the 5 and 3 minute charts. Usually I only trade off the 5 unless the bars are big and whippy, which was not the case today. It's painful to look where those trades were placed on a 5 minute chart.

The 5-min chart is for your trading time frame, so any valid setup needs to appear in your main time frame, and the smaller time frames are for seeing inside the 5-min bars when they are wide or whippy.

Quote from frank8800:

I was watching CL make a slow, painful ascent. The 05:35 bar failed to make a LL, and the 05:40 and 05:50 bars formed a double bottom, so I'm thinking there's some support here. The 06:10 bar confirmed that.

It was slow and painful, but definitely an ascent (rising 20-bar MA, HLs/HHs). Your 6:10-6:20 bars uphold this trend, but there's a bit of a red flag when price fails to touch the upper channel line on 2 attempts; the breaks to higher highs are "weenie breaks" as I like to call them. Also, the fact that it's a trending channel and not a strong trend is a signal to drill down to a smaller time frame to look for possible long entries closer to the bottom of the channel, so you don't give up so much of the move.

Quote from frank8800:

Trade #1

The 06:35 bar was the 2nd push down in the pullback, and broke the previous pivot low and broke the previous double bottom by 1 tick (false break out), then found lots of buyers that pushed price back up. So far so good, but here's were I screwed up the entry. I waited too long to switch to the lower time frame and missed a survivable entry by a bar. Ironically, I was filled at the exact high of the next bar and stopped out. Got 1 tick of slip. -12 ticks.

An up trend is defined by higher lows and higher highs. The higher highs were very weak during this trend, though the higher lows were following he lower line nicely.

When you see that price broke a previous pivot low, and then another one, this is strong signal that either the trend is reversing or price is going to consolidate in a range.

You don't want to play a bar break entry unless the bar is small enough to allow a reasonable stop. 90.60 is going to be approximately a 50% retracement zone from the round number resistance around midnight your time to the LOD near the other round number.

You wouldn't want to go long at that price after the trend broke down.

The best place to go long is above that resistance shelf around 90.70. In fact, I waited for that shelf to break, price to pull back, then I entered long @ 90.78 when 90.70 became support on the 1-min chart (prev R becomes S). I call that a second mouse entry. Yes, I risk missing the breakout by not taking it the first try, BUT there was so much R there from before my concern was it would be only a stop run and selling would resume. Once the strength of the breakout held up, I stepped in as the second mouse and got some cheese.

Quote from frank8800:

Trade #2

After the 07:12 bar closed down, I started trailing a buy stop 1 tick above. I was filled and stopped out on the next bar, ironically at the highest tick again. -11 ticks.

I don't understand this trade. Why long @ 91.12, as price was pulling back from a major breakout move?

 

[frank8800]

Quote from NoDoji:

The 5-min chart is for your trading time frame, so any valid setup needs to appear in your main time frame, and the smaller time frames are for seeing inside the 5-min bars when they are wide or whippy.

Yes, I realized this a little too late.

Quote from NoDoji:

When you see that price broke a previous pivot low, and then another one, this is strong signal that either the trend is reversing or price is going to consolidate in a range.

[/B]

I was focusing more on the support side of things. Even though price broke that pivot low, it didn't break the previous support. I didn't register the fact that the most recent pivot low was breached.

Quote from NoDoji:

I don't understand this trade. Why long @ 91.12, as price was pulling back from a major breakout move? [/B]

Although not pretty, it does look better on the 3 minute chart.

Today I traded as a frustrated trader. Over the weeks I've watched too many trades that I've passed up turn to winners with minimal heat.

 

[frank8800]

Not much to report. 1 trade in 6E for BE+1.

Most of the morning I played with a couple of different video recorders and recorded my trading and was surprised at how much talking out loud helped. As bars formed, I would describe what needed to happen for a valid signal to occur. I let it run for 15 minutes and generated a 200 MB avi file which compressed down to a 20 MB swf file. Can't let this thing run all morning, so maybe turning it on right before I see a setup coming, then record the trade and trade management.