Day-Trading 2.0 for small traders
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Hi IF,
Attached for convenience is one of your posted charts.
I am using this chart for illustration because it is similar to a previous chart I commented on.
1. You are still ignoring S/R.
2. You are still ignoring PA.
3. You are ignoring guidelines I gave you.
4. You're unwilling to take what the market gives you and keep gearing your trading method toward capturing 100+ tick moves.
Let me analyze the PA as I see it on your chart. The trend at the start of the chart is up. A swing hi was made around 40. The 1st LL took out the previous pivot low which is the 1st indication the trend might be changing. The 1st LH indicates the bulls could not take the market higher and if the 1st LL is taken out the trend is down based on price action.
The 2nd LH (PB in a trend) is a good short entry point based on PA. Prices moved to within 1 tick of previous support at 05. 1st profit target is the previous LL at 81. Prices exceeded the target and went to 58. The 3rd LL.
You tried to enter after the 3rd wave expecting a 4th and you traded right into Support at 55. Not a good place to go short, hi risk.
If you recall jjrvat said the later in the trend you enter a trade, the greater the risk. I also told you that after 3 or more waves in 1 direction to expect a bigger than normal correction or trend reversal.
A double bottom at 55 after 3 waves is a good long entry for at least a scalp. In this case the profit target would be 83, the previous pivot high. It made that profit target and went all the way to 08.
Recall what I told you about the correction after 3 or more waves. The most likely thing to happen is a retracement of the last wave. That is exactly where prices went before reversing. 08 is a good place to short for at least a scalp. Even though the trend is now up based on PA, we have had a good sized price swing from the low with a drop in momentum into resistance. 1st target is the 85 low of the small 85-95 congestion area. The target was reached and prices continued down to 66.
When the double bottom at 65 occurs there is an opportunity to go long, 1st target is the 99 pivot high. It reaches the 1st target and continues to 33, just 3 ticks over previous resistance.
There were 4 PA trades all winners. The 4 swings were 46/53/42/68 ticks. From my experience you should be able to capture at least 1/2 the swing points (23+26+21+34=104). Do price action trades always work out this well, of course not. But with practice you can get at least 75% winners and because you can use close stops, losses are very small.
One thing that decreases your profits and increases your losses is that ma entries very frequently get you into a trade late. The following tip may help.
Tip: When you see a trade setup forming look on a smaller fractal chart to fine tune your entry. E.g., if using a 233 tick chart look at a 40-50 tick chart to examine the price action in more detail near your entry point.
Intraday moves of 100+ ticks are rare. 20/30/40 tick swings are common.
Don't just blindly take trades because a moving average gets broken. You have to adjust your trading plan to fit the market.
The market has 'tells'. If you can learn to read those 'tells', it will give you the edge you need to trade profitably.
Bill
Attached for convenience is one of your posted charts.
I am using this chart for illustration because it is similar to a previous chart I commented on.
1. You are still ignoring S/R.
2. You are still ignoring PA.
3. You are ignoring guidelines I gave you.
4. You're unwilling to take what the market gives you and keep gearing your trading method toward capturing 100+ tick moves.
Let me analyze the PA as I see it on your chart. The trend at the start of the chart is up. A swing hi was made around 40. The 1st LL took out the previous pivot low which is the 1st indication the trend might be changing. The 1st LH indicates the bulls could not take the market higher and if the 1st LL is taken out the trend is down based on price action.
The 2nd LH (PB in a trend) is a good short entry point based on PA. Prices moved to within 1 tick of previous support at 05. 1st profit target is the previous LL at 81. Prices exceeded the target and went to 58. The 3rd LL.
You tried to enter after the 3rd wave expecting a 4th and you traded right into Support at 55. Not a good place to go short, hi risk.
If you recall jjrvat said the later in the trend you enter a trade, the greater the risk. I also told you that after 3 or more waves in 1 direction to expect a bigger than normal correction or trend reversal.
A double bottom at 55 after 3 waves is a good long entry for at least a scalp. In this case the profit target would be 83, the previous pivot high. It made that profit target and went all the way to 08.
Recall what I told you about the correction after 3 or more waves. The most likely thing to happen is a retracement of the last wave. That is exactly where prices went before reversing. 08 is a good place to short for at least a scalp. Even though the trend is now up based on PA, we have had a good sized price swing from the low with a drop in momentum into resistance. 1st target is the 85 low of the small 85-95 congestion area. The target was reached and prices continued down to 66.
When the double bottom at 65 occurs there is an opportunity to go long, 1st target is the 99 pivot high. It reaches the 1st target and continues to 33, just 3 ticks over previous resistance.
There were 4 PA trades all winners. The 4 swings were 46/53/42/68 ticks. From my experience you should be able to capture at least 1/2 the swing points (23+26+21+34=104). Do price action trades always work out this well, of course not. But with practice you can get at least 75% winners and because you can use close stops, losses are very small.
One thing that decreases your profits and increases your losses is that ma entries very frequently get you into a trade late. The following tip may help.
Tip: When you see a trade setup forming look on a smaller fractal chart to fine tune your entry. E.g., if using a 233 tick chart look at a 40-50 tick chart to examine the price action in more detail near your entry point.
Intraday moves of 100+ ticks are rare. 20/30/40 tick swings are common.
Don't just blindly take trades because a moving average gets broken. You have to adjust your trading plan to fit the market.
The market has 'tells'. If you can learn to read those 'tells', it will give you the edge you need to trade profitably.
Bill
Great post Bil!
Although I won't suggest entering right at the S/R because it might just break. I'd like to see at least a 3 bar reversal pattern at the S/R in order to enter.
Also I must agree about the Double Tops/Double Bottoms. They are very very powerful if one knows how to use them.
Although I won't suggest entering right at the S/R because it might just break. I'd like to see at least a 3 bar reversal pattern at the S/R in order to enter.
Also I must agree about the Double Tops/Double Bottoms. They are very very powerful if one knows how to use them.
I hope I am not interrupting this thread. I am new to ET. I have been trading for 4 months and wanted to know what is a good typical return you guys would expect from frequent trading. In the 4 moths that I have been at it, I am averaging 90% win ratio and 2.5% monthly return. Is this considered ok?
Do you mean Pivot Point S/R or S/R from the waves in the chart?
How? I'm entering short after LLs and LHs and entering long after HHs and HLs.
Let me go read that post again and then I'll comment on that.
Incorrect. I let the market stop me out (fast slope changing) because that was the only way I was able to show a profit in backtesting. My goal isn't to capture a 100 tick move every time, but sometimes I'll be down 20 or 30 ticks but the slope doesn't change so I keep my position open and then it turns into a 100 tick move.
The reason I don't "take what the market gives me" is because when I backtested with 2, 3, 5, 8, 10, and 15 point profit targets, I ended with a net loss at the end. The only way I was able to have positive expectancy was to hold every trade until the market stopped me out (fast slope changing). The conclusion I drew was that the occasional huge winners are required in order to have positive expectancy and therefore I don't close trades early.
Please explain if this conclusion is wrong and if so how.
How in the world do you know it's a LH until price has moved away from it/ It would've been a wonderful short entry, I agree, but I had no idea it was a LH until the new downtrend was established. You could say the LH was an upside-down hammer (forgot what that's called) but those only signal tops sometimes. So how would you have known to enter here when that was the hard right edge of the chart?
Are you saying it's not a good place to go short because it was the 4th wave?
As for "trading into support," new waves start all the time at around the previous support level and end up being profitable waves. Look at the previous wave. It was confirmed at around 11611 and the previous LL was at 11600. Wouldn't that be "trading into support?" It went on to a low of 11581 or so."
I remember.
I will have to go look at the last few months worth of charts before I reply to that because I don't want to say something and have it be wrong
Again, how did you know it was a double bottom when it was the hard right edge of the chart? (same way how did you know that first LH was a good short entry... how did you know it was the LH?)
Now this is very interesting to me. I never have a way of predicting what the profit target will be (and it seems neither does anyone else) and everyone computes their Risk/Reward after the fact.
(here comes a tangent:
That's one thing that annoys me about a lot of posts here. People say "oh yeah, I took (past tense) that trade with a stop 10 ticks away and made 20 ticks. It had a good risk/reward of 1/2!" But to me, "risk/reward" as a concept doesn't make sense unless you know it before you place the trade. Any statistical calculation performed after the fact doesn't count.
So then there are some people who put their target stop up 20 points and their stoploss down 10 points and say that have 1:2 reward/risk. It sounds good but they're just arbitrarily picking those numbers. That's no good to me either.
I stay away from r/r discussions unless I can say why I have picked certain numbers as targets and stops (which I never can, so I don't mention r/r)
tangent over
)I wouldn't have entered any of those trades because they were short and didn't follow LLs and LHs. I figured that was bad PA (not following PBP).
This is something I want to talk about, too.
In all my (demo account) experiences using stop losses, they always have to be HUGE (at least 1 ATR if not bigger) because price action is never smooth and always full of noise. And on that chart I attached, 1 ATR is >10, which doesn't seem like a "tight" stop to me.
Basically my experience suggests that using stop losses, even trailing stop losses (which I love conceptually, is that they ALWAYS get hit and I ALWAYS lose money (unless I happen to enter right before a trend takes off). I don't like how the prices moves all over and there's so much noise even tho the general direction is establish, my stops always get hit, always, even if they're >20 ticks away and I'm following PBP. That's why I've been letting price action (fast MA slope) stop me out and NOT stop losses. And if I'm gonna put a stop 20 ticks away I might as well not even use one, right?
So use the same interval of MA on the smaller chart? So if I'm using an HMA(21) on the 233 tick chart then I should use the same HMA(21)on the 40-50 tick chart to set up entries and enter when that slope changes?
What is the stop then? When the slope changes on the 40-50 tick chart or when it changes on the 233 tick chart?
As I've mentioned before, I get plenty of 20/30/40 tick swings that end up going against me for a loss in one giant bar the other way (that changes the color of the MA).
The reason I never take profits on those trades when I'm up 20/30/40 ticks is because sometimes they still go against me and THEN turn into 100 tick trades which I explained were necessary in order for me to show profits during the period I backtested.
I was taking trades only when the MAs lined up and only after appropriate LL/LH/HH/HLs.
Yeah that's what I seem to be having problems with
Can't be answered until we know what is at risk. 2.5% could be terrific if your trades aren't exposing you to a even a small chance of blow-up. 2.5% could be bad if you're highly levered.
First of all, this is really not connected to the thread so please don't post any of those questions here, they have their place.
Because you're new i'll answer you.
You numbers say nothing. 90% of success? what's your Risk/Reward ratio? it's very easy to achive 90% of success when yor target is 5 ticks and stop is 30 ticks for example.
and secondly, 2.5% return. On what sum of money? if it's 10k then your 250$ per month won't help you much but if it's let's say on 1mil, now that something to talk about.
so, according to you, you make 5.5K per month with an 8k risk per trade?? looks pretty lousy to me. Espcially if you're day trading (meaning you are in front of the screen at least some part of the day).
Anyways, this is not the place for this. You can open a new thread in the trading forum or in the "trade managment" forum.
Dear Iron Fist,
I see your comment to bill and I must say that it seems you just miss the whole picture and pay your attantion to the small details instead.
Start by removing all indicators from your chart and just look at price for a while. Learn how it acts, how it treats S/R, what the meaning of different patterns.
I was at your place once, trying to find the system that could be automated and make money. Trying to avoid all losing trades and so on.
My suggestion, leave it. There is no such system and even if there is you'll do much better learning price action by heart instead of trying to find why your system don't work.
Go to this thread:
http://www.elitetrader.com/vb/showthread.php?s=&threadid=132170&perpage=6&pagenumber=1
and read everything there throughly. Try to trade like Susana and the other people there. Only after you'll feel you're finally starting to understand what's the meaning of price action go back to this thread and start it from the beggining. I promise you, you'll see things way way different than you see theme now.
Good luck
Amit
I see your comment to bill and I must say that it seems you just miss the whole picture and pay your attantion to the small details instead.
Start by removing all indicators from your chart and just look at price for a while. Learn how it acts, how it treats S/R, what the meaning of different patterns.
I was at your place once, trying to find the system that could be automated and make money. Trying to avoid all losing trades and so on.
My suggestion, leave it. There is no such system and even if there is you'll do much better learning price action by heart instead of trying to find why your system don't work.
Go to this thread:
http://www.elitetrader.com/vb/showthread.php?s=&threadid=132170&perpage=6&pagenumber=1
and read everything there throughly. Try to trade like Susana and the other people there. Only after you'll feel you're finally starting to understand what's the meaning of price action go back to this thread and start it from the beggining. I promise you, you'll see things way way different than you see theme now.
Good luck
Amit
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