Have you ever thought "should I be short or long today? "

[MarketAddict]

Have you ever thought to yourself "should I be short or long today"? Every time I day trade now, I know exactly if I'm going to be short or long for the day. It took me long enough to realize this, but now I realize it.. In my opinion the best way to day trade is to look at the higher time frame and then enter your trades on a smaller time frame.. So how do I know I'm going to be short or long today? I'll take a look at the 60 min chart.. If the 60 min chart is above the 21 ema, then I'm looking for longs all day.. and if the 60 min chart is below the 21 ema... I'm looking for shorts all day long..

When the 60 min tells me to go short/long.. I will then go to my 2min or 5min chart to look to enter the market.. Now, the key is the 2min or 5 min has to match up with the 60 min.. So if the 60 min is below the 21ema.. then the 5 min also has to be below the 21 ema in order to take shorts and vice versa..

I swear to you that's it.. Now it's up to you to work on you entries and exits.. I'm not giving you a system... I'm giving you a template that will put you on the right side.. The odds will be in your favor.. You can use anything to enter the market.. An engulf , 123, trend line etc.. Whatever you feel comfortable with.. If you are new to trading or not profitable yet, please only look for 2-3 winners a day and stop trading.. Over trading is a big no no.. Over trading is only for the professionals.. I will post a CL chart below..

 

[bearmace]

why the 21 ema, and is this only relevant for crude?

 

[Sergio77]

In my opinion the best way to day trade is to look at the higher time frame and then enter your trades on a smaller time frame..

If you are sure about the higher time frame then you should put the order at the open of that time frame and exit at the close and save yourself a lot of trouble.

 

[MarketAddict]

why the 21 ema, and is this only relevant for crude?

I noticed that 21 ema works good for day trading especially if you are following the higher time frame for direction.. If you are swing trading maybe you can use wider ema's such as 50, 100 etc.. And no, this isn't just for crude oil.. It could work on any instrument.. I just like trading crude and the dow..

 

[MarketAddict]

If you are sure about the higher time frame then you should put the order at the open of that time frame and exit at the close and save yourself a lot of trouble.

I only day trade.. It's very hard to day trade with the 60 min unless you are willing to hold onto your position for awhile.. I want to be in and out when I trade.. Also you risk more and get less trades.. Maybe one trade a day.. So you have to be accurate..

 

[Scaleout.Scalper]

I'll take a look at the 60 min chart.. If the 60 min chart is above the 21 ema, then I'm looking for longs all day.. and if the 60 min chart is below the 21 ema... I'm looking for shorts all day long..

When the 60 min tells me to go short/long..

I swear to you that's it..

I wish it was as easy as you think it is, but in my experience, it is not.

Will list a few scenarios that accentuate the weakness of your strategy.

First of all, fast timeframes like the ones you listed, particularly the 2min chart, will give long and short signals most of the time, no matter what the trend of the 60min is, but that's not the only problem, there is also a fundamental problem with moving averages, as they tell the past, not the future.

Times when the 21 ema is uptrending and price opens significantly above it due to a gap up and spends a few hours just retracing down to it. How are your longs doing now?

Times when the 21 ema is downtrending and price opens significantly below it due to a gap down and spends a few hours just retracing up to it. How are your shorts doing now?

Times when price changes the trend of the 21 ema in the hourly chart and the so called trend change is short lived, allowing you no profits and just losses whenever those fake breakouts occur.

Times when price cannot find a trend and is simply dancing like a snake around your 60min 21 ema, how are you shorts and longs doing now? How about if you decide to wait for price to start a trend and it's just a fake breakout and it goes back to dancing around the 21 ema?

Another thought regarding using small timeframes to "confirm" larger timeframes.....

A real move in the 60min will have a turn in the small timeframes, so far so good.

Here is the problem...

A fake move in the 60min will probably also have a turn that ends up failing in the small timeframe, so the winners and the losers will probably *both* have 2min signals.

Remember the market can do only one of two things, range or trend, one basic strategy works for trends, another one works for ranges, and the opposite is true, use the trending strategy when ranging, or use the ranging strategy when trending, and you are a sitting duck. I suggest you work first on determining if the market is ranging or trending, and what's the likelihood or this state remaining, so you can adapt accordingly.

Just a few things to consider, and of course, everything I listed also applied to the 2min and the 5min timeframes, mounting losses over losses.

Following a profitable system can be simple, finding it, unfortunately is far from simple.

 

[MarketAddict]

I wish it was as easy as you think it is, but in my experience, it is not.

Will list a few scenarios that accentuate the weakness of your strategy.

First of all, fast timeframes like the ones you listed, particularly the 2min chart, will give long and short signals most of the time, no matter what the trend of the 60min is, but that's not the only problem, there is also a fundamental problem with moving averages, as they tell the past, not the future.

Times when the 21 ema is uptrending and price opens significantly above it due to a gap up and spends a few hours just retracing down to it. How are your longs doing now?

Times when the 21 ema is downtrending and price opens significantly below it due to a gap down and spends a few hours just retracing up to it. How are your shorts doing now?

Times when price changes the trend of the 21 ema in the hourly chart and the so called trend change is short lived, allowing you no profits and just losses whenever those fake breakouts occur.

Times when price cannot find a trend and is simply dancing like a snake around your 60min 21 ema, how are you shorts and longs doing now? How about if you decide to wait for price to start a trend and it's just a fake breakout and it goes back to dancing around the 21 ema?

Just a few things to consider.

Following a profitable system can be simple, finding it, unfortunately is far from simple.

I understand your concerns, but you have to give me real life examples.. Post your charts.. I will bet you that it will take you a long time for you to dig up a chart that's giving you false signals all day long.. And for choppy days don't trade them if you don't feel comfortable.. Who said you have to trade everyday? As long as you are making money monthly.. Trading isn't black and white..

 

[Scaleout.Scalper]

I understand your concerns, but you have to give me real life examples.. Post your charts.. I will bet you that it will take you a long time for you to dig up a chart that's giving you false signals all day long.. And for choppy days don't trade them if you don't feel comfortable.. Who said you have to trade everyday? As long as you are making money monthly.. Trading isn't black and white..

I get what you are saying about not trading everyday, the solution for this can be the use of multiple instruments. However, regarding the rest of your comments it's clear to me your research is incomplete.

Best of luck with your trading.

 

[NoDoji]

However, regarding the rest of your comments it's clear to me your research is incomplete.

What I've found is that most people I've spoken with who believe they have a trading plan based on research have, in reality, a trading idea based on observation which is notoriously deceptive.

A few years ago I was caught in some losing trades based on a similar pattern and I noticed something about the context that led me deduce this setup (pattern + context) had extremely negative expectancy.

Then later I was putting together some trading rules in a way that a programmer could automate them. I was trying to figure out how to filter out this setup and I wanted to be able to compare this same pattern in different context to the one that had caused my losses, so I did an objective statistical analysis.

The way I help ensure that my analyses are as objective as possible is I scroll the charts all the way to the hard right edge and reveal a single bar at a time. This way when the pattern appears I can only see the context (to the left) and the pattern itself; I have no idea what's going to happen next until I reveal the next bars.

Surprisingly, I found that this setup had a 55% win rate when I applied my risk:reward parameters to it.

Because I'd felt pain when taking the losses, I instinctively came to the conclusion that the pain surrounding the pattern+context I'd identified (observationally) indicated a poor trade setup.

The problem is our observations are colored by our beliefs and experiences. If we notice price does something similar a few times , we then begin to only see the successful occurrences down the road. It's human nature: we stereotype and judge based on a small sample size of consequences. It's a protective mechanism in life, but dangerous in trading.

If you have a trading idea, test it objectively. Then have another person apply the rules and see if they come up with the same results.

The reason my trading plan evolved so nicely is that I was talking about it with other traders several hours a day in real time and after hours as well. I had to become more and more objective and precise in my rules and definitions.

 

[dbphoenix]

If you have a trading idea, test it objectively. Then have another person apply the rules and see if they come up with the same results.

This is far more important than most people realize. The process one goes through to explain his plan to somebody else forces him to analyze and clarify aspects that he would otherwise leave fuzzy and indeterminate.

One hears the excuse, of course, that the trading plan is "secret" and can't be shared, which has always puzzled me given that the trading plan leads to losing trades.