Quote from justrading:
Been meaning to ask you this, if one wants to catch the 'trend' of the day, or a big swing in a particular direction, what bar interval would you suggest? Getting a good entry makes a significant difference in options spreads, so this is something I'm working on.
Swing trading, so the decision to enter is a separate process, but if I want to buy a put vertical for example, catching a daily high would mean a great entry price. Equally, if price is just going to head down, the sooner one enters the better.
I rarely get into a trend at the beginning. I used to have a top picking/bottom picking illness, and in fact it can work in the hands of a very experienced trader with a very specific plan, but I really didn't know what I was doing at that time and I'm very happy to have learned to stay with the trend mostly and trade off extremes in a wide range only.
What I've found is that "if price is going to head down" I get plenty of profit from the move without having to get in at the turn.
In oil futures today (those who don't trade futures can reference a chart of USO; I think a CL contract is similar to trading 2000 shares USO), price ran up to new highs during the 11:05 ET bar. I have no idea if the move is over. There's higher resistance levels to be tested and it's Friday; heck, price could break 109.00 for all I know. However, by the close of the 11:45 bar, price had broken the uptrend line and closed below it. That's an early reversal signal, but I prefer to see more price action take place before shorting. There's previous resistance at 107.92 (CLU3 contract) and the bulls should defend that. If it breaks without much defense, then I'll look for a short entry.
This sort of patience to wait for ideal conditions, conditions where the counter-trend traders will get more aggressive and where the current bulls will start taking more profit off the table, pays off very well. There's no need for me to try to pick the earliest possible turning point. By having my mind in a counter-trend "it's gone too high" mode, I would miss with-trend opportunities, and sometimes the final leg of a strong trend is the best move of all.
So in this situation in oil, 107.92 broke down with conviction during the 11:55 bar, and I then watched for a pullback on the 1min chart to short. There was a very nice little bear flag setup and the bottom just fell out after that.
If I'd tried shorting earlier, in the nasty chop after the initial breakout, I might've made a real mess of things.
I did position long twice after that breakout. I scratched the first attempt when a test of the breakout high failed to materialize, then I positioned long a second time and scratched that one 2 minutes before the breakout to a new high. I committed the cardinal sin of "thinking while trading", LOL.
