Well, there are two approaches to this problem
Professionals call the first one "holding through the pain"
As the name implies, you are trying to hold on while price is correcting and depending on your risk tolerance, you may experience the pullbacks, retracements, etc as "painful"
If you are one of those folks who get flushed out easy, the only way to learn to do this is to take charts apart, to analyze them. What you do is to look at a chart as though it were made up of swings. For me, the open is the first hour. Look at your target market, checking out only the first hour. make your notes.
1. What is the average size of the first hour move
2. At the end of the first hour, does this market retrace and then continue? If so, what is the average size of the retracement?
3. On the days the market continues to trend, what is the retracement size after the first hour? Is there a difference in size of retracement on those days? Is there some other way to tell whether you are seeing a retrace or the start of a reversal?
4. What does your market do at lunchtime (NY). Does it just sit there or does it move.
5. At the end of lunch hour, most markets resume the morning trend. If they retrace, what is the size of that retracement? Is the retracement big enough to trade?
6. what does the last hour look like in your target market.
To give another example, in the ES market, if the planets line up, the last hour will sometimes see a move that pros call the bond bounce. During the half hour right before last hour starts, the market starts to trend in one direction. Then we get to the last hour, and suddenly the market reverses. This "Bond Bounce" can be up to several points in duration, or it can fizzle out after a point. You need to know your market.
The second approach is to use position sizing
For example you know you have a signal to enter early on the open. You expect a profit of up to 2-3 points, but at that point, the market will either correct, or continue.
One way to handle this is to put on say three contracts, take one (or two off) when you get to 2 or 3 points profit, leaving one in (or two) place for the possible continuation. Depending on your risk tolerance, you can place a break even stop or use a nearby pivot or price point as your "line in the sand".
The challenge with using position size is to decide where to draw the line ("What is the difference between a retracement and the start of a new leg or reversal)?
If you lack experience, it is better to trade small and take small profits (looking for 2-3 points max). You hope that you get two or three shots at it during the day. I draw my line in the sand with a hard stop that is usually near a pivot or known "sensitive" price point.
I hope some of this helps you
Steve
Professionals call the first one "holding through the pain"
As the name implies, you are trying to hold on while price is correcting and depending on your risk tolerance, you may experience the pullbacks, retracements, etc as "painful"
If you are one of those folks who get flushed out easy, the only way to learn to do this is to take charts apart, to analyze them. What you do is to look at a chart as though it were made up of swings. For me, the open is the first hour. Look at your target market, checking out only the first hour. make your notes.
1. What is the average size of the first hour move
2. At the end of the first hour, does this market retrace and then continue? If so, what is the average size of the retracement?
3. On the days the market continues to trend, what is the retracement size after the first hour? Is there a difference in size of retracement on those days? Is there some other way to tell whether you are seeing a retrace or the start of a reversal?
4. What does your market do at lunchtime (NY). Does it just sit there or does it move.
5. At the end of lunch hour, most markets resume the morning trend. If they retrace, what is the size of that retracement? Is the retracement big enough to trade?
6. what does the last hour look like in your target market.
To give another example, in the ES market, if the planets line up, the last hour will sometimes see a move that pros call the bond bounce. During the half hour right before last hour starts, the market starts to trend in one direction. Then we get to the last hour, and suddenly the market reverses. This "Bond Bounce" can be up to several points in duration, or it can fizzle out after a point. You need to know your market.
The second approach is to use position sizing
For example you know you have a signal to enter early on the open. You expect a profit of up to 2-3 points, but at that point, the market will either correct, or continue.
One way to handle this is to put on say three contracts, take one (or two off) when you get to 2 or 3 points profit, leaving one in (or two) place for the possible continuation. Depending on your risk tolerance, you can place a break even stop or use a nearby pivot or price point as your "line in the sand".
The challenge with using position size is to decide where to draw the line ("What is the difference between a retracement and the start of a new leg or reversal)?
If you lack experience, it is better to trade small and take small profits (looking for 2-3 points max). You hope that you get two or three shots at it during the day. I draw my line in the sand with a hard stop that is usually near a pivot or known "sensitive" price point.
I hope some of this helps you
Steve
