If You Can Draw A Straight Line . . .

[fortydraws]

Quote from dbphoenix:

The rets were pretty feeble. The one at 0942 was only a dinky little point. The next one 2m later couldn't breach it (that's a big shoutout for those who are nervous). By 0950, one can draw a new demand line (that's the line that the BSDs are always snickering about). From there you're good until 1024. It then takes off again at 1031, after which one can draw a new one tracking demand up to 1046. Which is where you get the break and the lower high and the lower low I mentioned earlier. But there's still no compelling reason to exit, which is why I suggested 02. But price decided it would rather go to 09, which is okay by me.

Sometimes demand fades. People do get tired. But demand fuels buying (this is something the snickerers seem not to understand). And sometimes they just have to rest for a while and see what's going on around them. Speaking of snickerers, there's been a strange silence about this morning's trading. Hmm.



That's where the mechanical approach falls short. It's not enough to see it; one must also understand what he's looking at. Unfortunately, those who put this stuff out there don't understand traders and trading any more than their audiences.

Edit: Incidentally, the ride was even easier on the ES, from 31 to 43/2.5. One would have done slightly better on the NQ.

Anyone out there in TV land following along at home would do themselves a boatload of good to print out one minute charts of today's NQ and ES activity, print out DbPhoneix's post, and hand write his analysis with arrows and circles and exclamation points on those charts. Staple it all together, punch three holes in it, stick it in your notebook, and make it part of your regular study. He made a post similar to this a month or maybe even two months ago after I had gotten steam rolled shorting a runaway buying spree. I have not made that mistake since. These are the moments you have to snatch hold of amd learn from.

- retracments dinky & feeble

- second try couldn't breach the first lame retrace (Big Shoutout)

Don't read this stuff and let it go in one ear and out the other. You have to pick up these things so that you get somewhere. Otherwise you'll spin your wheels here for a few weeks before you're off to another message board discussion thread blindly buying or selling because price happens to be above or below this that or the other moving average indicator.

 

[fortydraws]

Quote from dbphoenix:

In the meantime, back to work?

Yes, and a good day "at the office" it was

 

[dbphoenix]

Quote from bigmoose:

The good ones break fast in the right direction, the bad ones I get a tick or two in the right direction, then a reversal and a meander to the stop. I don't move stops away from entry, I will move them in tighter.

Except for a catastrophe stop, grow away from stops. If the bad ones reverse, get out. Don't hand over the responsibility for the trade to the market and wait for it to "meander to the stop". Just get out. You'll feel better about being in charge rather than being a helpless pawn. And once you feel more empowered, you'll be more likely to take those testicular trades.

 

[fortydraws]

Quote from slugar:

I'm struggling with an exact trading plan because to me so much of this is subjective.

Start with what is not subjective at all: Identify S/R - highs where sellers took control, lows where buyers took the ball, and the midpoints of easily identified and defined ranges.

From there, observe price behavior at those levels. Eventually, you should come to an objective understanding of how price acts at those levels and what different price behaviors likely mean as to the immediate trend of price (is it trending, reversing).

Then you put it together. Once you understand that this approach is about detecting the change or no chnage in control between buyers and sellers, and you learn only to act on that activity that occurs at S & R, clear, visible, easily identifiable S & R where lots and lots of eyeballs are also watching, then your plan will come together too. It will be subjective, in that it should allow you to achieve your goals, but it will be based on objectively recognized behaviors and objectively identified price levels. I was just over reading Game's journal. He too had identified 68/64 as anticipate S before the open, and he too saw the same entries as were mentioned here today.

If you let yourself remain convinced that this is thoroughly subjective, I do not see how you will have the open mindedness necessary to understand it. And do not mistake the inherent uncertainty that all trading involves for "subjectivity." What we are trying to do here is objectively assess probabilities, and as probabilities, we accept that though one thing may be more likely than another, sometimes it is the least likely outcome that comes to pass. Sometimes a LH at R is just deeper ret than one might have expected, and instead of reversing lower, price continues higher. This does not mean the trader was wrong to take the trade. It simply means that in this case, price did what was least expected based on the behavior that immediately preceded it.

 

[bmwhendrix]

Quote from dbphoenix:

Except for a catastrophe stop, grow away from stops. If the bad ones reverse, get out. Don't hand over the responsibility for the trade to the market and wait for it to "meander to the stop". Just get out. You'll feel better about being in charge rather than being a helpless pawn. And once you feel more empowered, you'll be more likely to take those testicular trades.

"If the bad ones reverse"? Not quite sure what that means.

Would it be correct to say that in general, if a trade does not go your way pretty quickly, then you exit?

 

[bigmoose]

Quote from dbphoenix:

Except for a catastrophe stop, grow away from stops. If the bad ones reverse, get out. Don't hand over the responsibility for the trade to the market and wait for it to "meander to the stop". Just get out. You'll feel better about being in charge rather than being a helpless pawn. And once you feel more empowered, you'll be more likely to take those testicular trades.

It's like getting the oracle in stereo! I was working through this thread again from the beginning, editing my notebook with things I missed. I added this from page 2 before checking for new posts here at the end of the thread:

Quote from dbphoenix: transferred to my notebook
A lot of traders would relinquish responsibility for the trade at this point and leave it up to fate. They might even move up their "stop" to just under this level in order to "capture" whatever profit they might have. This is crap. To begin with, there's no justification for using stops except for catastrophe stops (losing your connection to your broker, losing your internet connection, getting a BSD, whatever). If the trade isn't going as expected, then just get out. Take responsibility. Leaving it up to the market to take out your stop so that you don't have to assume the responsibility for the trade is not characteristic of a successful trader.

That mistake of using stops and wait and pray or hope and wait will be replaced with the assessment of the price action, and a traders intervention.

 

[dbphoenix]

Quote from bmwhendrix:

"If the bad ones reverse"? Not quite sure what that means.

Would it be correct to say that in general, if a trade does not go your way pretty quickly, then you exit?

That's how bigmoose put it. I don't know exactly how he defines "bad ones", but, yes, if the trade doesn't go your way, why do you want to be there? The only reason to stay is hope. And/or fear that you messed up again and don't want to deal with it.

 

[bigmoose]

That's a good description. By "bad ones" I mean loosing trades. They will typically move a tick or two or three in a profit making direction, then reverse, meander around a bit and head towards my 1.5 to 2 point stop. I can see that the trade is not going to work when it looses momentum after that one or three tick move towards profit. Then as db aptly described me, either fear or hope kicked in to "wait it out till the stop"... when I knew the trade was dead 4 ticks sooner. I don't move stops farther out (thankfully), but with both my mistakes today, I knew the trades were dead 4 to 6 ticks before the stop was hit and sat on my hands and "hoped."

 

[bmwhendrix]

Closing in a little bit on a more concise point.

"if the trade doesn't go your way,"

A common approach to quantify the above is to set
a stop just above/below the last swing point.

A more aggressive approach is to bail on the first bar that
shows some retracement that puts you in the red.

I never really know if a trade is not going to go my way until
price makes a swing in the opposite direction, but I never put
that much at risk.

Can you elaborate a bit more on the idea of the trade not
going your way?

Thanks DB

 

[dbphoenix]

Quote from bmwhendrix:

Closing in a little bit on a more concise point.

"if the trade doesn't go your way,"

A common approach to quantify the above is to set
a stop just above/below the last swing point.

A more aggressive approach is to bail on the first bar that
shows some retracement that puts you in the red.

I never really know if a trade is not going to go my way until
price makes a swing in the opposite direction, but I never put
that much at risk.

Can you elaborate a bit more on the idea of the trade not
going your way?

Thanks DB

This has been addressed by many different people in many different forums over many years and none of what's been written or said makes much if any impact on the troubled trader because it's too vague and too metaphysical. Once the trader has hit the Enter key, he wants more than philosophy.

First, forget about stops, other than catastrophe stops. They make you lazy.

Second, be very clear about what you want to see. If you don't see it, then get out.

Third, be very deliberate about where you're entering. If, for example, you're going long off support and price doesn't advance as you expected it to, you got the support level wrong. Staying in isn't going to make it any better. Get out.

Fourth, make price come to you. Don't just jump in. If going long, set a limit buystop just above price so that you can't enter unless price draws you in. If price stalls at that point, get out. If it turns out to be good, you can always re-enter a few points later.

Fifth, if you get it right, price will take off and never look back. If this turns out not to be the case, determine why not. What did you see that wasn't really there? What did you not see that was?

Sixth, if it does go, don't cash in as soon as you've shown a profit just to make yourself feel better. And once you have exited, don't walk away. Continue to monitor price movement to see if and how much you can pick up of traders' motives. If you exited too early, what did you read wrong? How can you fix it before the next trading session?

And so on.

This is a large part of what a journal is all about. It's the daily accumulation of examples that over time build up a knowledge base that is founded in experience, not just in some course you took or some book you read. If you do this every single day with every single trade, in no time at all you will have taught yourself just what a solid entry looks like. Of course if you don't or can't learn from them, then you end up just making the same mistakes over and over again. In this case, hire somebody to come over and smack you.