Hi IF,
Let me add my 2¢.
Your entry and exit techniques leave much to be desired.
Trendlines per se are not part of price action.
PA is not about following rigid rules, it is a discretionary form of trading. You have trading guidelines and you use PA to fine tune entries and exits.
What are the basics?
My view (it is fluid and changes over time) is there are 4 things you can use to help you trade: price, time, momentum, volume.
Brief description of each:
Price - Price Action is understanding how prices move up, down and sideways. Patterns (HH,HL,DT/DB, congestion, etc.), Support/Resistance and statistical tendencies (prices zig-zag and regress to the mean, knowing when the odds favor reversal and when the odds favor trend continuation).
Time - Also called cycles and MTFA. It's about time symmetry in prices. When you choose bar size and bar type, you are choosing a specific view of the time factor. Trendlines are 1 way of dealing with time. When the underlying dominant cycle you are watching changes, trendlines get broken. As far as trendlines go, Andrews Pitchfork (also called Median Lines) is a very good channeling technique, see PM.
Momentum - Momentum (also called pace, speed, trend strength) is extremely important and mostly over looked in discussions about trading. The most important thing I can tell you about momentum is if prices are moving with strong momentum, don't trade against it! How do you ID strong momentum? The clues, consecutive bars the same color, consecutive wider range bars, consecutive bars that don't overlap much and have small or no candle shadows. Momentum is easiest to interpret using small size range bars (also called momentum bars). You can gauge momentum by the speed with which the bars print.
Volume - Volume is the most difficult to interpret. It is most useful when you see big changes up or down. It is only useful on time based bars. On the smaller timeframes especially, you need to compare volume of entire swings not individual bars.
Practical trading tips:
1. Don't take a position at S/R (or trendlines) blindly. Look at the trend and momemtum to determine whether or not it is likely to hold.
2. For you a good entry technique would be something akin to Joe Ross' Trader's Trick Entry. Only enter when price breaks the extreme of the previous bar, in your direction, by 1 or 2 ticks. That would have saved you a lot of loosing trades on 12/04.
3. It is possible to gauge momentum using the slope of a trend but it requires you to use a fixed price scale otherwise your perception of the slope will change as prices scroll off the screen and the scale changes. You can also use a statistically based indicator like Bollinger Bands to help gauge momentum and statistical extremes.
4. Try to take more trades with the trend than against it. Countertrend trading requires a higher skill level than trading with the trend.
5. Trade at least 2 contracts so you can scale out, e.g., take 1st profit quickly, move stop to BE+1 and let the balance run.
Bill
