IN THIS THREAD: IronFist learns (the elusive) PRICE ACTION

Hello IF,

The rule you are trying to use is too simplistic.

It's critical that you learn to ID congestion. In congestion the highs and lows of bars get violated frequently by a tick or 2 in both directions.

What I see on that chart is congestion followed by a minor breakout to the up side, than right back into congestion. Notice the large red bar with almost no shadows that breaks out of the 2nd congestion to the downside. That's the kind of thrust you like to see to indicate the BO is for real. Price pulls back to the bottom of the congestion zone and then the downtrend resumes.

Trade the next PB in the developing down trend. Get short on the 3rd candle from the right as it takes out the low of the bar to its immediate left (the high bar of the PB).

Look at the congestion carefully. It is typical of behavior you will see over and over. When MM's want to take the market down, 1st they take it up to get stops above the market. The safe trade is getting short on the next pull back.

The reason you have to be cautious in congestion is because trading volume is low and the floor likes to play games like gunning for stops and causing false BO's. Whenever there is low volume (lunchtime, pre-holiday, etc) strong hands can push the market around some. You don't want to get caught fading SH.
 
im posting from my phone here

cm69 that image you posted is hard to see on my little phone screen, but i can totally tell thats a forex chart :p i swear i can always identify forex charts cuz they have giant tall bars out of nowhere. futures and stocks dont move like that. are those during news releases? i cant see the times on my phone screen.

no point to this reply other than to mention that.
 
If you’ll permit me – let me take the previous chart I.F. posted onpage 59 and step into the way I would trade it using price action (as I see it)


Couple of things about my make up and where I am in my trading

1.) I will enter / exit any trade with a small loss, small win, big win without hesitation / thought or second guessing

2.)I will never allow a small loss to grow into a big loss (I used to but I will not now)

3.)I will wait all day on just one trade if I think it is the only high probability / low risk trade I'll get

4.) I don’t give commissions a thought (just CODB – cost of doing business) meaning I don’t care how many times I enter / exit

5.) I always predefine the maximum risk I’m willing to assume for each trade before I enter it , and I know exactly the price I will exit for that loss, and I know if hit the trade has fail to materialized they way I thought

6.) I have opinions only about market / price direction, and my opinions can easily change

7.) I do not listen to anyone on what the market, or a stock’s price may or may not do, or why it may or may not do it - period

8.) I have more rules that keep me from trading than I do allowing me to trade

9.) Once I hit my daily goal I’m done



As for the trade itself – and based on the data (chart) I.F posted


I see one trade on this chart

Building into trade set up

Starting at ~9:31.05 – 10:07:18 – price is consolidating or in congestion – no opinion, just waiting and observing

10:07:18 - ~ 10:30 ish – Price went lower and did it in 10 bars – Data Point 1 – but still no opinion

10:30 ish - ~11:00 price retraced about half way over 9 bars – Data Point 2 – opinion maybe price likes going down more than going up

11:00:48 – 11:24:18 price went down over 8 bars

NOTE – to me the sporadic red and green bars in the middle of each up / down move is just profit taking

11:24:18 – 11:43 price retraced ~ half way with 6 bars – Data point 3 – opinion - price still likes going down, and has to work to go up (BUT MY OPPINION COULD BE WRONG)



Then something interesting occurs where I.F has the words “Stopped Out” Price begins to consolidate at the 8740 level (I’ll call that candle 1)

So is it a reverse because there are rising bottoms on the candles, or is price resting and preparing for the next downward thrust – I don’t absolutely know.. but Data point 1 – 3 says price has liked the down move more then the up move

At this point I’m looking at Level II (Inside Bid and Ask only) to see if interest is growing one way or the other, but

more importantly I’m looking at time in sales to see what price is actually doing (are there any block prints, more red than green, or what)

I would also be looking at my other charts in different time frames, along with the chart I have of another correlated market - to see what thiese are telling me

Time to decide – stay out, go long go short

I decide to short on candle three (sell when others are buying and price is / has been bumping its head)

I have my stop loss defined



Then depending on my stop loss price

I next have to determine if candle 6 (remember the 1st candle is where I.F. has the note “stopped out”) is a head fake or a reversal – I don’t know at this point in the trade

Maybe candle 6 makes me exit for a loss – If I stop out then I immediately look to see if reversing and re-entering is appropriate, or re-entering the same way is appropriate – or what

NOTE - To reverse – minimum I would need a candle to close above the 8760 level, and Time and Sales showing green

Again looking to level II’s inside Bid and Ask, and Time in Sales for an indication of where price wants to go


Maybe candle 6 does not reach my stop loss but is headed that way – again what is level II inside bid and ask and Time in Sales price action indicating

If I exited out and reversed long – I lost money twice when it hit my second stop loss point – but I didn’t loose a lot – and I’ll re-reenter short without a second thought

If I exited out and reentered short – no harm no foul in in the trade

If the upper wick on candle 6 didn’t hit my stop loss then I’m still in the original short trade


(This is where keeping a journal of all trades is important – all equities have a personality, and ATRs you can use to help gauge their (what I call breathing tendencies)



Let’s say I’m short – maybe I’ve had to enter once, twice, or even three times to get there – but now I’m managing this trade (meaning I’m looking at Time & Sales and my other charts to see what price doing) All the while trying to form and opinion on whether to get out or stay in

Also time of day - assuming the time on the chart is EST it about lunch and price will have a tendancy to fall of its own weight - or then again maybe not


Then candle 9 shows up (the red one with the long wick @ 8740) again what is T&S showing, what is my shorter time frame chart showing – maybe I exit (at which point I believe I’ve covered my loss just incurred or I got a profit if I shorted once and stayed with it


Maybe I stick it out (again I’m trying to form an opinion based on Price action in T&S, Price action in different time frames, and price action on a correlated market) – to determing if I get out or stay in


Yes Price Action Trading is work but to me trading is a business



If I am really lucky I stay in to 8705 and exited


If I’m not so lucky I exited at ~8755 (but remember I always have the option of re-entering if I price tells me it want to down some more)


To me it’s all about probabilities, and knowing exactly where to exit (with low risk) when a trade doesn’t work


Take Care
 
Quote from IronFist:

im posting from my phone here

cm69 that image you posted is hard to see on my little phone screen, but i can totally tell thats a forex chart :p i swear i can always identify forex charts cuz they have giant tall bars out of nowhere. futures and stocks dont move like that. are those during news releases? i cant see the times on my phone screen.

no point to this reply other than to mention that.
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lol futures make some pretty big ass bars too :p , but no, no news at that time.
 
Quote from Redneck trader:

If you’ll permit me – let me take the previous chart I.F. posted onpage 59 and step into the way I would trade it using price action (as I see it)

..
I would also be looking at my other charts in different time frames, along with the chart I have of another correlated market - to see what thiese are telling me
..Take Care
More...
I think the rule of the game is no other chart and no trend lines either.
 
I have a similar style to Redneck. Since 9/15/08 I have placed 29 (real) trades so I do a lot of watching and waiting like RT here. I pretty much just fade the market when price is bumping up against a recent high or bouncing off a recent low. Like Broz says in the videos "when you enter here you know you have something to lean on." I don't look at myself as going counter-trend but instead I'm getting on the next one. I only trade one contract so there is no opportunity to average down. I go for small targets of one to two points because I know the market will cough those up all the time. Once in a while one will take off and run in my favor. My account has grown 24.7% since 9/15. I don't swing for the fence but just concentrate on banging out singles, doubles and an occaisional triple. My thought is I have a much higher probability of getting one or two points out of the move I am in rather than 5 or 10 points. When those come you take 'em. All my trades are entered from watching the DOM. Probably not a recommended trading style but I find it works for me.
 
Quote from bilbod:

Hello IF,

The rule you are trying to use is too simplistic.
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I will add conditions to it then.

- go short in a down trend after a retracement when a red candle breaks the low of the previous bar when conditions x, y, and z occur.

More replies later. Just wanted to pop into this thread cuz I had 2 spare minutes.
 
Quote from Bingoking:

I have a similar style to Redneck. Since 9/15/08 I have placed 29 (real) trades so I do a lot of watching and waiting like RT here. I pretty much just fade the market when price is bumping up against a recent high or bouncing off a recent low. Like Broz says in the videos "when you enter here you know you have something to lean on." I don't look at myself as going counter-trend but instead I'm getting on the next one. I only trade one contract so there is no opportunity to average down. I go for small targets of one to two points because I know the market will cough those up all the time. Once in a while one will take off and run in my favor. My account has grown 24.7% since 9/15. I don't swing for the fence but just concentrate on banging out singles, doubles and an occaisional triple. My thought is I have a much higher probability of getting one or two points out of the move I am in rather than 5 or 10 points. When those come you take 'em. All my trades are entered from watching the DOM. Probably not a recommended trading style but I find it works for me.
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How big of a stop do you use to only allow for a 1-2 point profit?

Perhaps this is a mindset I will have to change for trading with Price Action, but based on my backtesting, the only way to have (slightly) positive expectancy over time was to let every trade run to the max. Stopping them early with 5, 8, 10, and 12 point (ticks, cuz YM) targets led to higher frequency of winners but overall negative expectancy because you were missing out on the occasional 50+ point winners that are needed to balance out the losers.

Maybe I'm going about this all wrong but it seems the YM is too "noisy" to go for small targets and more importantly, too noisy to use tight stops. So that's why before I would let the trend (slope of a relatively fast MA) stop me out. If it stopped me out after -30, -10, 2, 15, 40, or however many ticks, that's fine. That's when I would exit. I never found a system that was profitable using fixed stop loss or fixed targets. Other people claim to have success using x point stop loss and y point target on every trade. I have been unable to find a way to make that profitable, and I've experimented with tons of options and ratios of target:stop.

Maybe all that changes when you use price action.

Or maybe it's unique to the YM and ES is tradeable with fixed stops/targets.

OR hey, I just thought of this; since you're using such small targets, are you actually trading within the noise???? I hadn't really ever considered that before until just now.
 
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