Keeping It Simple II

Quote from redzuk:


On attached chart circles 1 and 2 looked like good breakouts as I understand this kis setup. Was it a basic principle that made you pass them up or just your feel for the market not being a breakout type of day.

I somehow had the impression you were mostly a breakout trader, tossing in an occasional reversal or pullback entry.
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Entry on the NQ today was at 1059.5 at 10:00, 3m chart, target 51, for 8.5 pts. I haven't been taking BOs lately because the volume has been so poor. As for reversals, there was nothing that I liked, so I didn't take anything. Came close, but nothing gelled.

As for my feelings, they don't enter into it. If breakouts aren't working for me, I try retracements. When volatility returns, I go back to BOs. But since the daily range keeps contracting, Monday or Tuesday should be a good day.

I don't understand what you mean by "pivots", so I can't speak to them.

As for the 5m chart, you may not see an "N" with a 5m chart, which means that you're going to have to trade a breakout of the 30m bar (or whatever you choose) without regard for what it looks like. If you wait for the "opening range", you may wind up missing the entire move.

--Db
 
the ES was clearly lagging the NQ today and was not making a new low at this time so why do you suggest a valid setup occurred?

Some days ago I recall you avoiding a trade just for this very reason.
 
Quote from LongShot:

the ES was clearly lagging the NQ today and was not making a new low at this time so why do you suggest a valid setup occurred?

Some days ago I recall you avoiding a trade just for this very reason.
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I did avoid it. But other people took it and made money. Just goes to show you.

--Db
 
Quote from dbphoenix:
How do you define "reversal"?--Db
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You're confusing me now.

for high:
Price makes Higher High than previous two bars. The HH is where it failed moving that direction (pivot). And price makes a LL, failing to make another HH for atleast two following price bars.
 
Quote from redzuk:



You're confusing me now.

for high:
Price makes Higher High than previous two bars. The HH is where it failed moving that direction (pivot). And price makes a LL, failing to make another HH for atleast two following price bars.
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I don't mean to confuse you, but "pivot point" is one of those terms that has multiple definitions depending on who's using it, which is why I prefer the traditional "reaction". Defined in this way, there can be dozens or hundreds of pivot points in an intraday chart (and some people define pivot points in terms of where they expect price to reverse, as in Fib levels). But reactions refer to relatively important countertrend movements. Once a reaction high or low is made, then any intervening switchbacks are immaterial.

"Pivot points" may mean something to you and you may be able to build a strategy using your pivot points along with the rules I posted to the OBR strategy. But what's more important with regard to reversals - as opposed to breakouts - is understanding trend, trend direction, trend change, and trend reversal, and to understand that you have to have a very definite idea of "higher high/ higher low" and "lower high/lower low" (i.e., higher than what and lower than what). Without that, you'll be in chop most of the time.

--Db
 
On the chart I posted the first red line marks what I considered the opening range break. The rest of them marked what I considered important REACTION HIGHS and REACTION LOWS. It basically shows prior support and resistance, right? You draw horizontal lines off of RH and RL. If you want to incorporate time you connect the RH and RL with diagonal lines. Combined with other price levels I think RH/RL become more important.
1. Daily RH/RL
2. Percent retracement (fib levels)
3. "pivot" calculations from daily high, low and close
4. Gaps
5. Daily moving average's
6. average range plus high/low (system target)
7. Anything else??

How important can these fluctuations be on a 3 or 5 minute chart, without combining them with the above? Thats what i'm trying to get at. Maybe I should have posted to the "determining the trend" thread.

I posted the chart hoping to get any discussion on what makes a one RH more important than any other one. To me the price action at RH/RL levels defines the trend (blue circles on my chart). With all the overlapping and failure to follow through there was no trend. Of course trading would be very easy if we always knew what kind of day we were going to get. And I think that is the key to discretionary daytrading.

Consecutive RH when the RL does not overlap previous RL makes a nice stairstep trend. Is trading a breakout this simple:
1. wait for a RL that is higher than preceding RL, to enter a breakout RH.
2. don't trade breakouts on low volume days.
3. daily range contraction will lead to a trend day eventually. Traders often mention narrow/wide range of 4 or 7 days, are these important to you?

If you can add any insight on defining RH and RL please do.
 
As far as "diagonal lines" or trendlines, they really don't have anything to do with incorporating time. They're there. Time is not an issue.

As to your items one through seven, 2-6 are not incorporated into this particular ORB strategy. One begins by determining the opening range, then he enters the breakout, then he either exits before the day's target is reached if conditions (as he defines them) warrant, or he exits at the target. And that's it. Gaps and reversals are not part of the strategy. One can trade them, but one can also take the money off the ORB trade and quit.

Trading gaps is not especially difficult, but it's not as simple as the above. But, in any case, it is a separate issue and doesn't have anything to do with the ORB strategy.

Trading reversals is also an option. However, reversals are considerably more complicated than what is required by the ORB strategy. They can be made simpler by making choices, but they are not inherently simple. Therefore, they are not included in the ORB strategy either.

As to your chart and what makes one reaction more important than another, keeping it simple entails avoiding the issue of "importance". I look at higher/lower and little else. I also don't work the day to death.

Your chart begins with a move downward, a reaction, and a downward break through the opening range. It then makes a low. It then makes a lower low and reaches the target. For most people trading this strategy, that's the end of their day. If, however, you choose to have a wide stop or are hoping for a range expansion, you might choose to stay in.

If you exit and trade the reversal, the double bottom is a legitimate trade. Whether you buy the inside low or buy a breakout of the RH is up to you since trading reversals are not part of the ORB strategy. If you had bought the breakout of the RH, you would have been SO quickly.

But that would have been that. When you start trading reversals of reversals, much less reversals of reversals of reversals, then you're almost guaranteed to be trading chop. It's not necessary to know what kind of day you're going to have. The task is to decide what sort of day you're having, i.e., understanding what's in front of you in real time.

As for your last three questions, if the first one is directed toward entering on retracements, that's what I'm doing now due to the low volume breakouts, but that's my choice; retracements are not part of the ORB strategy. As to the second, volume is not a consideration in the ORB strategy. As to the third, range contraction does lead to wide-range days, but the idea that you can count the number of days leading up to a WR day is largely nonsense. And, again, it's not a part of the ORB strategy.

The ORB strategy is extremely simple. One can massage it until it is almost entirely discretionary and thus considerably more complex and complicated, but then there's little point in developing the strategy in the first place. The strategy is for getting in, getting out, and doing something more productive with the rest of your day. It's not about scalping or trading chop or squeezing out every available point.

What I personally am doing on any given day is largely irrelevant. This thread is not my journal. It's about simple ways of trading futures. The ORB strategy is only one of those ways and I'm happy to answer questions about it if I can do so. However, I have no interest in maintaining a journal. Anyone who's interested for some reason in what I'm doing is welcome to join me in the chat room if I happen to be there.

--Db
 
Whether you buy the inside low...

Db, by "inside low" do you mean buying a break of the high of a down bar that makes second low of the double bottom (like T's 2b entry)?

______

I know it's not in the ORB context, but for redzuk I would point out that on the 3min chart this double bottom was not very "crisp" for want of a better term. To me, a good reversal pattern should trigger with some "oomph", and not after dilly-dallying around. This one took a while to work it's way back up to the RH at the middle of the "W". This wouldn't necessarily be a deal-breaker if it did so in a constructive way, building stair-steps and indicating potential emerging trend. But this one neither "popped", nor did it build a convincing case for anything other than sideways correction.

But please don't take me as any sort of authority. I'm mostly trying to clarify for myself in a way that is more objective and definable why I wasn't interested in that potential reversal.

Whether we're talking about ORB, or our perception of the way Db trades, you are not going to see attempts to trade every "signal' or squeeze every move out of the NQ. Since I began trading futures intraday, one of the principles that I've adopted is that it is not like longer term swing trading on a continuous extraday chart. Certainly the same principles of price action and TA can be applied, but I find it significant the way each day is it's own self-contained little "drama". And just like in the movies, there are a limited amount of basic plot-lines that you'll see, and in any given plot line a limited number of major plot twists or key events.

My point is not to try to predict which basic story is going to play out on a specific day, but to approach it with the idea that there will or may be certain specific opportunities to position ourselves to exploit the plot line as it emerges. And if one steps back and looks at numerous days, one can see that within the context of trying to let winners run and letting our actions be determined by price action rather than grabbing profits prematurely, you just don't see more than 2 or 3 prime entry opportunites and profitable moves per day.

It's like the difference between growing, storing and processing food so that one can eat 2 or 3 good square meals a day without stress, versus hunting and gathering, eating many small snacks throughout the day but expending so much energy to obtain them that one is barely keeping up with needed nourishment.
 
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