Making of a method

FT Day 21 Sept 20

R: 3238/3237 (High and DT from 19th and PM)

S: 3231 (PM S)
S: 3225 (Multiple S from 19th)
S: 3208 (mp of recent upwave, SL, SH from 16th) Also, approx zone when price will touch the supply line draw from May 22nd

Story 1: While price remains in the value area, pressure has been building to the the upside since the climb from ON to a retest of 37. While traders sold at 37, they also came into buy at 31. The value area is now compressed between this narrower area between 37 and 31. A break from the hinge may provide an opp to go long in anticipation of breaking through the highs.

Story 2: If price breaks down, there is not much to do until it goes below the S from 19th. In that case, there will be a strong case for a move to test the mp at 3208. If it does not, there is an opp to go long again at Range S.

http://www.sierrachart.com/image.php?l=1379680766116.png
 
Quote from game:

Long at 35.75 as price leaves the hinge.
More...

Out at 35

Entry reason: Pressure up since ON + Break out of hinge + close enough to highs to anticipate breaking through + Long term LOLR up
 
Review:

Trade 1: The reasons for the first long during PM were sound. After exiting the trade, price continued to confirm the original thesis. The thesis was strong and a re-entry was called for. I hesitated because:

Lack of trust in my ability to form a good thesis
Doubt regarding whether I would be over trading

However, since this was a critical zone and since PA was still confirming the thesis, a long reentry was called for.

Trade 2: As price broke through 37, I was aware that since this BO run started at 35, it may be a little overextended upon crossing R, as opposed to a BO that occurs after congestion just below R. This thought of overextension added hesitation and led to a late entry.

Trade 3: The BO retraced back just below R. However, since the long term LOLR was up, I judged the long to be worth it.

Trade 4: Once the attempt for a trend run failed, the short was entered as LOLR was now down. Traders who entered in anticipation of BO would begin selling. Despite movement back to entry, I kept holding this trade because the balance was judged to reside with sellers, mainly due to the rejection of BO attempt and the likely travel back to mp value level and possibly to range bottom at 31. Trade was exited once LOLR was seen to be neutral upon crossing of DS line.

http://www.sierrachart.com/image.php?l=1379690131819.png
 
I have been maintaining stats like MAE, MFE, Time trade held, etc. However, there seems to be greater value in capturing and organizing the quality of thinking before and during the trade.

What is quality?
Right action derived from right thinking.

What is right thinking?
Observation freely passing through the prism of method, to emerge as non distorted judgment.

What is right action?
Consistent application of right thinking.

Observed PA is filtered through method. The method is a construct derived from simpler elements. The major elements are:

1) Context via trend and S/R
2) Trading extremes - based on lack of edge within value zones. Trading critical points - based on market as a complex adaptive system.
3) LOLR - based on supply/demand imbalance viewed against S/R
4) Tactics

Of these, the extreme/critical point condition is the most objective since price is either at an extreme or it is not. The only subjectivity here lies in demarcating the value zone - but this is fairly straightforward.

Tactics are easy to review as well.

The other two elements are more nuanced and I will need a simple but robust way of capturing their contributions to the trade.
 
FT Day 22 Sept 23

R: 3228/3230 (LH and H from ON)

S: 3219.50 (mp of recent surge)
S: 3212 (mp of 3183 to 3241 and pm tested S)
S: 3208 (SL from 18th, SH from 16th)
S: 3195 (From 18th)


Story 1: Sharp selling during PM finds price at the mp of the up move from the 18th. Prelim S has been found at 3212. Another important level of 3208 is close by. Recent 14 point price surge turns LOLR from down to up.

Story 2: Recent price surge is unable to cross the High from pm and price bounces in a value zone between 3230 and 3220.

http://www.sierrachart.com/image.php?l=1379939700473.png
 
Review:

Trade 1:
Before: LOLR up with 14 point surge. Price bounces off SL. Waiting for ret upon crossing prior high of 3229.
During: Not moving and entry seemed late and extended.
After: This was a late entry. The best opp to bet on trend continuation was when price bounced off the SL. This would have been a good position to ride the potential uptrend and position oneself for the open. The next best was the ret after price made new high.

Error: Getting in at a high price risk situation with the knowledge that better entries had been missed.
Reason: I missed the earlier entries because I was not focused. If the LOLR was up, then I should have been keeping an eye on how price reacted at the SL.

Trade 2:
Before: Opening thrust had sold down. But since LOLR was up, entry was taken on a deep ret in anticipation of PM strength to continue.
During: Early adv movement. Giving it some room till ret bottom. Buying comes in but price stalls. Don't want to stay in a stall at the open.

Trade 3:
Before: The best entry on DT reversal has been missed. Don't want to get in before a test of OL now. Failure of opening thrust meant LOLR was down. A lot of trades taken in PM in anticipation of uptrend. So potential collapse possible.
During: Not moving down fast enough to support collapse thesis. The surge from PM creating a potential balance and value area so get out.

Trade 4:
Before: Price rejected at 0851. LOLR back down.
During: 1st out on cross of DS line. All out on Rev off PM S and start of PM surge.

Missed Opps:

Short off HH failure at 0840. The strong rise from 29 to 37 discouraged aggressive shorting. But in this case, the failure of price to make a new high was significant because of the trend continuation expectations of traders. There was a low risk opp to go short during the ret at 0842.

Short off R at 3219 between 0923 and 0927. At the time, my thinking was that price is neither at S nor at 50%, so I would be taking the trade in the middle, away from any extreme. Failed to see that the Reversal was finding clear R well short of the 50% mark. Additionally, the surge from the 18th presented an air pocket scenario which called for positioning for the fall through the remaining pocket.

http://www.sierrachart.com/image.php?l=1379955350665.png
 
FT Day 23 Sept 24

R: 3225
R: 3220 (LH zone from 23rd)
R: 3216 (R of ON Range)

S: 3210 (S of ON Range)
S: 3198 (Low of 23rd)

Story 1: Price right on the DS line of the latest stride on the Daily. ON action resulted in a filled out 6 point range and presently there is no indication of which side price will break from. Price showing signs of being contained within the larger zone of 3220 to 3198.

Story 2: The LOLR over the last couple of days has been down. Price's ability to drop more than 50% of the rise from the 18th point to weakness. The steepness of the rise that began on Aug 29th is showing signs of reverting to a more moderate pace as price goes down to the next DS line drawn from June 25.

http://www.sierrachart.com/image.php?l=1380027403279.png
http://www.sierrachart.com/image.php?l=1380027415797.png
 
Review:

Trade 1
Before: Selling of the climb from break of ON trading range.
Error: The entry was too early. Although Open had sold down, there was no ret against an established S/R level. The short was taken just above potential S from the top of the ON range. It was an impulsive entry.

Trade 2
Before: The opening down move bounces off the top of ON range, setting up a Rev entry.

Trade 3
Before: Price forming a small hinge around the ON range top. Price is not breaking down. The move down out of the hinge is rejected, setting up a Rev entry off S and off the middle of the hinge.

Trade 4
Before: Unable to enter the previous breakdown. Price is now at bottom of ON range. Entry taken as price breaks this S level and forms a ret against R.

Trade 5
Before: Price moving back inside former range indicating formation of S. Strong bounce off S.
Error: Did not wait for the ret of the Rev wave. Led to extended entry with S too far below.

Trade 6
Before: Formation of HL

Trade 7
Before: Price breaks down from congestion. Entry on first ret

Trade 8:
Before: Add to short on next ret
Error: Was unaware of the extent of sell off since the high of at 3221. Too extended to add to short here on a simple ret.

Trade 9
Before: The HH attempt at 0946 sells down. Price at anticipated R zone.

Missed opps:
0759 Missed the ret on BO from ON range. Saw the climb from 3212 as too steep and this led to hesitation.
0849 Being in the long led to an inability to short as price gets rejected a second time at anticipated R zone.
0927 The losses from the day discouraged me from taking this trade.

http://www.sierrachart.com/image.php?l=1380040850728.png
 
FT Day 24 Sept 25

R: 3219

S: 3205

Context: There has been a hinge forming since the 23rd. Price is getting compressed. The daily shows some weakness as price about to break the latest DS line from Aug 28. A break to the downside may reduce the stride although the larger uptrend will still be in place as price moves down to join the fanned out DS line from June.

http://www.sierrachart.com/image.php?l=1380112715211.png
 
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