Making of a method
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good question!
there was not one ,but manny AHA and breakthru moments
Like first and foremost , to get an market understanding
why is a market there in the first place ?
who is participating ?
how does price move ?
law of supply and demand
law of effort vs. result
law of cause and effect
How can i put myself into this equation ?
Planning A trading day/ a trade/scenarios beforehand
putting as much odds in my favour as possible
preserve and maintain my edge (follow the plan , setups)
anything can happen
dont get attached to an analysis or trade / bias
only trade the obvious
dont force myself into finding a trade everytime i sit infront of a chart , if the market doesent speak to me / is clear .. wait till the picture gets clear
Psychology makes and breaks a trader !
so in the end :
results=Market understanding x (you+trading strategy)
Day 5 of 10
Prep:
Buying pressure came in overnight and during premarket. The pressure since the lows of the 5th remains intact. LOLR is up.
S: 2967 (S from PM)
S: 2962 (S from ON)
S: 2945 (from 5th)
S: 2953 (MP of upswing from lows of the 5th)
R: 2973
R: 2977 (from ON)
0835 down pressure but hasn't crossed S level for trade taking
0841 crossed S. Trend now down. look for RET.
0842 10 POINT run already. not sure about getting in this late
0844 has to be a retest for Reversal to be considered
0846 at MP of downswing. can consider long now in anticipation of break beyond OH
0849 STAY and use left
0853 wait for all this to resolve. otherwise it is chop. wait for boundaries of range.
0859 confirmed LH and HL
0904 wait for break of 74 or look for REV off range but only with retest
0911 Situation still chop but price finding S through HL's. General tilt is up. Possible long entry may come later as anticipation of BO out of this chop.
0914 down pressure to resolve the hinge.
0922 down pressure against S of range. wait till decisive break before shorting on RET.
0933 The S at 65 evident on all timeframes. Pressure is down but price still in range.
0938 wait for RET to short. Also, there is a S level at 62
0946 thought about long off retest of S but canceled because too many trades from range above.
Day's Review:
Rules were followed and trading was deliberate. The first short found strong S soon after entry. Gave the trade some time because of the R from the Range above that price had recently broken down from. Price dropped but bounce back again at 0944. I considered this a re-test and confirmation of Support to exit the trade.
I had established anticipated S at 62 from prep work. On the one hand, price had broken down from a lot of chop and this was the first RET after the breakdown. On the other hand the anticipated S level of 62 from prep work was right below the entry. So where did the probabilities lie? Would it have been a better trade to wait and see if S manifested at 62. It did. And then R from the range above came into play, giving a short entry opp on RET at 0944. Perhaps this was the better option but I don't know.
http://www.sierrachart.com/image.php?l=137332938258.png
Prep:
Buying pressure came in overnight and during premarket. The pressure since the lows of the 5th remains intact. LOLR is up.
S: 2967 (S from PM)
S: 2962 (S from ON)
S: 2945 (from 5th)
S: 2953 (MP of upswing from lows of the 5th)
R: 2973
R: 2977 (from ON)
0835 down pressure but hasn't crossed S level for trade taking
0841 crossed S. Trend now down. look for RET.
0842 10 POINT run already. not sure about getting in this late
0844 has to be a retest for Reversal to be considered
0846 at MP of downswing. can consider long now in anticipation of break beyond OH
0849 STAY and use left
0853 wait for all this to resolve. otherwise it is chop. wait for boundaries of range.
0859 confirmed LH and HL
0904 wait for break of 74 or look for REV off range but only with retest
0911 Situation still chop but price finding S through HL's. General tilt is up. Possible long entry may come later as anticipation of BO out of this chop.
0914 down pressure to resolve the hinge.
0922 down pressure against S of range. wait till decisive break before shorting on RET.
0933 The S at 65 evident on all timeframes. Pressure is down but price still in range.
0938 wait for RET to short. Also, there is a S level at 62
0946 thought about long off retest of S but canceled because too many trades from range above.
Day's Review:
Rules were followed and trading was deliberate. The first short found strong S soon after entry. Gave the trade some time because of the R from the Range above that price had recently broken down from. Price dropped but bounce back again at 0944. I considered this a re-test and confirmation of Support to exit the trade.
I had established anticipated S at 62 from prep work. On the one hand, price had broken down from a lot of chop and this was the first RET after the breakdown. On the other hand the anticipated S level of 62 from prep work was right below the entry. So where did the probabilities lie? Would it have been a better trade to wait and see if S manifested at 62. It did. And then R from the range above came into play, giving a short entry opp on RET at 0944. Perhaps this was the better option but I don't know.
http://www.sierrachart.com/image.php?l=137332938258.png
Day 6 of 10
Focus for today:
Mentally cycle through checklist, especially upon feeling a strong impulse for action. Write down observations for post session review.
During the session - Reflect on the question 'What is a compelling opportunity?'
Pre trading session checklist:
Clear mind
Prime it with best practice checklist
Look at overnight and pre-market action to form context.
Prep:
Clear R at 2977, with price having bounced off it during ON and then two retests during PM. Yesterday's HL suggests that trend is still up. But the action from PM suggests R overhead leading to a short bias.
S: 2973 (LSL from PM)
S: 2966 (PM)
S: 2955 (mp of congestion from 8th)
S: 2949 (Low of 8th)
R: 2977
0837: dropped 9 points. don't want to enter now on RET. Expecting technical rally. plus PM and ON S is at 66.
0841 makes LL on retest. still don't want to take short because of move being extended without any major RET.
0845 WAIT FOR retest before taking REV
0849 MP of move at 71
0856 Finding R at MP
0858 buying waves being brought back down. no compelling direction and likelihood of chop.
0904 placed sell stop 1 point away from RETcrest
0908 stay in the trade. trend is down. give it room till lSH
0932 price breaks SL. But still inside range 0901. wait for definite break above range at 67.50
Review:
Don't see any major errors based on rules. Exiting losing trades based on DS line break would have been better today. But on the other hand I am making a concerted effort to stay in trades longer and giving them room using prior S/R. Give the trade room or cut it fast? If I cut it fast then I will be making more trades. And perhaps that is not a bad thing. If I can identify an attractive zone/boundary condition, then I can take multiple trades in that zone. The main issue would then be waiting for fertile conditions and then taking multiple trades to time the fruition of the condition. So patience interspersed with bursts of activity.
http://www.sierrachart.com/image.php?l=1373413080569.png
Focus for today:
Mentally cycle through checklist, especially upon feeling a strong impulse for action. Write down observations for post session review.
During the session - Reflect on the question 'What is a compelling opportunity?'
Pre trading session checklist:
Clear mind
Prime it with best practice checklist
Look at overnight and pre-market action to form context.
Prep:
Clear R at 2977, with price having bounced off it during ON and then two retests during PM. Yesterday's HL suggests that trend is still up. But the action from PM suggests R overhead leading to a short bias.
S: 2973 (LSL from PM)
S: 2966 (PM)
S: 2955 (mp of congestion from 8th)
S: 2949 (Low of 8th)
R: 2977
0837: dropped 9 points. don't want to enter now on RET. Expecting technical rally. plus PM and ON S is at 66.
0841 makes LL on retest. still don't want to take short because of move being extended without any major RET.
0845 WAIT FOR retest before taking REV
0849 MP of move at 71
0856 Finding R at MP
0858 buying waves being brought back down. no compelling direction and likelihood of chop.
0904 placed sell stop 1 point away from RETcrest
0908 stay in the trade. trend is down. give it room till lSH
0932 price breaks SL. But still inside range 0901. wait for definite break above range at 67.50
Review:
Don't see any major errors based on rules. Exiting losing trades based on DS line break would have been better today. But on the other hand I am making a concerted effort to stay in trades longer and giving them room using prior S/R. Give the trade room or cut it fast? If I cut it fast then I will be making more trades. And perhaps that is not a bad thing. If I can identify an attractive zone/boundary condition, then I can take multiple trades in that zone. The main issue would then be waiting for fertile conditions and then taking multiple trades to time the fruition of the condition. So patience interspersed with bursts of activity.
http://www.sierrachart.com/image.php?l=1373413080569.png
The entire premise behind this effort is that the movement of price can be anticipated based on the past behavior of traders. Their behavior being systematically biased because of the inherent properties of the mind.
If the premise is true, it seems short term movements have a larger likelihood of being anticipated correctly.
If the premise is true, how can one lose the edge? Will it not be evergreen, requiring tactical tweaks based on the market environment, but remaining consistent at it's core?
That is the allure.
The problem is the "inherent properties of the mind" part, outside the open and close hours traders tend to interact more with HFTs and less with hedge funds, big money and retail flow. Things get more noisy, unpredictable and random. Even the open and close haven't been all that great when there is no big news
That made me re-think the premise a little.
Price movement can be anticipated with the knowledge obtained from two sources:
1) Systematic biases
2) The nature of auction markets
So yes, if I assume that all the other traders besides me are unbiased HFT's, it would greatly diminish the influence of using predictable human nature to anticipate price movement. There would still be some influence though, since the HFT's themselves are designed with biases in mind, or are designed to take advantage of human biases.
But regardless of who is on the other end, the nature of auction markets will remain intact. So for example: If I see price converging in a tight range, I can assume that there is some kind of momentary equilibrium and thus elect to trade only once disequilibrium returns.
Perhaps the presence of HFT's underscores the importance of trading only during instances of obvious information - like the information obtained when price breaks out of a region of congestion.
Thanks for the input. That helped me clarify the premise.
Day 7 of 10
Prep:
Price in upper half of daily trend channel from the 24th. Daily range has been small the last couple of days. Overnight attempt towards yesterday's high of 85 failed. PM hasn't shown any buying interest either. Someone has been buying the dips ever since the 24th and the trend remains up with higher closes. But buying waves are becoming smaller too. This, along with the uncertain PM action gives me a neutral bias today. Let's see what price does at the first S and R zones.
R: 2976 (PM)
R: 2981 (ON R)
R: 2985 (High of 9th)
S: 2970 (PM)
S: 2961 (low of 9th)
0831 Strength is clear
0835 give it room. mp is 79.50
0839 get out if retest successful
0842 wait for BO before adding to position
0843 approaching key level of 85
0845 price falls back into range so exit
0849 not much enthusiasm upon crossing high of 85. But a lot of trades below as S. Nothing compelling happening.
0856 Trend resumes but pace is slow. Wait for low risk opp through deep RET.
0904 Range increasing trend weakening
0908 possible REV but wait for one more ret
0914 unless something happens I am not going to trade in this zone
0918 mp at 80.50
0939 compression through hinge
0944 possible break to downside
0957 Buying Pressure and HL inside range
0958 anticipating BO
Review:
Trade 1: My exits were planned in advance but in hindsight the exit was too soon. I was aware that convincing strength had been shown after the open. When price started stalling, I could have given it room at least till BE because the buying pressure underneath was more convincing that the selling, even though there was R manifesting. This awareness would have allowed me to give the trade room.
Trade 3: This was an impulsive entry. The method does not include BO's so I had not reason to take it. I should have waited for a ret which never came. Instead there was strong buying pressure and I should have been ready for a good REV entry. I did take the REV but it was too high.
For tomorrow:
1)Be aware of the context when managing the trade.
2) Do not take breakouts even if price moves in the direction of the prior trade that was stopped out. In these instances where price confirms the original stopped out trade, wait for a ret before entering.
http://www.sierrachart.com/image.php?l=1373509482320.png
Prep:
Price in upper half of daily trend channel from the 24th. Daily range has been small the last couple of days. Overnight attempt towards yesterday's high of 85 failed. PM hasn't shown any buying interest either. Someone has been buying the dips ever since the 24th and the trend remains up with higher closes. But buying waves are becoming smaller too. This, along with the uncertain PM action gives me a neutral bias today. Let's see what price does at the first S and R zones.
R: 2976 (PM)
R: 2981 (ON R)
R: 2985 (High of 9th)
S: 2970 (PM)
S: 2961 (low of 9th)
0831 Strength is clear
0835 give it room. mp is 79.50
0839 get out if retest successful
0842 wait for BO before adding to position
0843 approaching key level of 85
0845 price falls back into range so exit
0849 not much enthusiasm upon crossing high of 85. But a lot of trades below as S. Nothing compelling happening.
0856 Trend resumes but pace is slow. Wait for low risk opp through deep RET.
0904 Range increasing trend weakening
0908 possible REV but wait for one more ret
0914 unless something happens I am not going to trade in this zone
0918 mp at 80.50
0939 compression through hinge
0944 possible break to downside
0957 Buying Pressure and HL inside range
0958 anticipating BO
Review:
Trade 1: My exits were planned in advance but in hindsight the exit was too soon. I was aware that convincing strength had been shown after the open. When price started stalling, I could have given it room at least till BE because the buying pressure underneath was more convincing that the selling, even though there was R manifesting. This awareness would have allowed me to give the trade room.
Trade 3: This was an impulsive entry. The method does not include BO's so I had not reason to take it. I should have waited for a ret which never came. Instead there was strong buying pressure and I should have been ready for a good REV entry. I did take the REV but it was too high.
For tomorrow:
1)Be aware of the context when managing the trade.
2) Do not take breakouts even if price moves in the direction of the prior trade that was stopped out. In these instances where price confirms the original stopped out trade, wait for a ret before entering.
http://www.sierrachart.com/image.php?l=1373509482320.png