Making of a method
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Better, and I hope the swings are clearer. And you drew the hinge. However, the last two bars are pre-mkt jitters. When I saw this, it was before 0800. I also rotated the upper bar down slightly so that it did not include the top of the swing high at 0100, largely because I could see plainly where price was congregating and a more downward-sloping line was more in keeping with what price was doing. Either way the apex doesn't change that much.
So, back to your question, yes, the short is off 48. After that, there's no reason to exit unless you're spooked by that four-bar pop above 21 at 1108. But even if you are, there's a lower high at 1124 that can be used to re-enter the short. There's no reason to go long until 1226 at the earliest.
If you're not going to use the volume, may as well get rid of it. It's a waste of real estate.
So, back to your question, yes, the short is off 48. After that, there's no reason to exit unless you're spooked by that four-bar pop above 21 at 1108. But even if you are, there's a lower high at 1124 that can be used to re-enter the short. There's no reason to go long until 1226 at the earliest.
If you're not going to use the volume, may as well get rid of it. It's a waste of real estate.
My current plan for Reversal entries is based on getting confirmation through 2 retests. One is major and the other is minor. The major retest is when price goes back towards the Low or High to confirm S/R. The minor retest is the resolution of the momentary hesitation that occurs within the Reversal swing itself, i.e. the ret.
In my plan, an exception to the major and/or minor retest rule occurs when entering on a Reversal of a counter trend wave, in the direction of the original trend. This often occurs as SAR off the 50% mark, as a trend continuation entry. I call this a straight Reversal.
I am seeking to extend this same SAR concept of entering on a straight Reversal to situations where there is a dramatic failure of a thrust beyond S/R. This can be a failed thrust outside a Range or a failed thrust to make a High/Low. This is much higher information risk. However, the advantage here is positioning oneself for cascades that occur when the failure of the thrust dismantles the large expectations of traders who had positioned for a BO.
Since there are few markers to define this sort of entry, it can encourage impulsive overtrading. So I need to be careful about choosing only those instances where the failure to BO is occurring within the context of high expectations.
In my plan, an exception to the major and/or minor retest rule occurs when entering on a Reversal of a counter trend wave, in the direction of the original trend. This often occurs as SAR off the 50% mark, as a trend continuation entry. I call this a straight Reversal.
I am seeking to extend this same SAR concept of entering on a straight Reversal to situations where there is a dramatic failure of a thrust beyond S/R. This can be a failed thrust outside a Range or a failed thrust to make a High/Low. This is much higher information risk. However, the advantage here is positioning oneself for cascades that occur when the failure of the thrust dismantles the large expectations of traders who had positioned for a BO.
Since there are few markers to define this sort of entry, it can encourage impulsive overtrading. So I need to be careful about choosing only those instances where the failure to BO is occurring within the context of high expectations.
FT Day 31 Oct 4
R: 3223
R: 3216
S: 3206
S: 3199
Context: Price broke out of a hinge at 0330 but found R below the SH R zone of 3217 from yesterday. Currently in the process of going up again after making a HL. For now LOLR is up due to higher supports.
http://www.sierrachart.com/image.php?l=138089148227.png
R: 3223
R: 3216
S: 3206
S: 3199
Context: Price broke out of a hinge at 0330 but found R below the SH R zone of 3217 from yesterday. Currently in the process of going up again after making a HL. For now LOLR is up due to higher supports.
http://www.sierrachart.com/image.php?l=138089148227.png
Review:
Hesitation: I notice two types of hesitation. One is when I have a good primary position and hesitate to scale into it. The second type is due to a lack of clarity on defining the entry for breach failures of S/R. This is something that will improve over time.
Overtrading: Short at 0934 was blatantly counter-trend. Was experimenting with taking a short off the danger zone. Once again, this is currently a half baked idea and I need to get clarity here.
Trade Management:
Long at 0848 - The first exit was early. A better approach is to wait till PA unfolds at anticipated R. Second and third exits were fine. Had this been a trend day, the next opp to go long would have been on a ret of the new high.
Experimented with position sizing today. Reduced size on trades once the initial break from the hinge retraced. Logic here is to protect current profits from overtrading tendencies during periods of sideways action that normally follow a sharp swing. Felt psychologically easier to take trades with this reduced size. Eventually, the key will be in knowing which opportunities justify going all in and which call for reduced size. For now, reducing size as more time elapses from the open seems like a good guideline.
http://www.sierrachart.com/image.php?l=1380903649524.png
Hesitation: I notice two types of hesitation. One is when I have a good primary position and hesitate to scale into it. The second type is due to a lack of clarity on defining the entry for breach failures of S/R. This is something that will improve over time.
Overtrading: Short at 0934 was blatantly counter-trend. Was experimenting with taking a short off the danger zone. Once again, this is currently a half baked idea and I need to get clarity here.
Trade Management:
Long at 0848 - The first exit was early. A better approach is to wait till PA unfolds at anticipated R. Second and third exits were fine. Had this been a trend day, the next opp to go long would have been on a ret of the new high.
Experimented with position sizing today. Reduced size on trades once the initial break from the hinge retraced. Logic here is to protect current profits from overtrading tendencies during periods of sideways action that normally follow a sharp swing. Felt psychologically easier to take trades with this reduced size. Eventually, the key will be in knowing which opportunities justify going all in and which call for reduced size. For now, reducing size as more time elapses from the open seems like a good guideline.
http://www.sierrachart.com/image.php?l=1380903649524.png
Db,
The chart from today contains some ideas that I am planning to look into. Seeking your feedback on these situations and whether I am thinking about these in the right way.
There are 3 different events. They all fall within the category of 'Danger Zone' entries. Basically those entries which occur very close to either a turning point or a S/R boundary. They are all high information risk and low price risk entries.
1: Breach below confirmed S/R returns back inside value zone with violence.
Reversal entry right above Support.
2: Dramatic failure of new high marks turning point of wave.
Reversal entry below previous High level.
3: Trend continuation effort displays 'topping behavior' and stall.
Reversal entry on cross of DS line.
The first two have distinct markers (dramatic failure against S/R), while the third requires a keener sense in judging pressure.
http://www.sierrachart.com/image.php?l=1380929301166.png
The chart from today contains some ideas that I am planning to look into. Seeking your feedback on these situations and whether I am thinking about these in the right way.
There are 3 different events. They all fall within the category of 'Danger Zone' entries. Basically those entries which occur very close to either a turning point or a S/R boundary. They are all high information risk and low price risk entries.
1: Breach below confirmed S/R returns back inside value zone with violence.
Reversal entry right above Support.
2: Dramatic failure of new high marks turning point of wave.
Reversal entry below previous High level.
3: Trend continuation effort displays 'topping behavior' and stall.
Reversal entry on cross of DS line.
The first two have distinct markers (dramatic failure against S/R), while the third requires a keener sense in judging pressure.
http://www.sierrachart.com/image.php?l=1380929301166.png
I don't know that I'd call it "confirmed", though you may if you like. But that's not the problem. First, could you get filled at a reasonable price? Second, would you be willing to let price come all the way back to your entry and probably below? Third, would you be willing to sit there for nearly 15m waiting for price to move?
Not a good choice. The breakout from the hinge, on the other hand, is a superior one.
But it's not the turning point of the wave. Demand clearly outweighs supply. Look at the pullbacks. Plus your demand line is nowhere near being breached. And you have a higher high following.
Your demand line isn't broken until after "3", which occurs after a decline of more than 50% of the previous upwave. These two factors call for a short at 0946 your time.
Addressed above.
So your long is the breakout from the hinge. Your short is after "3". S/R has nothing to do with it. Focus on the balance between supply and demand.
I agree that the hinge break presented the best entry. But my purpose here is not to look back at today's action to locate the best spots.
I am just trying to identify potential areas of research and was using today's action to give it context. I am not saying that these were the ideal entries.
My question is whether these instances - when there is a breach that is quickly brought back down - is an attractive area for research? I understand that these breach failures are just markers and that the decision will have to be made in the context of the overall supply/demand balance.
In the case of the first long, theoretically yes. Practically no. Even though you're not "looking back", you are. If and when you forwardtest this stuff, you'll see the problems.
But as for the potential trade at 2, still no. There's no indication that the balance is shifting until the pullback after "3" drops more than 50% of the upwave. This is not to say that the "touching the stove" scenario that you're looking for won't work, but these are not great examples.
What you're looking for is a reach that is foiled. Your first example qualifies. Your others don't.