Although my equity curve is consolidating in a range, the things I'm learning through after hours study, intense screen time, BigHog's incredible mentoring from afar, comments from so many of you on this site, and working my way through Al Brooks book is providing me with "confidence fuel" in a big way.
I realize now why it takes 5 years on average to become a consistent profitable trader.
As I posted once somewhere on ET I will soon either break out in a big way or totally blow up
I would like to say to my trading roomies that I really miss you and will drop in from time to time, but my focus has been incredible without any distractions the past few days and the down time I used to spend chatting has become intense study time and of enormous benefit to me.
Today, I added a 1-week hourly ES chart to my view so I can see the bigger picture on trending days, hopefully preventing my intraday bias from interfering with my trading.
I spent a great deal of time paper trading based on a set of conditions I drew up last night for trend trading, range trading, breakouts and flags/pennants, with me talking to myself out loud confirming or disproving every setup as it formed. This turned out to be the best thing Iâve ever done and if youâve never done that as a beginning trader, do it and find out how easy it is to avoid bad trades!
I continued to study entry points in trending stocks. A trend can be caught off the opening in a few ways and I'm still not sure what's the best, but they all seem to be fairly low risk, high reward:
1. Use the previous day's high and low for breakout points
2. Use price in relation to the previous day's close after the first X minutes (3- and 5-min bars seem to work very well).
3. Wait for the first 5-min bar and trade in the direction of price action following that bar - price above the high go long, below the low, go short.
In a trend price generally makes a continuation attempt at the 10-period MA, if that fails it makes a continuation attempt at the 20-period MA. If that fails, a reversal or consolidation range is likely to follow. The attempts at continuation are, at worst, superb scalping points in the direction of the trend. Even if they fail you can grab a small move, and if it works, youâre in the direction of the trend.
I said to myself loudly today not to chase when I missed an entry that quickly moved in my favor. Thatâs been an issue for me in the past, and it places me at risk of getting stopped out of the trade. My stops work well to keep me in good trades, but only if I act on the initial setup.
My aggressive ES short signal was @ 1002.75 when price left behind a lower high and broke down the 20 EMA, but it fell so quickly I was afraid to chase.
ES opening range triggers: long @ 1005.00, short @ 999.00. I did exactly what I did yesterday only today to the short side! Short triggered and quickly found support there. Total weakness and a retest, dropped a bit and bounced back, then repeated, leaving a lower low and lower high. This was proof the short signal was valid, and I shouldâve taken the trade here, but price fell quickly about 4 pts and I was then waiting for a value entry (retrace to near the 20 EMA, which never came).
As a stock or ES set up, I talked to myself out loud about the entry point and the pros and cons of the trade. I confirmed every rule of âbest setupâ that I drew up last night. I kept myself out of many mediocre and bad trades this way. This was a fantastic exercise and really improved my overall confidence.
Hereâs an example:
My observations at 11:50 a.m. on ES, which has been trading in a range between 993.00 and 996.50. (Iâm saying this stuff out loud so the traders standing over my shoulder can hear this and I wonât be tempted to take lukewarm setups):
âLooking at the 1-week chart, price has pulled far from the 20 EMA and should make at least a weak attempt to move back near it before dropping further.â
âPrice established a higher low after bouncing quickly from just below yesterdayâs support @ 992.00. Price also established a negligible higher high, remaining rangebound.â
âThere is no good trade entry at this point, and the range is too narrow for me to feel safe scalping a point or two. I would likely end up churning for b/e at best.â
âIn the near term intraday, I have no strong bias as to whether a break out of this range will be upside or downside. The indication for downside is the fact that price has been unable to move above the 20 EMA. The indication for upside would be the tendency for price to pull back toward the 20 EMA on the longer term chart.â
After some time price began ranging from the EMA to the upper channel of the range, supporting a gradual drift upward. Price eventually broke through 996.50 and worked its way to the 20 EMA on the 1 week hourly chart, as I expected.
A long was signaled @ 997.50 when a series of small doji bars left behind higher lows, above the 20 EMA. This turned out to be a superb long that never looked back one tick and went straight to 1002.00 before pulling back at all. Additional confirmation on this trade could be found on the 1-week hourly chart because price had been working its way toward the 20 EMA and still had room to go before even getting there, so chances were good it would at least test that level, which it did and broke out. The more confirmed long entry was 999.00, breakout above the bull flag resistance line.
Late in the day I saw X hitting the high ticker, a nice break out through the HOD. Since Iâd traded it a few times lately I watched the action, figuring I was too late to catch the breakout since it had climbed so much over the past few days. Well, I found out what a big buyer looks like and the benefit of jumping on these end of day breakout trains! Huge prints were going off in the Time & Sales window; just when it appeared the price would take a breather, it would push up again on huge rapid prints. I kept thinking it was too high to jump on board, yet it kept going and going and going. Extremely impressive price action and now I know what it looks like on the T&S. I will be watching for high tickers in the last 30 minutes of trading, because how nice to ride along with a buyer like that!
Attached an ES chart, and I am drained from intense focus and ready to go jump in the pool!
