One Trade at a Time

Trading is an incredible endeavor. Much respect goes to anyone who can trade successfully.

A couple months ago I pieced together a solid trend strategy. When price has broken out of a trading range and S/R "flips", or when I see a "series of HH/HL's or LL/LH's" I know most likely a trend is present. How does one trade the trend? Buy pull-backs. As a higher low pivot is forming in an uptrend one looks to enter. This goes on until the trend ends, which is when the break-out to the next HH or LL fails.

Manual back-testing showed positive expectancy even with slippage and commissions.

And of course, with a golden egg in my hand, I tell myself it's not enough! I must know how to trade ALL environments ALL the time, EVERY day! And I want it NOW!

So just yesterday I realized that I should be grateful for what I know! See if I can make money trend-trading first, and then I'll move forward. So enough is enough. I'm only trading trends right now. And I'm watching more than just CL as trends happen with all markets, not just oil. I've got my eyes on ES and 6E as well. Don't know how correlated they all are, but ideally I'd like to eventually settle on a few markets that are uncorrelated with decent liquidity.
 
In continuing with my last post, I am refining the strategy.

As I believe I've stated before, I use an EMA to easily see pull-backs.

So a short time-frame with a larger-period EMA seems to make pull-backs easy to spot, and the price swings themselves are easy to see because of the smaller time-frame chart. That's the basis of the strategy. The EMA must be directional, and my clear-as-day signal is entering trades when price touches or penetrates the EMA. If there's a trend but no EMA touch, then there's no trade. Simple, and easier to follow then the vague rules that "discretionary" amateurs like myself use.

As a guy named Braincell stated:

The evolutionary path is as follows: gambler > discretionary trader with discretion > discretionary trader trying to be an automaton > algo

Just food for thought.

Also, an image showing an example of a short tf chart with a larger-period EMA.
 

Attachments

Thanks!

I took a break from the journal because I had to figure out what the f*** trading was all about lol.

Now I have half a clue, and hopefully a bit of knowledge to share with others, so that's what I'm trying to do.
 
Quote from Chris_Anonymous:



As a guy named Braincell stated:

The evolutionary path is as follows: gambler > discretionary trader with discretion > discretionary trader trying to be an automaton > algo

Just food for thought.
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evolutionary path of a trader: discretionary trader => discretionary trader+some automation =>some more automation+some discretionary => discretionary trader.

I thought algo is for front-running by brokers and currency dealers, not for directional trading. Fully automated trading is impossible, because 95% of the automated systems will lose money and human has to take over sooner or later.
 
Quote from 2steps:

evolutionary path of a trader: discretionary trader => discretionary trader+some automation =>some more automation+some discretionary => discretionary trader.

I thought algo is for front-running by brokers and currency dealers, not for directional trading. Fully automated trading is impossible, because 95% of the automated systems will lose money and human has to take over sooner or later.
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Although I don't know for sure, I assume the original poster of that evolutionary process meant "algo" as in the trader becomes virtually the same as a programmed system. Very little to no occurrences of breaking/not following one's trading plan. The ego is reduced to the point of not interfering with the method.
 
How can you read A Brook's and say candles are meaningless? Each bar is important according to the book. However, take a look at the engulfing candle after the 2nd HL. An engulfing green candle is just what you think it is. It basically is bigger than the proceeding red candle. This indicates strength on the long side.

As for volume, I day trade, and have not found any volume chart to be more helpful than price itself at least on my charts. They will just not show what you have in your attachment which is a weekly chart. However, if I could get volume to show in a daily chart like that then I see the point you are making.

Quote from Chris_Anonymous:

Shan,

Sounds like we've both been studying Al Brooks!

I'll take what you say and simplify it even further. I think the market only moves sideways and up/down. When it's moving up or down, it's trending, and the trend can show up in several variations. When price is moving sideways, it's either in a trading range (small or large) or in giant swings. Think reversals or continuations.

But I'm starting to see that it might be even simpler. I'm starting to see that price moves from level to level. When price is breaking through levels, it's trending. When price is getting stuck in levels, it's ranging/swinging.

To explain further, imagine a trend. Better yet, take the chart image of SPY that you attached. I've noticed trends tend to break out of current resistance, hit a new resistance zone, and then pull back to the old resistance that now acts as support. I edited the chart you uploaded to show what I mean. I've labeled the higher highs and higher lows. Each HH on the chart is a price level that could not be broken as evidenced by the large upper tails. They are false break-outs. Right after there is a pull-back that ends when price can not break below support. Look at the HL's I drew on the chart. The first HL is a strong down bar followed by consolidation in the form of an inside bar immediately after. The second HL shows two strong down bars (a bit deeper pull-back this time), and then the first up/green bar immediately after has a large lower tail, which is the false break-out past support. This means support held successfully, and now price will most likely trend upwards again. The third HL is a two-legged pull-back, and I believe Brooks mentions in his book that a 2-legged pull-back is common after three legs up, which is the case here.

The fourth HH and the last high, which are basically at the same price level, shows that the trend can't break through the latest resistance zone, signaling the end of the trend, and possibly a reversal.

Also notice that the first HH, which hit resistance, is the same level that the second HL could not break. It's the same for the second HH and the third HL as well as the third HH and the last HL.

Keep in mind, this is all just my opinion. Someone who actually trades professionally can feel free to call me out if I'm completely wrong.

BTW, I like what you're mentioning about volume as I have not used it at all up to this point. In an effort to keep things simple, I've taken volume off my charts. I figure I'm trading price, and direction is all I care about.

And to answer your question, I have not been trading at all over the past month or so. Instead, I was working on my trading plan and now I'm reading Al Brooks' book over and over while studying charts and trying to define and nail down a decent trend setup. It's all paid off so far, and if nothing else, I'm at least saving my money! :D
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CA,

Here’s a quick start guide to where you want to get

It won’t make you a profitable trader – your must do that

It won’t make your journey any less work

It will however get you headed in the right direction.. and it'll help you avoid some of the pitfalls


Develop this insight further

Quote from Chris_Anonymous:

I'm starting to see that it might be even simpler. I'm starting to see that price moves from level to level. When price is breaking through levels, it's trending. When price is getting stuck in levels, it's ranging/swinging.

:D
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Adopt this mentality

Btw a less genteel way of stating the same; “I place my head up price’s ass and follow it wherever it goes – every day without question”


Quote from NoDoji:

PA involves no ego - price tells you what to do; what you think is irrelevant. You can have a bias, as long as you trade price even if it runs counter to your bias. If you do the opposite, then you're not trading PA.

PA is good old fashioned trend following. See a trend, just follow it. If you aren't comfortable taking the early PA entries, jump on board later with the consensus of the market, just as you said.

By the way, a strong point emphasized in Brooks' book: There is no bad entry in a strong trend, just go with it. Every little pullback on a smaller time frame is trapping counter-trend traders to fuel the next push.

PA trading doesn't lead to psychological issues; ego, emotions and over-thinking while trading lead to psychological issues (such as hesitation, jumping the gun, over-trading, revenge trading, canceling protective stops and averaging down instead of switching to the other side based on the action of price).
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And do this;

a. Read Bar by Bar – to get an understanding of how to read price…, not necessarily to copy brook’s setups or his trading style – It is a must that you develop your own – on both accounts

b. Edwards and Mcgee is also a good read

c. Make a trading plan…, then follow it to the letter… and I don’t care if you don’t know how to write one…, don’t know what it should contain…, or how simple/ comprehensive to make it… Make a damn plan – then stick to it

d. Modify your plan, off hours, as necessary

Notes on a trading plan;

No way in hell can a discretionary trader be consistent – in a totally uncertain environment – unless they follow their plan – to the letter

Keep your plan simple

If you need suggestions on how to create a plan.., say so – and I’ll post a link to a plan outline – believe me – its nothing special - but one is necessary

e. Journal all your trades.., all your thoughts…, everything… To identify behaviors you need to keep repeating… behaviors you need to change… patterns within you… patterns within the mkt

f. Setups – keep them such – that your risk is always small

g. The levels you refer to above – learn to use them for targets

h. Learn to draw.., and use – lines – horizontally and diagonally (simple yet damn effective)

i. Market has no context, save for buying and selling – create the context you need.., while keeping it simple… and specific

j. Smart money sets the levels you mention in your above insight – the intraday BS (movement we trade) gets price there – “eventually”

k. The “eventually” will break your account – if you don’t identify setups with small losers – then take every one of the small losers when a trade goes against you

l. All successful traders have losing trades - and will until they stop trading

m. Keep everything simple

n. Patience…, Focus…, Discipline…, and two I’ll add – Adaptability.., and Accept Being Wrong Quickly and Easily…

Become comfortable with these…, as they are all absolutely necessary

o. Some like a single time frame, I like multiple… should you decide to use multiple – make sure all your charts line up… It is way too easy to have conflicting multiple time frames – which consequently tell you different things…, and send you contradictory signals…

Get em synced up – its money..
================================

Okay, so here’s your quick start guide

In and of its self – this will not make you profitable… so don’t get any bright ideas…

But this…, in conjunction with you becoming a trader (iow’s doing the work and developing a trader’s mindset) – will


You’re on a journey… so I respectfully suggest you enjoy it as much as possible..., for once you arrive – it becomes rather redundant….

Success to You Sir

RN
 
CA

Had one additional thought (and yes it hurt :p )

Print out 90/ 180 days worth of 5 minute daily charts… then study each chart individually, mark each chart up, make notes on it..

Look for repeating set ups.., write it/ them down… describe each set up in your own words… paste copies of each setup in your journal – along side your notes describing it

Then once you are comfortable with a specific set up – start looking for it on the hard right edge, in real time, as its forming

Yup – it’s work…

But then what worth it – isn’t

eta - And never be remiss in taking small losers - no matter how good the set up(s) may appear

RN
 
Redneck,

Wow thanks! That's a hell of an outline.

For the record, I've done a fair amount of the work already mentioned.

I've read Brooks book and that gave me a great insight into price action. I've read Edwards & Magee and other books on classic TA.
I've read Douglas' book as well, several times.

I've got the majority of a plan down on paper. Everything from risk to annual goals to psychological/mental traits I am working towards.

I've edited it a bunch as well. I've got a solid idea of how to play trends, and for a while I was trying to figure out how to trade ranges. Right now I'm just simply back to attempting to trade trends (sim-trading only of course!) and I'm going from there. KISS, as some say.

I definitely will start tracking my progress in much more detail as you explained, it will probably help a LOT.

I think I get stuck because sometimes I feel I have a lot of puzzle pieces but I'm still missing a few and although I can see the rough image, I don't yet know what it looks like completely.

Obviously there's still a lot of work to be done, so thank you for all the advice and notes on what I can do.
 
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