switching gears to Price Action via SLA

[gears]

With regard to the green buy dot after the BO (the RET one), do you tend to use the same rules (+/- 2 points) as you alluded to for a REV? It looks like you have it on 84 which is 2 points away from 82...

 

[dbphoenix]

The "rule" was merely a suggestion. It's up to the trader to determine whether he enters on a tick or two or four or twelve, understanding that the later he enters, the more likely he is to be underwater and quickly.

Veering back to the subject of this journal and the OP's desire to make the SLA/AMT at least reasonably mechanical, let's say that I tell Beginning Trader that I place a stop-limit buy two points, for example, away from the upper limit of a range with an automatic stop, if I were to use stops, of 1pt (4t). Let us say also that once price has moved in my favor 5pts, for example, that I move the stop, if I were to use stops, to BE.

So Beginning Trader implements these tactics into his own trading and the first attempt gets stopped out. And the second. And the third. And the fourth and fifth. At this point, Beginning Trader may believe that I'm holding something back, that I'm being untruthful.

But the problem does not lie in truth or falsehood or transparency. The problem lies in the fact that for any of this to work, Beginning Trader must be able to recognize and draw the correct upper limit for a range. If Beginning Trader has no idea where to draw a proper upper limit for the range or indeed has no idea what a range looks like to begin with, then none of what I've told him is going to make the least difference to his trading other than to increase his losses.

Beginning Trader has to define a range. Only after he has done so can he even begin to test various entries, with or without stops, much less begin to test tactics for trading a trend since trends are born of ranges. If he cannot define a range, he needs to find some other approach, most likely one based on indicators.

 

[eminiman414]

With regard to the green buy dot after the BO (the RET one), do you tend to use the same rules (+/- 2 points) as you alluded to for a REV? It looks like you have it on 84 which is 2 points away from 82...

As per the SLA rules it would be a one point buy stop if I remember correctly.

 

[gears]

The "rule" was merely a suggestion. It's up to the trader to determine whether he enters on a tick or two or four or twelve, understanding that the later he enters, the more likely he is to be underwater and quickly.

I hear you. And again, I'm not looking to trap someone into saying something to later say, "but you said…". I was just wondering if it was a suggestion in the same vein as to the REV with a range.

And you're right - it's up to me to figure out something that works for me.

 

[gears]

As per the SLA rules it would be a one point buy stop if I remember correctly.

Yes, 1 point is the standard SLA entry. In the picture Db included, the green dot was next to a price bar - not above/below it - so I figured I'd inquire since it did appear to be 2 points from the range area identified.

 

[dbphoenix]

One must have rules that he's tested and that he trusts. What the specific rules are doesn't matter if one can't locate the range and start with it. If he does locate the range and trades it correctly, the rules may change throughout the session according to how traders are trading. But if he gets off to a bad start, he'd best not trade at all that day.

As regards listening to the market, I don't know if this will be of any importance tomorrow morning, but in this example, even if one hadn't paid any attention to the overnight range in today's prep and trading, the market was telling you that 20 and 30 mattered (and may matter again). One might not even have noticed the overnight range until it was all over. But it wouldn't have made any difference as long as one paid attention and listened.

 

[k p]

One must have rules that he's tested and that he trusts. What the specific rules are doesn't matter if one can't locate the range and start with it. If he does locate the range and trades it correctly, the rules may change throughout the session according to how traders are trading. But if he gets off to a bad start, he'd best not trade at all that day.

As regards listening to the market, I don't know if this will be of any importance tomorrow morning, but in this example, even if one hadn't paid any attention to the overnight range in today's prep and trading, the market was telling you that 20 and 30 mattered (and may matter again). One might not even have noticed the overnight range until it was all over. But it wouldn't have made any difference as long as one paid attention and listened.

View attachment 150696

Given that 20 was actually the PDL, do you think it makes sense to attribute the importance of 20 to that? It makes sense of course that overnight, when price dropped a couple of ticks below 20, it was bought up, but do you suppose that 20 was more important because of the fact that is was the low yesterday? Of course 4330 didn't seem to make a difference yesterday, whereas overnight, this high is what made the difference today, so both were significant but maybe 4320 more so because it was originally the PDL?

Likewise, going into today, you had 4281 as a resistance level given the range before the open from overnight, but it was on my chart actually from March 13, as a support line. (chart attached)

Now of course the "why" doesn't so much matter, but I think you said at one point that the more traders that create the swing point, the more importance it has... or something like this. Hence, previous day lows or highs are created by more traders than lows or highs during the overnight session, especially at the start of the overnight session when the activity is very light.

So I'm just curious about putting this idea of "who" creates this level into perspective.

 

[dbphoenix]

Here is another, which is the follow-on to your original chart.

Note here that if you buy the breakout, price is going to recoil on you. You must decide in advance whether you are going to hold and wait to see if price drops back into the range, exit if price does not advance immediately, or exit if price comes back a tick or two or three or whatever toward or below your entry price. In advance.

If you do exit, there is an "inside" bar six bars later that you may decide to interpret as a retracement and enter there. Or you may decide to wait until price exits this congestion and buy it as a breakout. Either way, you're going to be underwater again in two minutes as price returns to the upper limit of the range a second time. Buying this one, or the retracement three bars later, is the winner. BUT. If you're obsessing over your two or three "failed" attempts at going long rather than focusing on price and what it's doing, you will miss this entry entirely, a 30+ point trade. If you enter late, you'll end up in that hour-long mess (though you'll probably stop yourself out of it within the first few minutes, in which case you'll miss the trade anyway).

Your feelings about the trades can wait. While you're trading, trade.

 

[gears]

Today was one of those days where patience really came into play. And I'll say that something has clicked for me in the past few weeks about only getting in a) at extremes and b) when I want to (as in "want" to be in the trade). I've kind of had some epiphanies so I'm in a bit of a sharing mood.

I've finally figured out that the pain is much worse to get into a trade just because I 'hoped' price might do 'x' compared to NOT being in a trade when price takes off if it isn't near an extreme/according to my plan. I used to be all about FOMO and jump the gun because I couldn't have price taking off without me. Thank goodness I'm no longer seeking out to chase price.

So it feels like I fell off the proverbial wagon. I wrote this just on Monday and on Friday, I did exactly what I'd hoped I'd learned was painful enough NOT to do - chase price. As much as I'd identified 4331 and 4272 as the extremes, I allowed myself to be sucked in to the intense movement shortly after the market opened.

I didn't do well - because I basically tossed my plan to the side.

I've got to put this behind me and move on.

 

[NoDoji]

So it feels like I fell off the proverbial wagon. I wrote this just on Monday and on Friday, I did exactly what I'd hoped I'd learned was painful enough NOT to do - chase price. As much as I'd identified 4331 and 4272 as the extremes, I allowed myself to be sucked in to the intense movement shortly after the market opened.

I didn't do well - because I basically tossed my plan to the side.

I've got to put this behind me and move on.

Chasing price is a serious account killer. The professionals know that the best way to get an excellent entry price and accumulate fuel for the next move is to create a bid/offer vacuum that causes price to move quickly. Since so much trading is programmed trading now, these intense moves happened incredibly fast. This is why when you chase price, you very often end up entering very close to a high or low tick of a swing.

This is also why it's so easy to see what to do on a static chart after the fact, but so difficult to actually do it in real time.

"In the market environment you have to make the rules to the game and then have the discipline to abide by these rules, even though the market moves in ways that will constantly tempt you into believing you don't need to follow your rules this time. This movement allows you to indulge in any illusion or distortion that suits you in any given moment."

- Mark Douglas (The Disciplined Trader)