Techniques for Day Trading the ES, NQ, YM, MES, MNQ, and MYM

[NoahA]

MY T#3 was a combination averaging down and martingaling. Lets review. Price goes from BO (bar 7:30) to channel to TR to a SUCCESSFUL BO south of the trading range. So what is the new C#1? It is a BO of the established TR! What is the new C#2? A trend south that started in the TR! What is the new C#3? Starting at bar 9:45 we get 3 bear bars and one doji with the last bear bar being the BO bar south of the range. And they are increasing in size. That is the new C#3! Remember context #3 is the immediate context.

So, what happens usually after a BO? A PB. What happens when you got a BO that has a PB?Well that is when the channel phase starts! So by bar 10:20 which was the PB bar we see another new C#1 starts. Namely a channel. Bar 10:20 was the PB and the start of a bear channel. Anticipating that the BO (bars 10:00 through 10:15) would have a PB but also that the BO was deep enough that price would probably not make it back into the channel anytime soon I saw a chance to average down on a coming PB. Why did I anticipate the bar 10:20 PB? Look at bars 10:00, 10:05, 10:10, and 10:15. While they are part of the BO they all show buying buying pressure coming in by virtue of having tails on the bottom of each bar and the extent of the overlapping of the bars, indicating probing by both bears and bulls. BO south? yes, but also pressures from the bulls. That is what is causing the overlapping bars. A back and forth from both sides. Bears want the BO to continue. Bulls want to make it fail. That bar 10:20 (the bull PB bar) was the strongest effort by the bulls to make the BO fail. I reasoned I could add to my losing position and if I martingaled I could get out with a profit on an even smaller move back south than just averaging down. So I doubled up on that last entry.

Excellent and detailed analysis Volpri. Really enjoy going through your trades and thought process.

I'm a bit puzzled by trade 3 though. Using your chart to make my point, and counting the bars where price closes outside of the trading range. You say here that it was a successful BO, but elsewhere you say that price will usually return into the TR within 5 bars. So why are you shorting on the 4th bar instead of looking for longs? Why did you call this a successful BO so soon without waiting for 5 bars to close outside of the TR? Thanks!

 

[ondafringe]

There is lost of variations of Martingale. One that does what you allude to was 'devopled by a French mathmatician: Jean le Rond d'Alembert.

His Martingale variations are commonly known as D'Alembert gaming/betting strategies.

At the simplest level, wheras Martingale sequence goes 1, 2,4, 8, 16 etc until you get a win at which point you have one net winner; D'Alembert sequencing goes 1,2,3,4 etc but when you finally get a winner, say on '4' then the next trade would be '3', assuming a winner the next trade would be '2'. If you then got a loss the next trade would be '3'.

So Martingale gets you to one net win on the first win after a losing streak whereas D'Alembert will take a series of trades after a losing streak to get you back to net 1 win, but has a much drawn out compounding of contracts so keeps you in the game longer.

So if you had a series of trades as follows:

W W L L L L L L W W W L W W W W

Martingale would see the following bet sizes:

1W 1W 1L 2L 4L 8L 16L 32L 64W 1W 1W 1L 2W 1W 1W 1W= net = + 9W

D'Alembert would see the following bet sizes:

1W 1W 1L 2L 3L 4L 5L 6L 7W 6W 5W 4L 5W 4W 3W 2W = +9W

Yes, I'm familiar with that. My brother used to play craps that way, but called it progression/regression... or more simply... how to lose a heck of a lot of money playing craps!

However, in trading, I think it would work well, with the usual risks; very much like scale trading where you make a lot of your money on the churn.

 

[ondafringe]

My like is based on your statement
There is lost of variations of Martingale. One that does what you allude to was 'devopled by a French mathmatician: Jean le Rond d'Alembert. But @volpri makes a fine distinction that [he] is not really using "Martingale" per se .

But he does occasionally trade straight Martingale: See Page 145, Post 1444

 

[volpri]

@NoahA

I will try to explain. I certainly could have waited for five bars, to be sure before trading. I think maybe some clarification is necessary concerning the concepts of a BO attempt and a successful BO. A BO attempt is any attempt for price to BO of the range. It doesn’t have to actually BO of the range. In this case ANY move towards the bottom is an attempt by the bears to create a bear BO. Bars 8:35, 9:30, and 9:35, were all BO attempts by the bears but none made it out of the range. The bears tried but it did not work. The bulls pushed back.

When the bears do succeed in actually pushing price out of the range it still is not a successful BO UNTIL there are 1 or 2 FT bars. If there are no follow thru bars it usually goes right back into the range as in the bull BO attempt on bar 8:45. But if there are 1 or 2 good FT bars (in this case there were 3 FT bars, then the BO can be called a successful BO. But that, in no way, means that bulls won't try to make the successful BO fail. They often succeed at it within 5 bars. It was a successful BO has far as the definition stands, but the other side can make it fail within 5 bars. If they do succeed in making a successful BO fail within 5 bars then AT THAT TIME it can be labeled a failed BO. If they don’t do it within 5 bars then there will likely be a continuation in the direction of the BO. You got BO attempts and you got successful BO’s and either can fail depending on the strength of the other side.

Anytime you have a BO with one or more good FT bars then that is a successful BO. In this case there were 3 FT bars. So, the BO is a successful BO. The five bars is related to a percentage of BO’s attempts that fail. That is, 80% of BO attempts or actual BO’s will fail within five bars and price will head back towards the range, within five bars. I often will wait for 5 bars before I take any position. But sometimes I will be averaging down long on those FT bars betting the bulls will push back enough to make it fail enough for a profit and I can exit on any PB say like that bull PB bar.

This time instead of going long and averaging down I did the opposite. I shorted three times. I was betting the bulls causing a PB (green arrow) from the leg#1 down (red arrow) would not succeed in getting price back into the range and the bears would push back enough to give me a profit and that is what happened. While both sides were active in the BO of the range I just made a judgement decision betting the bears were stronger than the bulls and the bulls would not be able to get price back into the range hence I was averaging down on that PB bar 10:20.

There are several key things going on here:

1) The price probing by both sides during the BO show both sides as active but it was stronger on the bear side. 5 consecutive bear bars in that red arrow leg#1.

2) Bottom line a BO is successful once it has FT bars then it is successful. That doesn’t mean that it can’t be made to fail within 5 bars. If the other side is strong enough they can make it fail within 5 bars. If they succeed then it becomes a failed BO. If they don’t succeed within 5 bars then it will likely have a second leg as in the red arrow in this case.

3) you will hear me speak of the larger context or phases of the market cycle. These I call C#1. While price was in a range the previous context 1 were first, a BO spike (bar 7:30) C#1 that morphed into a 12 bar bull channel C#1 which in turn morphed into the range C#1. Now the trend is the spike PLUS the channel. Now look at the little blue horizontal lines that embody the trend. Any PB that goes past 50% retracement as in this case, is showing weakness. The blue dashed line is the low of the retracement and it is about 70%. When I see a 70% retracement of the previous bull trend (spike + channel) then I am willing to bet any PB bar (10:20) from the range BO bars 9:55 to 10:15 will not be strong enough to make the successful BO fail within 5 bars. The PB of the spike and channel was was too deep and the BO of the bottom of the range was to deep from the bottom of the range to expect that a PB from the BO will get price back into the channel. So, I begin shorting on the 10:15 bar and more on the 10:20 bar. My bet turns out right and we get that second leg down and I get to exit with a profit.

4) Price trading below both MA’s. Another indication of further weakness to come.

Maybe this explanation will help. Or have I only succeeded in muddying the waters even more?

 

[volpri]

So, I begin shorting on bar 10:15 which is also the dashed red line to the left to compare it with the 50% PB area. There is a GOOD chance the FIRST PB attempt from the BO (the BO move actually started at the top of bar 9:50 and consisted of 5 bears bars down through the range into a successful BO (one with FT). There of course will be a PB from those five bear bars as we see buying coming in (tails on bottom) but the BO was big enough that if you look at the total picture it is unlikely the FIRST PB will get price back into the range. Of course it could but it was just a calculated decision on my part that it would not make it back into the range. Hence I am shorting starting at bar 10:15 (E#1) before the first PB starts on bar 10:20 where I make E#2 and E#3. There are other signs of weakness too after that BO spike of bar 7:30. I will post a chart showing a different PA perspective. There usually are multiple ways of looking at PA. I often will keep more than one instance of a chart of the same TF up. I will mark both up as price is advancing with the different PA patterns that can be deduced or perceived. In addition, I like to keep a pure naked chart (same TF) on the screen with just the MA’s. That keeps me alert for perceiving things like SPBL or SPBR trends that can get lost in a markup up chart.

The explanation here seem long and detailed but you asked so I responded. In actual practice everything is mentally done quickly. I don’t sit around thinking up all these details. I just assess, decide, and execute.

 

[volpri]

Here is another PA perspective. Same chart, same TF. There is spike BO (7:30 bar) that morphs into a bull channel channel. The identifying factor that the spike is becoming a bull channel is the first PB (red explanation explains this). It is at this precise point I look to start drawing the channel lines in picking at least two points on one side of the channel to draw from and extending it upwards. I will also extend it backwards to where it makes sense and that usually includes the transition area from spike to bull channel. Then I copy and paste that on the opposite side of the channel if the opposite side only has 1 point to draw from. In this case, on the bottom side of the channel, the bar after the PB gave two points to draw from so I didn’t have to copy and paste the top channel line on the bottom.

So, we see this bull channel transition into a TR. The blue explanation explains the transition area that becomes a part of the TR once it is drawn in. Until we can see a transition evolving we cannot fully determine a new C#1 is beginning. Once the the transition is complete we can then actually see that the latter part of the previous C#1 becomes the FIRST PART of the new C#1.

So, we go from BO spike (bar 7:30 C#1) to bull Channel (new C#1) to Range (new C#1) But now notice something else. In the range between bars 8:20 and 8:45 we see a bear channel WITHIN a TR evolving. This is a nested pattern. A nested PA pattern with the Range C#1. A PA pattern within a larger PA pattern, if you will. This happens a lot. At this point a bear channel line across the top can be drawn, copied and pasted on the opposite side, completing a bear channel and extending forward and backwards. These bear channel lines are lines to watch and see how price reacts around those lines. We see every BO attempt of the top of the nested channel fails and the bear channel continues, as does the trading range. Typically 75% of BO attempts of channels will fail within 3 bars and at times 5 bars.

So the bear channel continues and price breaks out of the bottom of the range on a nested bear channel. If you extend the bottom bear channel line past my entry points you can see price reacted off it on bar 11:50 price starts back up into the channel after a failed BO of the bottom channel line. And within 3 bars.

I suppose the purpose of all this explanation is to show that further weakness was indicated by the nested pattern itself and not only the other weaknesses described in my previous chart that would cause me to to start shorting on bar 10:15 at the bottom of the nested bear channel and continue adding to that short on bar 10:20 betting that price would not make it back to the top of the bear channel (or the bottom of the range) before we would see another price probe south rendering me a profit on my averaged down short. After all the BO of the TR was done on a bear channel. Good odds that the move south would continue at least enough for a good short scalp,

So to make a short story long….on trade #3……..ROFLMAO.

IT IS BENEFICIAL TO HAVE MORE THAN ONE INSTANCE OF A CHART UP AND TO DRAW IN THE DIFFERENT PERSPECTIVES ON PA AS THEY OCCUR, OTHERWISE, A SINGLE CHART CAN GET SO BUSY ONE CAN’T SEE THE FOREST FOR THE TREES. AND DON’T FORGET TO HAVE A NAKED CHART TO GLANCE AT ONCE IN A WHILE. ALL OF THE SAME TF.

I will not, at this time, discuss other TF perspectives like 15 min and 30 min as I might have heads spinning and people lost as termite in a yo yo. But I have discussed A LITTLE on other TF’s in earlier posts in the journal. But too much too quick and folks will choke on a nat while trying to swallow a bite of a ribeye.

 

[volpri]

Well it is Sunday and a covid outbreak among the vaccinated at church so I will not be going anywhere to church but will stay home and work on my water well, which is not yet up and running. I have to install the new pump today. I am slow as molasses as I am a bit old. What should be a few hours work now takes me a few days. I do not like getting old one bit except finally people say yes sir and no sir and I get senior discounts which tickles me pink. Otherwise, I would start life over especially, if I could have the knowledge I have now.

 

[Relentless]

Well it is Sunday and a covid outbreak among the vaccinated at church so I will not be going anywhere to church but will stay home and work on my water well, which is not yet up and running. I have to install the new pump today. I am slow as molasses as I am a bit old. What should be a few hours work now takes me a few days. I do not like getting old one bit except finally people say yes sir and no sir and I get senior discounts which tickles me pink. Otherwise, I would start life over especially, if I could have the knowledge I have now.

With the knowledge you have now I'm curious - what would you do differently were you able to start over?

Always good I think to pick the brains of the older and more wise amongst us.

 

[Illini Trader]

I am really curious about the covid outbreak among the vaccinated at your church. I see on your profile that you live in Honduras. I live in the US and we are quickly becoming a very censored country. Any negative information about the vaccine is quickly cut off and labeled misinformation. No scientific debate is allowed.

So with this preface, and from what we are told a "breakthrough covid case" is a rare event and causes no problem for the individual other than the sniffles for a day or two. Are you seeing something different in Hoduras because from what we are led to believe an "outbreak" among the vaccinated is suppose to be impossible.

 

[volpri]

I am really curious about the covid outbreak among the vaccinated at your church. I see on your profile that you live in Honduras. I live in the US and we are quickly becoming a very censored country. Any negative information about the vaccine is quickly cut off and labeled misinformation. No scientific debate is allowed.

So with this preface, and from what we are told a "breakthrough covid case" is a rare event and causes no problem for the individual other than the sniffles for a day or two. Are you seeing something different in Hoduras because from what we are led to believe an "outbreak" among the vaccinated is suppose to be impossible.

The outbreak is at the church here in the USA. I live back and forth between countries. Most in the church have been vaccinated with pfizer or moderna. The unvaccinated are looked upon as ignorant. So far none of the unvaccinated, have covid that I know of, but I suppose if they to were to get this new variant it could wreck havoc. In Honduras, by far, most don’t have the vaccine. The politicians, physicians, and the more wealthy do. The poor (which is most) make do with bush medicines and Ivermectin to survive. Some make it, others don’t.

I am not anti-vaccine but I don’t like the MRNA technology. And I don’t think adequate testing was done and imo testing the testing is basically being done “live” on humans right now. Kinda like trading. No demo practice. Just starting off with live trading with real money which usually ends up with decimated accounts. No real demo practice with vaccines. Or at least, not enough IMO.

As far as vaccines I am interested in Novavax. It is more along the lined of traditional vaccines. They were looking to debut it in September but I think the debut it got pushed further up.

I have a theory about the variants but probably best I keep my mouth shut or I might get banned from ET or get in arguments I don’t want to get into. I guess every man has to decide to do whatever floats their boat. I have friends for the vaccines, and friends against them.