Techniques for Day Trading the ES, NQ, YM, MES, MNQ, and MYM
- Thread starter volpri
- Start date
Volpri,
I can see from the chart that you are long at the bottom of the range and short at top. I was trading this same market and whenever we reach the bottom, I got scared that it might shoot down and thus cannot convince myself to buy at the bottom area. Especially the PA came down fast and furious sometimes.
How do you control this potential detrimental emotion? thank you. It is always great to read your writings explaining your trades.
I have been to 5 family reunions (even hosted 3 of them) between 3rd of July and now. So I haven't had much time for posting in this journal.
I do want to revisit my charts posted in my post #743 but at this moment I want to post a chart of Friday's 7-24-2020 price action and make some comments.
Here is what I have previously discussed from time to time in this journal concerning Trading Ranges. This chart embodies the elements of range trading. It is a 5 min MES chart.
See, 80% of BO ATTEMPTS, from top or bottom of the range, will fail within 5 bars of price action, and price usually goes back up into, or down into, the range.
So what can a trader do that understands range trading? Well you short in the top 1/3 and cover on moves down to the middle or even the bottom of the range. And in the bottom 1/3 you go long and exit taking profits on moves to the middle or even to the top. 80% is high odds.
But what do novices do? The exact opposite. They go long at the top on BO attempts. And they short at the bottom.
What do I like to do? When price is in an established range and is trading in the bottom 1/3 I am going long and averaging down long as it moves against me. Then depending on how far out of the bottom it moved against me, before heading north in my favor, I will then exit on a good move to the middle, or maybe even hold until the top of the range, or at least the top 1/3, IF it didn't trade out of the bottom, when it moved against me as I was averaging down long.
What do I like to do? When price is in an established range and is trading in the top 1/3 I am going short and averaging down short as it moves against me. Then depending on how far out of the top it moved against me, before heading south in my favor, I will then cover on a good move to the middle, or maybe even hold until the bottom of the range, or at least the bottom 1/3, IF it didn't trade out of the top, when it moved against me as I was averaging down short.
Don't be fooled by range behavior. The bulls and bears are pushing against each other. That is why the range forms. Bulls want a BO north. Bears want a BO south. Sooner or later one side will win. When they do then I like to go with the winning side for a measured move up or down that may be 2 legged or even more legs.
However, if I am say short at the top and the BO attempted succeeds what do I do? I exit my position immediately then look to double up and go in the successful BO direction. I get back my loss and then can usually make some on one or more of the BO legs. Ditto for successful BO's out of the bottom.
Ok what is an established range? What is range behavior? I distinguish between the two. Range behavior is two sided trading. A doji bar is a 1 bar trading range. Dial down to a smaller TF and you will see the range formed by the doji bar. Several bars with sideways action are range behavior. It is more risky to trade any range behavior because the behavior could just be a PB and the original trend will continue. All PB's are usually simply range behavior i.e. areas of two sided trading.
Generally speaking (there are exceptions though) I will employ the range trading techniques described above in ESTABLISHED ranges. What is an established range? It is 20 or more bars of sideways action. I start drawing the range box when I get data points to do so even before the established range is made. I want the range box to contain most of the price action and I can see BO attempts. Count the bars from the open and you will see the establish range area (20 bars). It is now ripe for range trading behavior and not PB behavior and PB trading.
Now look at the 5 min chart of Friday's 7-24-2020 MES PA. See the BO attempts fail? Both top and bottom. The red circle areas are where I would be shorting and/or averaging down short. In the top 1/3 of the range. The green circle areas are where I would be going long and/or averaging down long. In the bottom 1/3 of the range.
Novices on the other hand are going long in the red areas and shorting in the green areas. The exact opposite of what they should be doing.
So, when will I go long on a BO out of the top of a range. When those red areas (that have bars above the top of the range) hold the gap between the top of the range and the low of those bars after 5 bars have formed outside the top. Why 5 bars? Because price usually will trade back into the range within 5 bars. Look at those red and green circles and count how many bars it stayed outside the range top or bottom. So to go long at the top of a range I want to see price hold above the top of the range for more than 5 bars and I like to see a PB then a resumption north. Then I will likely see a MM up. So, if I got caught holding short on a BO north I immediately exit, wait for the PB double and go long as price heads north. Or if strong BO with big bars I will double up and not wait for a PB. Ditto for bottom of the range just reverse the process.
P.S. The session for 7-24-2020 was 100% failed BO attempts not 80%. Very good odds! Not a single BO attempt succeeded. So why are traders going long at the top of ranges on BO's and shorting at the bottom of ranges on BO's. The odds are against them! So crank up the SIM for the fun of trying it and for the practice and experience and with the sim running as Nike says;.."just do it".
I do want to revisit my charts posted in my post #743 but at this moment I want to post a chart of Friday's 7-24-2020 price action and make some comments.
Here is what I have previously discussed from time to time in this journal concerning Trading Ranges. This chart embodies the elements of range trading. It is a 5 min MES chart.
See, 80% of BO ATTEMPTS, from top or bottom of the range, will fail within 5 bars of price action, and price usually goes back up into, or down into, the range.
So what can a trader do that understands range trading? Well you short in the top 1/3 and cover on moves down to the middle or even the bottom of the range. And in the bottom 1/3 you go long and exit taking profits on moves to the middle or even to the top. 80% is high odds.
But what do novices do? The exact opposite. They go long at the top on BO attempts. And they short at the bottom.
What do I like to do? When price is in an established range and is trading in the bottom 1/3 I am going long and averaging down long as it moves against me. Then depending on how far out of the bottom it moved against me, before heading north in my favor, I will then exit on a good move to the middle, or maybe even hold until the top of the range, or at least the top 1/3, IF it didn't trade out of the bottom, when it moved against me as I was averaging down long.
What do I like to do? When price is in an established range and is trading in the top 1/3 I am going short and averaging down short as it moves against me. Then depending on how far out of the top it moved against me, before heading south in my favor, I will then cover on a good move to the middle, or maybe even hold until the bottom of the range, or at least the bottom 1/3, IF it didn't trade out of the top, when it moved against me as I was averaging down short.
Don't be fooled by range behavior. The bulls and bears are pushing against each other. That is why the range forms. Bulls want a BO north. Bears want a BO south. Sooner or later one side will win. When they do then I like to go with the winning side for a measured move up or down that may be 2 legged or even more legs.
However, if I am say short at the top and the BO attempted succeeds what do I do? I exit my position immediately then look to double up and go in the successful BO direction. I get back my loss and then can usually make some on one or more of the BO legs. Ditto for successful BO's out of the bottom.
Ok what is an established range? What is range behavior? I distinguish between the two. Range behavior is two sided trading. A doji bar is a 1 bar trading range. Dial down to a smaller TF and you will see the range formed by the doji bar. Several bars with sideways action are range behavior. It is more risky to trade any range behavior because the behavior could just be a PB and the original trend will continue. All PB's are usually simply range behavior i.e. areas of two sided trading.
Generally speaking (there are exceptions though) I will employ the range trading techniques described above in ESTABLISHED ranges. What is an established range? It is 20 or more bars of sideways action. I start drawing the range box when I get data points to do so even before the established range is made. I want the range box to contain most of the price action and I can see BO attempts. Count the bars from the open and you will see the establish range area (20 bars). It is now ripe for range trading behavior and not PB behavior and PB trading.
Now look at the 5 min chart of Friday's 7-24-2020 MES PA. See the BO attempts fail? Both top and bottom. The red circle areas are where I would be shorting and/or averaging down short. In the top 1/3 of the range. The green circle areas are where I would be going long and/or averaging down long. In the bottom 1/3 of the range.
Novices on the other hand are going long in the red areas and shorting in the green areas. The exact opposite of what they should be doing.
So, when will I go long on a BO out of the top of a range. When those red areas (that have bars above the top of the range) hold the gap between the top of the range and the low of those bars after 5 bars have formed outside the top. Why 5 bars? Because price usually will trade back into the range within 5 bars. Look at those red and green circles and count how many bars it stayed outside the range top or bottom. So to go long at the top of a range I want to see price hold above the top of the range for more than 5 bars and I like to see a PB then a resumption north. Then I will likely see a MM up. So, if I got caught holding short on a BO north I immediately exit, wait for the PB double and go long as price heads north. Or if strong BO with big bars I will double up and not wait for a PB. Ditto for bottom of the range just reverse the process.
P.S. The session for 7-24-2020 was 100% failed BO attempts not 80%. Very good odds! Not a single BO attempt succeeded. So why are traders going long at the top of ranges on BO's and shorting at the bottom of ranges on BO's. The odds are against them! So crank up the SIM for the fun of trying it and for the practice and experience and with the sim running as Nike says;.."just do it".
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Fast and furious is a sign of TR behavior. Races to the top. Races to the bottom. Traders get excited about the race to the top and go long and get whipsawed out minutes later. Ditto for the bottom. However, they should get excited about races to the top to short and races to the bottom to go long. They are getting excited about the wrong thing.
A trader has to train himself to react. That is where a sim helps. It gets you practice. Build routines. Reduces stress in executions. Builds memory. Builds habits. Build instincts. When it becomes second nature then a trader can react properly. It can ONLY become second nature by PRACTICE.
When the process (short at top long at the bottom) FAILS and sooner or later, it will fail, then you have to have a procedure in place and PRACTICED SO you know "what" to do and "how" to do it. So you will know how to mitigate. Like General Patton said "when you face the enemy and he is shooting at you then you will know what to do" Paraphrased more or less.
That is why seal teams practice runs on raids in a created environment. Practice makes perfect or at least increases the odds of a successful outcome. Samathing with trading.
I suppose it could be said that way. But basically I am looking for opportunities to "fade" the edges of the ranges. Sometime I do pay attention to the MA's for entries. Like a second entry short L2 (low two) that may be based around the 20 EMA. Or a H2 (high two) long in the bottom of the range that may or may not be based around a MA.
In addition, on entries, even in ranges, I may pay attention to Gaps between price and the MA's generally the 20 EMA as they are often indicative of final flags coming up in broad ranges.
And sometimes I will add an 8EMA to the chart. See say there is an uptrend in a broad range. Bears push price below the 8EMA and the 20EMA and bulls push back but they can't get price above the MA's. In other words a gap is created. Price is in the top 1/3 of the range. Then if I see after a few bars the bulls manage to overcome the bears and push back through the MA's ( 8ema and 20 ema) then I will consider that the next sideways price action behavior (i.e. less than 20 bars see my post 753 concerning comments for distinguishing between range behavior and established range) will probably be a final flag for the bulls and the bears will then overwhelm them and price will trade back towards the middle or bottom of the range. So, in this sense I am looking at the MA's gaps as indicative of PA to come in an established range.
The above chart is NOT the only way to trade TR behavior. It is one technique: Fading the outer ranges and averaging down while fading.
If a range is broad enough it will often have 2 or 3 legs as it moves to the top or bottom of the range. And in such a cases there will be other tradable PA patterns such as flags, triangles, wedges, micro channels and also nested patterns. So, depending on the patterns presented, often times I can be taking positions in the middle of the range. There are many ways to skin a cat so to speak.
Just look at the multi-legs down from 10:00 a.m. till 12:10 and then the multi-leg up from 12:10 to 13:05. Multiple PB’s in each multi-leg move that could have been traded using PB techniques. Since the move down and the move up also formed tight channels, down and up, those tight channels could have been scalped over and over with limit orders as they formed capturing multiple 1 and 2 point scalps. That is, by using limit orders and fading the outer edges of the tight channel. Those tight channels are just the results of multiple leg moves up and down with their pb’s.
It is also common to see tiny wedges, triangles, ..etc within trading range legs. Wedge is simply a 3 push, up or down. It doesn’t have to actually look just like a wedge. There are 3 push patterns in sideways moves that are just triangles even if they don’t have a triangle look about them. Functionally, they are triangles. Brooks explains all this stuff in his in-depth treatment of patterns...etc.
If a range is broad enough it will often have 2 or 3 legs as it moves to the top or bottom of the range. And in such a cases there will be other tradable PA patterns such as flags, triangles, wedges, micro channels and also nested patterns. So, depending on the patterns presented, often times I can be taking positions in the middle of the range. There are many ways to skin a cat so to speak.
Just look at the multi-legs down from 10:00 a.m. till 12:10 and then the multi-leg up from 12:10 to 13:05. Multiple PB’s in each multi-leg move that could have been traded using PB techniques. Since the move down and the move up also formed tight channels, down and up, those tight channels could have been scalped over and over with limit orders as they formed capturing multiple 1 and 2 point scalps. That is, by using limit orders and fading the outer edges of the tight channel. Those tight channels are just the results of multiple leg moves up and down with their pb’s.
It is also common to see tiny wedges, triangles, ..etc within trading range legs. Wedge is simply a 3 push, up or down. It doesn’t have to actually look just like a wedge. There are 3 push patterns in sideways moves that are just triangles even if they don’t have a triangle look about them. Functionally, they are triangles. Brooks explains all this stuff in his in-depth treatment of patterns...etc.
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Ain't that the truth. I can't very well (so far) see my way to mimicking your style, but i sure do enjoy and am learning from it. Your methods are probably superior to my own, but we each have to find "methods" that make sense to us and fit us. Some of us (me) may be lacking in expertise to do exactly what another (you) does. You keep sharing your ideas friend.
Your post today are "Classics" to be stored away and read and re-read.
Currently, i watch a 1 minute chart (for my long term context) and enter trades from tick charts that have 12 or more candles per minute. My exits are not taken from watching either chart, but by price alone, and that within 3 to 60 seconds.
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Will this trade on globex Sunday night? I have no idea what instrument this is nor the info on the horizontal axis. Is it a monthly, weekly, daily..5 min..1 min chart?
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That is true. We each have to find our own way. Thanks for the complements on my posts.