I haven't read your whole journal yet, but what I have read has been very good and feel I'm learning a lot.
Techniques for Day Trading the ES, NQ, YM, MES, MNQ, and MYM
- Thread starter volpri
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I haven't read your whole journal yet, but what I have read has been very good and feel I'm learning a lot.
Glad you are getting something from the journal. I need to get back to adding more stuff but have been out of the country on a long trip and recently got back and taking care of some loose ends...etc.
Indeed I am. I'm new to emini trading (haven't taken my first live trade yet). Been reading some old books I found and also was introduced to Al Brooks. Right now I'm just watching the 5 minute ES emini chart.
Here are a few trades I took this morning. I want to show the context larger, medium, and immediate. Hope this helps. It is MES Jan 27 2020. 5 min chart.
I am posting two charts of the same trades. The first one is the RTH (regular trading hours) and the second is the 24 hour chart with the gray range box draw in.
On the RTH's charts we see price opened with a large gap down (for a 5 min chart). That shows weakness right away. However, we see the bulls push back trying to reverse the gap down. Who will win? Bears want to keep pushing price down after the opening but bulls want to reverse price from the open. Bulls manage to get 5 bars up then the bears push back. It is always good to look for signs of strength or weakness.
On the open we see weakness (gap down) Right after the open we see strength as bull try to reverse it. Which is stronger? The gap or bulls pushing back? Signs of strength are series of bull bars, gaps between close of one bar and open of the next, bull bars getting larger. etc Signs of weakness same but bear bars. Now which looks stronger after 5 bull bars? The immediate context in terms of individual bars appears to be stronger. But the gap down is larger that the bull move up. Also, if you look at the 24 hour chart (second chart it is obvious that in the larger context the bears are stronger. Larger context = bears win/ Gap dwn= bears win. Individual bars RTH's on the open = bulls win (first 5 bars)
So what does this mean? It means bulls are strong enough to try and reverse the gap down open but on the 6th bar the bears push back and manage to push down to just over 50% of the bull move up. This indicates price is probably gonna enter a trading range on the RTH's chart which is what it did and actually had already been doing on the 24 hour chart (look at the gray box 24 hour chart). The open of the RTH's was really just price at the bottom of the already established range on the 24 hour chart.
Look on the 24 hour chart at that tight bear channel starting around 2 a.m. Then price goes into a sideways range move starting about 4:00 a.m. Once price gets 20 bars or more sideways a range has formed. Start counting bars by the open of RTH's price had been in a range for a few hours and More than 20 bars. That is, by the open of RT's price had formed a range already and was trading at the bottom of the range. That initial 5 bar move up was price racing to the top of the range ALREADY established. So, overall who is winning? BEARS are.
Now what is the tactic when trading a range? sell high cover lower. Buy low exit higher. So, from the middle of the range to the top (or form top 1/3 if more conservative trader) I start shorting. Remember 80% chance attempted BO's of the range top or bottom will fail until one finally does succeed. That is good odds! Correct! So I TAKE a short on RTH's chart and cover immediately on the same bar giving me a little profit to play with. Then I start shorting from around the middle of the range and start adding to my losing position as price moves against me towards the top of the range. Why? Well the larger context = weakness, the medium or intermediate context = range (price races up then down back and forth), the immediate context is price in the middle of range. So I start shorting willing to add up through the top of the range considering any BO will probably fail because of the larger and intermediate contexts (80%) chance. Once it gets to the top I short again for the last time after having shorted from the middle on my initial entry and adding to it 4 times in the subsequent for trades. I then wait for the slide back down to at least the bottom of the upper 1/3 of the range or the middle of the range. I then exit my entire position on that last bear bar in the gray range box.
Context is way more important than any individual price pattern. In addition, I have no qualms about averaging down (adding when a position moves against me) if the context is right. In this case it was. You may call it "scaling in" if that is more palatable to you. I just call it what it really is and that is adding to a losing position.
Now the question of what would I do if price kept going through the top of the range and I was scaled in? Well since most BO attempts fail I am not going to just jettison my averaged down position just because it price breaks through the top of the range. I first want to see a SUCCESSFUL BO. What do I mean by that? A successful BO is a BO that has follow-through. That is, price close above the range and the next bar or two or three price hold at or above the BO point AND then continues up. In such a case, on a successful BO, I will ditch the losing position, double up and go in the market direction. Why double up? Because my PREMISE (price is in range) is now no longer true and if I want to get my loss back in a hurry I need to now trade heavier in the correct direction. So I will double up, or even triple up, after a successful BO. Price only has to move a bit more and I have recuperated back my loss. A bit more and I am in profit. Anyway, most successful BO's are going to have at least a two legged move consisting of 10 or more bars.
I am posting two charts of the same trades. The first one is the RTH (regular trading hours) and the second is the 24 hour chart with the gray range box draw in.
On the RTH's charts we see price opened with a large gap down (for a 5 min chart). That shows weakness right away. However, we see the bulls push back trying to reverse the gap down. Who will win? Bears want to keep pushing price down after the opening but bulls want to reverse price from the open. Bulls manage to get 5 bars up then the bears push back. It is always good to look for signs of strength or weakness.
On the open we see weakness (gap down) Right after the open we see strength as bull try to reverse it. Which is stronger? The gap or bulls pushing back? Signs of strength are series of bull bars, gaps between close of one bar and open of the next, bull bars getting larger. etc Signs of weakness same but bear bars. Now which looks stronger after 5 bull bars? The immediate context in terms of individual bars appears to be stronger. But the gap down is larger that the bull move up. Also, if you look at the 24 hour chart (second chart it is obvious that in the larger context the bears are stronger. Larger context = bears win/ Gap dwn= bears win. Individual bars RTH's on the open = bulls win (first 5 bars)
So what does this mean? It means bulls are strong enough to try and reverse the gap down open but on the 6th bar the bears push back and manage to push down to just over 50% of the bull move up. This indicates price is probably gonna enter a trading range on the RTH's chart which is what it did and actually had already been doing on the 24 hour chart (look at the gray box 24 hour chart). The open of the RTH's was really just price at the bottom of the already established range on the 24 hour chart.
Look on the 24 hour chart at that tight bear channel starting around 2 a.m. Then price goes into a sideways range move starting about 4:00 a.m. Once price gets 20 bars or more sideways a range has formed. Start counting bars by the open of RTH's price had been in a range for a few hours and More than 20 bars. That is, by the open of RT's price had formed a range already and was trading at the bottom of the range. That initial 5 bar move up was price racing to the top of the range ALREADY established. So, overall who is winning? BEARS are.
Now what is the tactic when trading a range? sell high cover lower. Buy low exit higher. So, from the middle of the range to the top (or form top 1/3 if more conservative trader) I start shorting. Remember 80% chance attempted BO's of the range top or bottom will fail until one finally does succeed. That is good odds! Correct! So I TAKE a short on RTH's chart and cover immediately on the same bar giving me a little profit to play with. Then I start shorting from around the middle of the range and start adding to my losing position as price moves against me towards the top of the range. Why? Well the larger context = weakness, the medium or intermediate context = range (price races up then down back and forth), the immediate context is price in the middle of range. So I start shorting willing to add up through the top of the range considering any BO will probably fail because of the larger and intermediate contexts (80%) chance. Once it gets to the top I short again for the last time after having shorted from the middle on my initial entry and adding to it 4 times in the subsequent for trades. I then wait for the slide back down to at least the bottom of the upper 1/3 of the range or the middle of the range. I then exit my entire position on that last bear bar in the gray range box.
Context is way more important than any individual price pattern. In addition, I have no qualms about averaging down (adding when a position moves against me) if the context is right. In this case it was. You may call it "scaling in" if that is more palatable to you. I just call it what it really is and that is adding to a losing position.
Now the question of what would I do if price kept going through the top of the range and I was scaled in? Well since most BO attempts fail I am not going to just jettison my averaged down position just because it price breaks through the top of the range. I first want to see a SUCCESSFUL BO. What do I mean by that? A successful BO is a BO that has follow-through. That is, price close above the range and the next bar or two or three price hold at or above the BO point AND then continues up. In such a case, on a successful BO, I will ditch the losing position, double up and go in the market direction. Why double up? Because my PREMISE (price is in range) is now no longer true and if I want to get my loss back in a hurry I need to now trade heavier in the correct direction. So I will double up, or even triple up, after a successful BO. Price only has to move a bit more and I have recuperated back my loss. A bit more and I am in profit. Anyway, most successful BO's are going to have at least a two legged move consisting of 10 or more bars.
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Throw them all way IMO except brooks. He is the top price action trader educator in the entire trading world IMO. That I know of anyways. IMO he can teach all you need to know to trade price action but it will take awhile as he is very detailed and thorough. Of course, he has his critics. Probably best to just IGNORE them and push through his materials and practice until the concepts become second nature. I have been trading since the 80's and I have many books on trading but I think I can say that brooks will encapsulate all that you need to know to trade PA. I learned a lot from others and a lot more from brooks but have put my own twist on things since I am a scalper and generally not an intraday swing trader. However, I consider a scalp to be at least 1 point in the ES. I am not talking about 1 tick scalps. I do this 1 to 4 point scalps over and over all day long (when I have time and my brain is working good (as I am getting old). Once you get a technique down size becomes of great importance to exponentialize profits. I am not a shill for brooks but I do recommend him and his materials. That said I will probably get a lot of kick backs on that LOL but I really just don't care. Everyone is free to think and do as they wish! ROFLMAO.
In the above situation, are you still allowed to scale in if it moves against you?
That is what I did. I did scale in with more shorts as it moved against me. I thought I had explained that??
First trade I took a short (first red triangle) then covered that short on the same bar (green triangle). Then the next 5 red triangles were all short positions each one adding to a losing position. I covered the entire averaged down position on that last bear bar (green triangle) in the gray range box second chart.
Thank you. Very helpful.
Sorry if I missed it, but I was asking regarding a specific case you described where you are stopped out and then double or triple the position in the opposite direction. When you just entered three times the regular size and position moves against you, are you still allowed to keep adding as it's going against you? At some point, you got to hit the max allowed position, no?