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

[vanv0029]

Perfect entry requires knowledge; if you dont have the knowledge of when a trade should be entered, the skill part becomes irrelevant. You can have all the skill in the world but if you dont know exactly when to execute your trades, the market will eat you alive at some point.

Brooks would say put a stop just above 3341 entering at
or below the signal bar at 11:35. Brooks' idea of probabilities
and need for prica action stops is good. If the 3341 stop can
be hit from say stop running, trade should be closed with a
loss because it means bears are in control. Brooks would
say to add if one is adding on the small bull bars at 3331
and 3329.

 

[volpri]

That is the trouble with Brooks' price action. There
are multiple interpretations. Do you not agree it
is better to enter using a stop below the bar around 11:35
so the market is actually moving in your direction?

Here is how I see the pattern. Common reversal after
down opening with a double bottom at 8:55. Good
trend up with 3 legs culiminating with a reversal
bar that was also a double top around 11:35.
Trading range from about 13:15 to close.

I think in reality you were lucky because around 11:30-12:00
there was some negative news on worsening Corona virus
epidemic.

Averaging in is good. Brooks advocates it also. What
would you do (close with a loss?) if the 3rd leg of the
up trend had contnued? Brooks says probability of
trend continuation after only 2 (or 3) legs is a least 60/40.

Yes, I don’t in anyway deny that entering on a stop below 11:35 is a classic Brook trade and a very good one at that. I did indeed label it as a LH MTR. It was a LH MTR preceded by a failed BO of a range. It was a great trade to take. But the fact remains I was showing an averaging down technique BEFORE all that came into being and was doing so in a weak environment within a defined TR. Besides I was short 6 contracts already when the first leg down of the LH MTR started. Actually I was poised to make MORE money than waiting for the LH MTR to materialize and enter the trade where you indicate. I was actually short 5 contracts above your entry (which is the proper entry for this HL MTR) so HAD I not had to go to town and could have stayed with the trade I would have made more money than a proper entry on a LH MTR.

However, I think you are missing my point. I was not doing this exercise to show the best trades of the day after the market closed nor to illustrate the best Brooks trades of the day after the market closed. I was doing this chart posting and live narration as price unfolded to show how I average down, reduce the risks while doing so and position myself for larger profits, turn losers into winners, and have a high win rate as a by products.

I started this between 9:00 a.m. and 9:30 a.m. central as a response to Tyro’s post #382 requesting charts illustrating averaging down so I decided to do it with live narration as PA unfolded. It is really hard to do as I type slow and there has to be a time delay. Plus it is hard to explain things as they are happening and at the same time keep focused on trading. I can tell you this I don’t think I will be doing much more of it. Maybe I will just stick to posting EOD hind site charts and making comments about it. But then you just have to listen to folks criticizing and hollering about hind site and how anyone can do it? Regardless, I don’t see many trading on here at ET explaining their trades and why they took them hind site or live! One reason it is is alot of WORK to do so.

I wanted to show how I can average down in Range when price is near the HIGH of the day and do so with lower risk when the larger and the immediate contexts show weakness. Let me ask you this? Did we end up with a down day or and up day? Did I read and explain the underlying pressures correctly by 9:30 a.m. in my charts I posted? I showed all those charts daily...60 min...15 min...5 min 24 hr to and the RTH’s 5 min chart with a down gap opening SHOW that there was weakness in the market that WEAKNESS was observable on the charts I postulated that such weakness would lower the risk of averaging down on shorts that were entered near the high of the day, whether or not, that high was a failed BO of a range or any other PA pattern. I was trying to drive home the point that averaging down should be done within an analysis of the larger contexts. That lowers the risk and gives higher probability that the trade will be successful. A trader should NEVER just average down to try and escape a losing trade. If he finds himself in a losing trade and there is no logical reason to add to it he is much better off to just dump the trade and enter again on another opportunity. There needs to be a logical reason for averaging down. There is no point in averaging down on a short at the bottom of a range. It needs to be done near the top and in the right larger contexts. I am simply saying the larger context is the main thing to consider when one is gonna average down in an immediate context. It can lower or raise the probability of a successful trade unfolding and becoming a reality. Besides the technique to lower averaging down risks and which I so carefully narrated, is not a Brooks technique other than the concepts of failed TR BO’s which he discusses. No, the technique is mine. I was sharing it. Maybe others employ it, I don’t know. For me, I discovered it and employ it.

As far as news I do not listen to it, nor need it, to trade and even prefer not to see or hear it. Whatever effect it has will show up on the chart and I am only concerned with what the chart does. As Brooks say there is always a bearish and bullish interpretation of the news. I don’t try to guess which will win. The chart will show me who is winning. That is all I need to know. The institutions cannot hide what they are doing or how they are moving the market. It will ALWAYS shows up in the bars and the chart. They print the chart. INSTITUTIONS PRINT THE CHART. THEY CANNOT HIDE WHAT THEY ARE DOING. Good to print out and stick on ones monitor to remind ones self.

Did you look at my charts since 9:00 a.m. 2-7-2020 and my explanations live as PA unfolded or did you just try to point out the best brooks trades? There were several goid brooks trades and scalps yesterday. None of that was my focus.

 

[volpri]

I respectfully disagree. Perfect/Precise entry requires skills. Averaging as price moves against you requires mean reversion - that is natural ebb and flow of the markets but not really a skill. I'm not saying that people who average down don't have skills, as you need to do it in the proper context - as volpri mentioned multiple times and practicing - but you end up trading with small initial size because you are factoring in possibility of averaging multiple times. That's the problem - you are small when it works for you, you are big as it's going against you. Then you hope for mean reversion to kick in. If it doesn't, you are in a very bad situation. Just my personal opinion on it. This is a good discussion to have I think. Don't meant to hijack the thread.

For me there are no precise entries in terms of bull/bear pressures being applied to the markets. I mean I can devise a plan and say every time I see “such and such” a pattern I will place a buy order 1 tick above the high of the previous bar. In that sense yes I am making precise entries. However, I cannot know beforehand WHEN nor HOW much a bullish or bearish institution will apply pressure on the market. It can totally obliterate my precise entry or it can confirm it and reward me with a handsome profit. I can only respond to those pressures as they unfold and and exit with a profit or a loss OR I can bet upon the tendency for market inertia, from those pressures, to go on, at least a little more and thus scale in or average down to better position myself for a successful trade or more profitable trade to unfold from my initial entry. The concept of market inertia is real. It is really easy to see it spikes or strong BO and not so easy to detect in say small pullback bull trends that crawl up all day long.

If precise entries really existed too many traders would discover them and simply become very rich. The way I see it, instead if focusing on precise entries, i will try to read the pressures in the market presented on the chart, as price movement unfolds. Then I will make the best entry I can utilizing the concept of inertia and extrapolating that out into the near future. Scaling in and averaging down are just mechanisms to increase profits and those mechanisms are extracted from “unknowable beforehand pressures” applied and subsequently read from the chart coupled together with market inertia from those applied pressures. This can then be combined with postulating what the other side will likely do and why. For instance, bull spikes ...big bull bars in sequence you know that profit taking will take place and bears will try to make the spike fail. So, PB’s ensue. Bulls are profit taking. Bears are selling to make the spike fail. All that selling is what is causing the PB to form in the first place. Will other bulls enter and price resumes or will bears win and force a reversal or range? We don’t know until the chart reveals it. If the trend continues then the bulls are winning. If on the other hand, a range develops from the PB then we are getting a two-sided market and new tactics have to be used to trade that range behavior successfully.

 

[volpri]

I think your trade took huge risk. You were
just lucky. You also violated Brooks price
action rules.

BTY vanv0029 I appreciate most of your brooks contributions to the journal. My only beefs are your 3 points here. The whole purpose of this endeavor i undertook was to narrate and do so this live showing how and why I was NOT TAKING HUGE RISKS, How I was NOT lucky (I think the trade proved that out and the day closing down proved both my points out to be correct.) And from my perspective I did not violate Brooks PA but traded within his explanations of failed BO’s of ranges. 80% of BO attempts fail per brooks and that is exactly what happened here and exactly how I traded it.

The proof of the pudding is in exactly what happened in PA all day long. It was indeed not risky averaging into shorts in the a.m. part of the session, where I did, and could even have been done in the afternoon but on the long side as brooks again says 80% of BO attempts top or bottom from a range fail.

If you look at yesterday’s price action on a 4 hour time frame it was simply part of a bull flag that will likely have an upside BO but at the open of yesterday was still weak and likely to go south more before the resumption of the bull trend. And at the close yesterday it still exhibited weakness before a BO will likely occurr. On a one hour chart it is a bear channel and bear channels are the same as bull flags on a high TF and usually function as bull flags with BO north when the BO occurs. If south then that is the unlikely BO direction and I would look for a MM down from the successful BO out of the bottom of the channel. The key word is successful. It must be a BO with follow thru.

 

[volpri]

I want to show a MTR (major trend reversal) trade that spans over two sessions. The session of yesterday 2-24-2020 and the morning part of the session today 2-20-2020. This view is WITHOUT regard to looking at longer time frames charts. Just looking at the 5 minute chart. However, the chart does have a 15 min 20 period ema (grey) plotted on the 5 min chart and a 1 hour 20 period ema plotted on the 5 min chart. The latter is the dotted line. In summary, it is looking at two sessions, seeing a MTR happening between them, and then trading the PB of the first leg down and some of the second leg down.

There are many ways to trade PA. One can look at multiple TF charts for the larger context if there is any doubt or just try to figure it out on one TF such as in this case, on a 5 min chart. It was pretty easy to see the weakness in the larger context on just this 5 min chart but if I had doubts I would look at first the daily chart ( which would obviously be a bear bar for 2-24-2020(but I haven’t even looked). Then I would take a peek at a 1 hour chart. Finally, a 15 min chart peek.


So...In The Case Of A Bull Trend:
What am I looking for? You see, in a major trend reversal I want to see a trendline break (see the green line). Then a push in the opposite direction of the trend and best if that push goes through the Ema’s. In this case it was a bull trendline from the PREVIOUS session that was broken and the countertrend push (still in the previous session was a 13 bar push down through both the 5 min ema and the 15 min ema.) This indicates sufficient weakness to look for a MTR. So after the counter trend push I like to see a test of the previous high that fails to generate a bull trend resumption. That test was the opening bar of 2-25-2020 and it immediately failed and had no FT (follow-thru). Finally, I want to see good signal bar (in this case a bear signal bar) and have that signal bar followed by an entry bar that goes below the signal bar.

So, are some trades I took this morning 2-25-2020 in MES. In total 40 contracts were traded. Almost all the trades were “averaged in” trades as the position went against me. The exits were “out of all averaged in positions” at one wack except for one contract that got exited before I could slide the bracketed order down for more profit. I added in to losing positions via 1 and 2 contracts at a time until I had my total position. Then upon exiting ...it was all out. Every averaged in position and its exits were overall profitable trades AS a whole but there might have been 1 or 2 contracts in the position that were BE.

At any rate 20 contracts sold short and 20 contracts covered long. Commissions .98 per side so commissions are 39.20. Total profit $582.50 minus 39.20 making Net profit 543.30. These trades were done over a 30 min time period. I missed the signal and entry bar marked on the chart as I didn’t feel well this morning and was still in bed. However, when I awoke and saw the price action with overall context weak (blue markings) and even though I missed that first highlighted red leg down I had no qualms about shorting multiple times in the PB area of that first leg down. Why not? Because I reasoned that with the larger context weak and the immediate context showing a MTR taking place I figured there would be two legs down.

I could show a different way to trade this on a 24 hour chart view but I wanted to show this MTR that actually started on the previous session of 2-24-2020 and by the RTH’s open on 2-25-2020 the test of prev highs were followed by the signal and entry bar reversal.

See that green highlighted opening gap is actually part of what took place in the overnight session for 2-25-2020

 

[volpri]

Basically all 5 of trades trades were overall winners but one one trade I think I broke even on one contract of multiple contracts that trade. With that in mind here is a zoomed in version of the trades from my previous chart.

Anyway maybe you might find this info useful. Or helpful??

 

[volpri]

And here is what happened while I was typing the previous two post. It is now easy to see the two legs that I mentioned after the MTR reversal. Also, price actually kept going on down even more becoming what is called a “A Small Pullback Bear Trend from the open.” The MTR was simply formed in the previous session and tested in todays session right after the open and then reversal as time passed simply became a small pullback bear trend from the open. The tactic in a small pb trend is to short the pb’s and cover them over and over or take one position and hold till near the close or until a reversal happens. I prefer shorting and covering over and over as price moves down. After 1:30 we could see a bit of a reversal so me thinks it is best to just lock in profits. Nevertheless, I was not trading the small pb trend but typing..lol

Like I said This will probably keep going down so shorting pb’s is a good tactic until, or if a reversal, takes place. A reversal could happen before the close. If so, probably will be a minor reversal but could be big enough that one would want to hold off shorting pbs. If we do get a reversal up before the close and it is a two legged reversal (that is a reversal attempt that then has its own pb and its pb attempt fails and price continues up for a second leg then i would look at going long and stop shorting. Basically it is just follow in taking positions on what price is doing. Price moves with inertia.

I got other things to do but maybe I will post a chart after the session closes and make a few comments.

 

[toby400]

Great stuff as usual

 

[volpri]

And here is what happened after my last chart. It did keep going down as I suspected and there was a reversal attempt after 1:30 and it was a minor reversal (basically a single leg reversal attempt that failed) so no reason to go long. But another opportunity to short.

The best the bulls could get before the close was failed reversal attempt that then turned into a range (yellow lines).

 

[tyro]

Your thread has been very helpful @volpri

I've been practicing and now I'm ready to wade into some live trading. I need to find a broker. The broker I've been using for demo has had a lot of gappy data since the market turned more volatile. I check it against my Think or Swim and Schwab account data and the gaps are not shown on those charts, so I am assuming the problem is the data source used by the demo broker.

I opened an Interactive Brokers account but I have no idea what the charting will look like. I have read here on ET that some do not think Interactive Brokers has good charting capability.

Are your charts from Interactive Brokers by chance?