Are trades only ever taken at pre-determined areas? Going though some of the sla threads earlier, it seems longs and shorts were being taken based on breaks of (and then a retrace of) trendlines with no concern as to where the trades were being taken in regards to the larger context (trades weren't being ignored if price wasn't at one of the predetermined level which were drawn on the longer term frame charts going into the day)
Or is it to do with trades only being taken at extremes of a range (if you can find one that is containing price) or anywhere (long and short) once price has left the range (where trades are based on the break and retest/failure of demand/supply breaks)
Note: I didn't see 40D's response while I was writing this, so there will be some repetition.
Without a specific chart, I can provide only a general answer. If you're referring to longs and shorts being taken by a variety of people, someone who's been doing this for twenty years will likely take different trades than someone who's been doing it for twenty minutes. But, as for the "larger context", it isn't a straight shot from the upper limit of the weekly trend channel to the lower limit. We haven't even touched the lower limit since October. Therefore, though the "cleanest" trades will take place when reversing off an extreme, they won't be the only trades that the market offers unless one is trading off a daily chart, i.e., not daytrading or anywhere near daytrading.
The SLA/AMT is an acknowledgement that it is the market that is in control of price movement, not the trader. The only control the trader has is over what he does about it. This, for example, is why the "Scribbler" doesn't use stops, other than catastrophe stops (loss of connectivity, etc). He instead has decided upon very specific criteria regarding what he wants to see in his trade. And once he no longer sees it, he exits. He doesn't hand over that responsibility to the market with a hard -- or, worse, a trailing -- stop and sit like a deer in headlights hoping for the best.
Therefore, even though the weekly trend may be up, a mean-reverting market such as the NQ will provide both trend and counter-trend opportunities, the trending opportunities when price moves from the lower limit of the range to the upper and counter-trend opportunities when price moves from the upper limit of the range to the lower. It is when price straddles the median that the direction becomes less clear and the avoidance of any sort of bias even more important than usual. For example, we spent five weeks three months ago straddling the median, which made for great trading for those with no bias but misery for those who couldn't address the market objectively.
And, yes, this is probably far more than you wanted to know, but the context is necessary in order for any response to make sense.
We bounced off the median a month ago, then made a lower weekly high, after which we returned to the median, which we've been straddling for three weeks. Therefore, it is even more important to follow the market's lead rather than try to force it to do one's will. And ths is what I tried to show in the month's worth of charts in the Foresight thread.
Which at last brings us to a possible answer to your question.
There are two states available to price:
trending and
ranging. If one doesn't know how to tell the difference, he won't understand this approach. If he does, he will also understand that all trends begin with a range, a state of balance or equilibrium, what the Market Profile people call "value". As the business of a market is to facilitate trade, big money traders will naturally gravitate to those levels or zones where the most trades are taking place (they do, after all, have a lot of contracts or shares to trade). This activity will eventually though quickly form a range. Price moves out of these ranges for many reasons, none of which are relevant to the Scribbler. But when they do, one of the three trading strategy options comes into play: the
breakout (within the range, another of the three is most useful: the
reversal). If one doesn't like trading breakouts for whatever reason, he can wait for the first pullback, or "
retracement", the third and last available strategy. At that point, one must follow the market's lead, turning when the market turns, reversing when the market reverses, standing aside when the market enters "chop" (which technically is a "range" but one which is so narrow and chaotic that it is essentially untradable), quitting when he's tired. Whether one does this using a 1m bar interval or a daily bar interval is irrelevant.
If any of helps to answer your questions, that is to the good. If it doesn't, I'll have to see specific charts. Even then, however, what I've posted here may make interpreting those charts easier.
