Thoughts on where to initiate a trade...

[k p]

You can learn to use a smaller bar interval AFTER GETTING A VALID SIGNAL IN A LONGER BAR INTERVAL, to enter in such a way that a "big" stop isn't necessary. Often additional confirmation (getting in 5 points lower, for example) means price has developed intertia and will not stop until it meets with a strong force the other direction. So big stops are unnecessary when you use your smaller bar interval for entries.

If you're trading against a prevailing trend, then confirmation is where you should be entering in the direction of the trend, because the counter-trend scalp is over. If you're looking to pick tops and bottoms so you can catch a counter-trend scalp or a possible reversal (with no reversal signal yet in sight), then you're best off simply placing your limit order at a key level (channel line or other longer term S/R with-trend target level) to buy or sell against the trend.

In a nutshell:

With-trend - buy or sell when you feel like you're going to miss what feels like a reversal of the trend. That's the ultimate "fade the trapped traders" with-trend entry.

Counter-trend - place an anticipatory limit order at a key S/R level to fade the trend or watch for a 1-2-3 reversal setup in a small bar interval for the counter-trend scalp.

Wide range - Fade the range extremes with very small stops

Narrow range - buy or sell in the direction of the previous strong move, preferable at the narrow range extreme opposite the previous strong move with a very small stop.

Jesus.. this is brilliant ND... so well summarized!

Part of the reason for what I say is that I'm getting over personal issues, and by taking a counter trend trade, I can be very quickly into profit, or out right away, so something about this I like. I see so often that at key levels, a bounce always happens. It might not amount to more than 2 or 3 stops, but its usually always there, unless price is coming down so fast that it blows right through.

So big stops are unnecessary when you use your smaller bar interval for entries.

This part I find very interesting. You see, I think that my stop still has to be where it should be as can be seen on a 5 min chart for example. If price started going up from 4200 and is now at 4210, then it can still go down to 4200 and still not invalidate the long. (its true though that you don't want to see price retrace more than 50% of the previous move though), but if its just the beginning of the trend, then price might just test the 4200 level again before really taking off. So if I'm waiting for confirmation of the trend, it seems to me that the stop has to be where the trend started. If I pick just some random swing low which is a higher low on the way up, this can easily be breached and still not invalidate the long, so the best stop is usually where the trend started, and this is often very far away. This is how I view it at least.

 

[k p]

I can't..., and wouldn't - sit here and say what best for you (what TF(s) marry up best to your personality)


A 5 sec chart would cause me alzheimers..., epilepsy...., aspergers..., uncontrollable shitting of my pants - all at the same time

Not an attempt at humor either

RN

Interesting, and I appreciate your feedback.

Part of what got me into 5 second charts is with Db and 40D constantly saying that there is a higher low or lower high in there, and pointing to behavior, I've wanted to find a way to display this behavior. It like I wanted to see the fossil evidence, the bones or fossilized remains that say 200 million years ago a dinosaur died here. So I wanted to find a way to show the behavior print on a chart. If all I'm doing is trading via a 1 minute or higher chart, then I simply don't care how price moves within that 1 minute bars. But since I've been steered towards studying the behavior and how price moves, in order to study it, I want to capture snapshots of it so that I could point to on a chart that thing which I needed to see which would be a trigger for me to put on the trade once I saw the same behavior again.

 

[fortydraws]

But you know, there is something else that has been bugging me, and I'd like to end with that. If you don't reply, that is fine, the entire community would have read it.

You had showed us this post back in January on how you got filled short for 20 contracts at 4206.

I do not use ninja to trade, though I do use it to demo and for charting functionality. I trade directly in IB's TWS - the charts suck and I used the demo to "demonstrate" what I was doing. That particular post, if you were to read it, was introduced by this phrase:

By request from a friend.

And then the three charts:

By request from a friend.
Looking for a trade:
20 Tick tracking to make entry:
View on a 5 minute bar interval chart:

I did take a short trade at that time, though I cannot say for certain my actual entry matched up tick to tick with the demo. My friend in question was fellow ET member slugar, with whom I have been corresponding through a private thread for a little while and he had asked me via PM to show a few things using different interval charts (perhaps he would be so kind as to confirm).

My bad for sharing it in my journal publically rather than keeping it in the private thread. You taught me a lesson, kp. And you took another giant slide toward full blow troll today. And for you to put me in a position like this where I either have to defend myself or possibly look like a liar is beyond the pale, kp. Trying to help you has been the biggest mistake I have ever made on the internet, and it will certainly make me think twice before offering help to someone else in the future.

 

[Redneck]

I've wanted to find a way to display this behavior.

It like I wanted to see the fossil evidence, the bones or fossilized remains that say 200 million years ago a dinosaur died here.

So I wanted to find a way to show the behavior print on a chart

To a lessor extent - a bar / bars on a chart reflect behavior

It how those bars formed (during their formation) the more important (and accurate) reflection of behavior

RN

 

[k p]

My bad for sharing it in my journal publically rather than keeping it in the private thread. You taught me a lesson, kp. And you took another giant slide toward full blow troll today. And for you to put me in a position like this where I either have to defend myself or possibly look like a liar is beyond the pale, kp. Trying to help you has been the biggest mistake I have ever made on the internet, and it will certainly make me think twice before offering help to someone else in the future.

I appreciate your explanation for the charting question. I think the way it was presented, you still made it seem as if this was your trade, which it in fact wasn't since this therefore wasn't the level at which you were filled. I'm certainly not wrong with my conclusion that the trade you showed wasn't in fact real and couldn't have been filled at the level you say it was.

My questions are completely legitimate and you are not right for calling me a troll. I have always struggled with the competing ideas that there are lots of holes in what you show, but your methodology sounds like you really know what you're talking about, and what you say here at least helps alleviate this.

If the position that you are taking now is that all your charts that you post are from a demo platform, then my concerns have been sufficiently addressed and I thank you for clearing this up.

The next logical question would be why you don't show your IB charts. I've shown charts where I'm randomly in and out 20 times a day... it looks like my trades are sprayed on the chart with a machine gun! This is certainly not a proper way to trade though. What is so bad about showing us your actual fills on your real chart? My only logical explanation is that you have to enter and exit several times before you finally get it right. It would be nice to know that you don't magically hit the best entry the first time and every time.

I just cannot understand why everyone here teaching shows us what to do, but they don't show us what they are in fact doing.

 

[k p]

In a nutshell:

With-trend - buy or sell when you feel like you're going to miss what feels like a reversal of the trend. That's the ultimate "fade the trapped traders" with-trend entry.

Counter-trend - place an anticipatory limit order at a key S/R level to fade the trend or watch for a 1-2-3 reversal setup in a small bar interval for the counter-trend scalp.

Wide range - Fade the range extremes with very small stops

Narrow range - buy or sell in the direction of the previous strong move, preferable at the narrow range extreme opposite the previous strong move with a very small stop.

I like this post so much ND as it summarizes almost every type of possible trade that one could take. When I look at your example for a narrow range, this is exactly what indeed was the action as presented in the 4th chart from earlier. (this one here)

We have an uptrend which turns into a narrow range. So your first point is to buy or sell in the previous original direction. This would be looking for a long. So now where is the long to be taken? As you say, its opposite to the narrow range extreme of the previous strong move. So this means we are looking for a long at the support level of this narrow range. This puts it at roughly the level of G. Perhaps we can't call this a narrow range yet because the range is only confirmed after G but each time we come down here again over the next minute or two, this provides the best long opportunity.

To take the counter trend trade, then you could be waiting with a sell order at resistance, here it at D, since I prefaced this example by saying that the pink line was already an important resistance level, and perhaps again at F.

I really do love your 4 examples. I think I'm almost mostly scared of the with trend entries, which is ironic since this should be the best way to make the most consistent money, but I think this is just because my entries in the past weren't where they should be, so I have in some ways taught myself to be scared of this type of trade because I was entering wrong, but not because its the wrong type of trade to take.

Anyway... just wanted to thank you again for this post. It really summarized so well what I've been trying to get into my head and the types of different trades that are possible and how to go about taking them.

Whats interesting to me is that if I take this same 5 second chart, and plot it on the 1 minute chart, here is what I get. The red box captures almost the entire period that the 5 second chart above shows. I have reproduced the resistance line and support line. If I only had this 1 minute chart to go on, I'm not sure if I could see as clearly what is going on as I can on the 5 second chart. Sure the range does stand out and I could probably draw a box around it. But with the 5 second chart, I can see so much better how price is hitting up against my so called resistance line, and how the first swing low provides support the next time price comes down here again which I labelled as G above. I just think so much of this is lost on this one minute chart. Perhaps when I get much better at this is will be easy to visualize in my head, but for right now, it helps to see how the price actually moved within that one minute bar.

 

[NoDoji]

I agree with everything you said, but why should a rookie like kp start to counter trend? It's harder enough for a rookie to be profitable with a trend..

A rookie should never counter-trend IMHO!

 

[NoDoji]

I like this post so much ND as it summarizes almost every type of possible trade that one could take. When I look at your example for a narrow range, this is exactly what indeed was the action as presented in the 4th chart from earlier. (this one here)

View attachment 149898

We have an uptrend which turns into a narrow range. So your first point is to buy or sell in the previous original direction. This would be looking for a long. So now where is the long to be taken? As you say, its opposite to the narrow range extreme of the previous strong move. So this means we are looking for a long at the support level of this narrow range. This puts it at roughly the level of G. Perhaps we can't call this a narrow range yet because the range is only confirmed after G but each time we come down here again over the next minute or two, this provides the best long opportunity.

Yes, you buy at level E, but don't have to wait for G to occur.

You say that gives you the best long opportunity. No. It gives you the cheapest long opportunity based on the narrow range. In fact, the best long opportunity comes by way of Bob Volman's price action techniques.

First you get the downside "break" (stop run), which is a trap for counter-tend traders who think narrow range consolidation following a strong move up is a sign of weakness/reversal. A head fake like G is an extra gift for the with-trend traders because it means someone's been trapped and their protective stop orders will help fuel the next move.

Volman would tell you to wait for the tease (the initial break out of the range), then be the second mouse who gets the cheese. Check out his range break/box break strategies.

 

[NoDoji]

The important thing, as I see it, is to get into that trend early. Once you can say its a trend and its under way.... you never know how far it will go.

So in many ways, a counter trend trade offers a really good risk:reward ratio I think with stops that can be tight which is some ways is good for a beginner.

I know how hard it is to believe that the opposite is so true. I was exactly like you once. My mindset was the absolute opposite of what's necessary to consistently extract profits from the market day after day.

It was incredibly difficult for me to come to understand how the absolute opposite of what you state above is the easiest way to trade profitably.

Now the vast majority of my profits come when a trend is WELL UNDER WAY and feels like it's run too far.

Trying to pick counter-trend price turns with tiny stops caused me an incredible amount of tiny losses that added up to far more than any profits (which I usually cut short) from catching an actual reversal or reasonable counter-trend scalp.

If you're a masochist, you'll really enjoy your journey as long as you stay on the path you're on.

But if you seek profit from trading, I can assure you that you are on the WRONG PATH.

 

[k p]

Volman would tell you to wait for the tease (the initial break out of the range), then be the second mouse who gets the cheese. Check out his range break/box break strategies.

Yes... I bought his book at your suggestion... and if I probably read through it now again, so much more will probably jump out at me and sink in at this point.

Yes, you buy at level E, but don't have to wait for G to occur.

This part here is confusing. What is the trigger to buy at E? How do I know that E is going to actually be a low until price does go all the way back up to at least resistance again?

I do remember with other examples you showed, you buy at one tick above a 1 minute bar. With these 5 second bars, certainly the one tick rule wouldn't apply. So is it the fact that after we hit E, we go sideways and can't penetrate? I have E marked on my chart, but to me, E isn't significant, isn't a level to watch, until price comes down again at G, and we see that with the exception of price dropping 2 ticks below, this is in fact a little level of support, and is the bottom of this narrow range.