Trading NQ via Price Action

[dbphoenix]

Thanks.... I absolutely will look this person's journal up when I'm at work with time to kill!

Why do you think everyone continues to struggle? What I see is that nobody actually has a solid plan. Maybe they do in their head, but they still don't seem to then trade it. If I had the backtesting done for a trade that appeared at least once a day with a 2:1 profit to loss ratio and a 50% win rate, well backtested over several hundred instances in various market conditions, I'd be a fool to not be sticking to it. So I can only surmise that most don't actually have a solid plan with an edge.

They continue to struggle because they don't/can't develop their own trading plans. Instead they look for someone to follow, which accounts in part for the continuing calls for PnLs. But even if they find someone to follow, they have no idea why the trades are taken since no trading plans are posted. Once the faucet is turned off, they're left high and dry, not much further ahead -- if at all -- than when they started. For the most part, all they've managed to do is waste time.

 

[dbphoenix]

Forward Testing... (still a loose trading plan.... yes... a "loose" "plan"... LOL)

How can you forward-test if you have not yet defined a break or a retracement, much less collected the stats to determine the probabilities of success/failure?

 

[k p]

How can you forward-test if you have not yet defined a break or a retracement, much less collected the stats to determine the probabilities of success/failure?

Ok... a bit of explanation. I guess I shouldn't say forward testing. What I'm doing is collecting those stats, so today was another chart to add to the stats. The break is... well... visually its easier to point and say, but yes, it needs to be defined with words. So in this case, its price going above the trendline and a RET happening without price going below the trendline. It can go above again, but what visually I'm seeing is that the bar that is the RET bar has to be above the trendline.

You're right, I do need an absolutely solid definition. Often these RETs happen so far above the trendline that I'm not even having to be as precise, but when its messy, I for sure need to have a solid definition.

 

[k p]

Its funny because just after I typed it, I noticed that the bar I would go long above actually dipped a tick below the trendline. So if I waited for the next RET that happened fully above the bar, it happens 3 bars after F and hence is a much better place to go long with price never going against me as much.

 

[dbphoenix]

Ok... a bit of explanation. I guess I shouldn't say forward testing. What I'm doing is collecting those stats, so today was another chart to add to the stats. The break is... well... visually its easier to point and say, but yes, it needs to be defined with words. So in this case, its price going above the trendline and a RET happening without price going below the trendline. It can go above again, but what visually I'm seeing is that the bar that is the RET bar has to be above the trendline.

You're right, I do need an absolutely solid definition. Often these RETs happen so far above the trendline that I'm not even having to be as precise, but when its messy, I for sure need to have a solid definition.

What about the 100+ charts you already have?

 

[k p]

What about the 100+ charts you already have?

It just hit me last night that I shouldn't worry about where the trade doesn't set up. I was trying to make a set of rules so that each break of a trend line resulted in a good trade. Basically, I'm the little boy trying to stick a circle, a square and a triangle all through a round hole in a wooden box. I just need to focus on seeing if the round objects fit in the round hole.

So it just hit me last night to not worry about getting every trade right. So I still have to build stats on these charts seeing as I only just late last night had a bit of a breakthrough I think.

(The other part of the answer is that I'm a bit hesitant to collect these stats and hence why I started adding more charts. I'm scared that when I finish, I won't have numbers that lead to an edge. I'm scared that a setup that works will only happen once every two weeks, so I could be sitting for days on end without a trade. So there is a bit of hesitation with collecting the actual stats... but I also know that these fears can only be solved by knowing I have a statistical edge and knowing exactly how to extract it)

 

[bh_prop]

It just hit me last night that I shouldn't worry about where the trade doesn't set up.

Precisely! However, you still have to concretely define the "setup" before you can begin collecting performance stats on it.

Oh, and your concern about this 1 setup only happening every 2 weeks should be of zero concern to you at this moment. Your goal right now should be to test the efficacy of this 1 setup, nothing more, and certainly nothing less.

 

[k p]

Precisely! However, you still have to concretely define the "setup" before you can begin collecting performance stats on it.

Oh, and your concern about this 1 setup only happening every 2 weeks should be of zero concern to you at this moment. Your goal right now should be to test the efficacy of this 1 setup, nothing more, and certainly nothing less.

I guess I'm still just seeing various combinations that work... this is why even though I have 100 charts, I haven't actually gone through them all and can conclusively say here are the net points gained and lost. I'm close though I think, and although there might not be a trade every day, one that fulfills the parameters of a "clean" break and exit, it happens often enough.

The other nice thing is that I will be able to apply this to other setups. A RET can after all happen after a break of a trendline, a break of a trading range, a break of a hinge... etc. So this will for sure be something that I can build on later.

 

[dbphoenix]

I guess I'm still just seeing various combinations that work... this is why even though I have 100 charts, I haven't actually gone through them all and can conclusively say here are the net points gained and lost.

Why not?

 

[k p]

Why not?

Comes back to that fear thing. I would see it work on 2 charts... and then it would be messy for a couple of charts.. and so I would be back to the drawing board. I would think I needed a better entry...an entry closer to the breakout. Then I see that these really chop you up. Sure the profits are bigger, but way too many losing trades.

Visually I could see it worked, but the moment I encountered some negative data, I was scared to continue. Not unlike while in a trade, the minute that RET/pullback happens, I'd want to run for the exits!

I just didn't think I had something good enough, without actually having the data to show me if it was good enough or not. I thought that if I missed most of the move with a RET entry high above the breakout level that this was a bad trade since it missed most the action. I could see some instances where right where the RET happens, price congests and then drops down again. So this RET entry was a failed entry and it made me second guess the entry method.

Sadly the next two days are so busy, but by the weekend, I should have some sort of number to work with.... my very first statistic. I think I will choose 2 variables... same setup though. The RET entry once the RET bar is fully above the trendline. Stop will be the low of the previous bar, and target will be either 1 times or 2 times the stop.

I seriously couldn't do this yet because I just didn't nail down exactly what I needed to see.