Trading NQ via Price Action
- Thread starter k p
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I know you probably know this already because of your great background, but having just finished The Nature of Risk, I understand price risk vs. information risk so well now. The less I think the better it seems. The idea I am developing for myself, not that its anything new of course, is that getting in sooner and scratching for hardly a loss is easier for me to deal with I think.
When I hesitate, I think. Then I feel terrible for not taking the original entry when price moves in my favor a few points. Then when I see another entry I think what if the move is about to reverse and so on. So getting in on even a third entry has now exposed me to a huge price risk because price can travel back up higher, still form a lower high for example to not endanger my short, but then I have to hold for a few points of initial loss which I wouldn't do. At least this is how I'm looking at things right now.
I know exactly what you mean. I could insert a poker analogy here but I think Wyckoff says it better than I ever could:
"Successful tape reading is a study of Force; it requires ability to judge which side has the greatest pulling power and one must have the courage to go with that side. There are critical points which occur in each swing, just as in the life of a business or individual. At these junctures it seems as though a featherâs weight on either side would determine the immediate trend. Anyone who can spot these points has much to win and little to lose."
It takes courage to buy before all the information is in. DBP took a lot of this struggle out of the process by giving us two important pieces of information for free; a DL break and a lower high. The probabilities are improved with respected 50% levels and longer-term channels (AMT). We enter as close to the bone as we reasonably can. We keep our finger on the trigger until price gives us a little breathing room - then we give price the breathing room. Its only the emotions that make this hard.
Preaching to the converted!
Just started reading the Wyckoff course book, so will be working on that this weekend.Have a great weekend green.. looking forward to chatting again Monday morning!
Great way to put it.
So by Db asking in the ghost thread what areas to look for today, he is guiding the prep work. We have dropped well below the March 2013 channel now that guided us to the big drop on Friday. So if there is more downside, we need to use the June 2013 channel. Using Db's image of the channel, it appears that the mean would fall roughly at about 3420 or so.
We hit a low of 3505 overnight, but in the past hour seem to somewhat gaining and have a DL in play now.
Lets see where we go.
We hit a low of 3505 overnight, but in the past hour seem to somewhat gaining and have a DL in play now.
Lets see where we go.
A - So I commented before open how we have a DL at A and a SL at B... not great for being in before open, but no worries.
C - The open starts out choppy... the bars looked quite large and overlapped. (they don't look large now of course since we had a good rally up) We hit a high here though.
D - Now we hit a low. The red line marks the overnight now. I hadn't been plotting these in for the past little while, was aware of them, but its more obvious when I mark them. So price here rejected the overnight low. These overnight levels I have seen do provide good trades. We either get through them, or in this case, reject them.
We ended up going higher than C, turned around and back down we came. On the way down, it sure looks like we stalled at about the 50% level of the move from .
E - Having dropped below the overnight low now, I was looking for a trade. I saw a RET by watching the right tick so figured lets try this for a short. Since I was expecting a drop right away, and didn't get it, out a minute later. Scratching for me needs to be this easy, then I'm not scared to get into trades. And once I'm in, I only have to worry about getting out, not so much about geee.. is this a good place to get in.. how about here... or here.... (I know Db says to look for reasons to stay in a trade.. but this I can only do once I have at least a few points in my direction)
F - Now this is an interesting spot. Niko took a long here, and I say its a perfect place. We have already tried to go lower and couldn't. We tried to go higher earlier as well, but that is still 10 points away, so we have room. So SLA gives us the entry, RET after the SL break earlier.
G -Sure enough, we get to the previous high and although it doesn't look like much here, watching it real time, you could really see the hesitation. Eventually we clear, and hesitate at the area of 32 which was pointed out as being just below the apex of the hinge on the hourly.
H - This is an interesting area. We have a broken DL from before, but also a broken SL (not shown, but it was tighter and slopped down more). So as was being discussed, we can almost go long or short. As it turns out, the short would trigger.
I - We hit a low of 18 here, and sure enough, as was pointed out, its 50% of the up move. We rally to roughly the high of H again. Had I been short at H, no way would I still be holding. But this was all part of a nice SL in the end.
J - Another area to take a short that some guys took. Looks ok now, but in real time, we did go up to 22 on the next bar, so if you were short at 20, maybe you would be a bit scared. A short 2 bars later at 18 would have been an entry where price moved against you less, but the funny thing is that being short from 20 is 2 points better than being short from 18.
K - Following the drill, the SL is broken, and here is a RET for a long which would get you at least a few points.
In the end, where we stand now, not much ground has been gained or lost. We didn't drop to the next level AMT would suggest, but our rally which got us back into the March channel also failed to hold. Catching the move up and then down would have certainly led to a profitable day though.
C - The open starts out choppy... the bars looked quite large and overlapped. (they don't look large now of course since we had a good rally up) We hit a high here though.
D - Now we hit a low. The red line marks the overnight now. I hadn't been plotting these in for the past little while, was aware of them, but its more obvious when I mark them. So price here rejected the overnight low. These overnight levels I have seen do provide good trades. We either get through them, or in this case, reject them.
We ended up going higher than C, turned around and back down we came. On the way down, it sure looks like we stalled at about the 50% level of the move from .
E - Having dropped below the overnight low now, I was looking for a trade. I saw a RET by watching the right tick so figured lets try this for a short. Since I was expecting a drop right away, and didn't get it, out a minute later. Scratching for me needs to be this easy, then I'm not scared to get into trades. And once I'm in, I only have to worry about getting out, not so much about geee.. is this a good place to get in.. how about here... or here.... (I know Db says to look for reasons to stay in a trade.. but this I can only do once I have at least a few points in my direction)
F - Now this is an interesting spot. Niko took a long here, and I say its a perfect place. We have already tried to go lower and couldn't. We tried to go higher earlier as well, but that is still 10 points away, so we have room. So SLA gives us the entry, RET after the SL break earlier.
G -Sure enough, we get to the previous high and although it doesn't look like much here, watching it real time, you could really see the hesitation. Eventually we clear, and hesitate at the area of 32 which was pointed out as being just below the apex of the hinge on the hourly.
H - This is an interesting area. We have a broken DL from before, but also a broken SL (not shown, but it was tighter and slopped down more). So as was being discussed, we can almost go long or short. As it turns out, the short would trigger.
I - We hit a low of 18 here, and sure enough, as was pointed out, its 50% of the up move. We rally to roughly the high of H again. Had I been short at H, no way would I still be holding. But this was all part of a nice SL in the end.
J - Another area to take a short that some guys took. Looks ok now, but in real time, we did go up to 22 on the next bar, so if you were short at 20, maybe you would be a bit scared. A short 2 bars later at 18 would have been an entry where price moved against you less, but the funny thing is that being short from 20 is 2 points better than being short from 18.
K - Following the drill, the SL is broken, and here is a RET for a long which would get you at least a few points.
In the end, where we stand now, not much ground has been gained or lost. We didn't drop to the next level AMT would suggest, but our rally which got us back into the March channel also failed to hold. Catching the move up and then down would have certainly led to a profitable day though.
Nice scratch at E. You had clear expectations for this trade, i.e
1. It had to break fast
2. If it did not break you would not give it room due to High price risk and lack of the safety of a fully formed ret on the 1 min.
It's interesting whether F or G would make a better entry. I would say G because:
1. Although the downside rejection was strong, the F entry was right on the apex of the previous Hinge.
2. Once price broke through all the chop, the only thing stopping it was the Opening High at 22. Being just a swing High, there were fewer trades to act as R here, and an anticipatory continuation entry could have been taken.
I was waiting for price to cross 22. But it did not give any low risk opps to get in until much later. I was thinking of 22 as Range R. But the Hinge from the open did a reset and invalidated the Range, so longs would have been ok to take.
Hey game... lovely to see you here! For the first trade at E, you are absolutely right on points 1 and 2. Not sure if its a high price risk though.. let me explain in the next example.
At F, I wasn't even watching the hinge so much, although now that you point it out, there it is. I was thinking more of the range. Here I have 10 point to go before we test 21 again. We couldn't go lower, so testing 21 at the higher end seemed likely.
When we get to G, I wouldn't even take an entry here as we are at the top of what could be a range if price reverses. This is why F is the much better entry. The information risk is high, we don't know if we can make it out of the range, but the price risk is low because we are already a few points in profit before we have to scratch a long if it reverses at the top of 21 and comes down.
This range was quite wide at 20 points so i feel it can be traded. Not so much to trade the range, but to be in a long if it leaves the range and then I don't have to worry too much.
When I looked at your chart, I can see the hesitation to not go long because as you say, you are waiting to leave all this behind. But then somehow the move up 40 points is missed. I'm not saying its right to do it this way, and Db does prefer to not trade ranges either, but he says its the trader's choice. I think Db tries to capture really big moves which he is so good at. I don't mind picking up pocket change off the floor.
If every day I only made 5 points I would be so happy, and then some days that trade turns into 40 when it just keeps going! (the worry of course is losing 1 point each time and you die of a thousand cuts!)Hey game... lovely to see you here! For the first trade at E, you are absolutely right on points 1 and 2. Not sure if its a high price risk though.. let me explain in the next example.
At F, I wasn't even watching the hinge so much, although now that you point it out, there it is. I was thinking more of the range. Here I have 10 point to go before we test 21 again. We couldn't go lower, so testing 21 at the higher end seemed likely.
When we get to G, I wouldn't even take an entry here as we are at the top of what could be a range if price reverses. This is why F is the much better entry. The information risk is high, we don't know if we can make it out of the range, but the price risk is low because we are already a few points in profit before we have to scratch a long if it reverses at the top of 21 and comes down.
This range was quite wide at 20 points so i feel it can be traded. Not so much to trade the range, but to be in a long if it leaves the range and then I don't have to worry too much.
When I looked at your chart, I can see the hesitation to not go long because as you say, you are waiting to leave all this behind. But then somehow the move up 40 points is missed. I'm not saying its right to do it this way, and Db does prefer to not trade ranges either, but he says its the trader's choice. I think Db tries to capture really big moves which he is so good at. I don't mind picking up pocket change off the floor.
The difference is that you are looking at F as a continuation entry in the middle of a wide enough range, while I am looking at F as an entry right in the middle of a hinge.
Yes, F appears as lower risk now, but you wouldn't have known that while putting on the trade.
Regarding trading within Ranges: Trip wrote something in his journal regarding the 'quality' of a Range. I agree with him. According to my observations, when price shoots to a Range boundary, an anticipatory entry is often worth it. If price meanders to a boundary, it's better to wait for the BO + ret drill.