Trading NQ via Price Action

[k p]

So first, the macro view chart. To further answer a previous poster, I do for sure look at the macro view, and just this morning as a fellow member was e-mailing me, we shared charts of this macro view. Here is what I was looking at going into the open.

I got up early today to watch the jobs report as its been a while since I've seen it live. I spent a bit of time going over news release PA and I've seen once again the power of the RET.

A - Even before price came down to here, this was already the OL. Price stopped here exactly again.

B - So here would be where to get in on a bounce from the OL. Sure this is over 8 points above, but there was an entry sooner on the 15 sec chart. If you get your levels right, the RET is on a lower time frame chart. But since I can't test this given that I don't have 15 sec charts to backtest, I'm not going to take entries from a 15 sec chart just yet.

C - Can't help but draw this hinge in... and then we drop out the bottom.

D - So all of this is plotted live, but I'm not going to take trades before the open. Here is a reason to go long, but its 1 tick shy of filling. I'm essentially just playing the OL again.

E - Here would be the first RET entry for a short after dropping out of a the hinge, but no way would I consider it given the OL just below. Sure enough, price only penetrates by 1 tick. As you can see, I'm slowly building up reasons for not taking RET entries. I don't have firm stats to back up if my so called win rate is higher, so this might be a bit random at the moment, but its a work in progress.

F - I marked this long in, but its tricky given the bit of consolidation now. A RET above this would be nice, which does happen 3 points above, so the entry would be 4 points higher.

G - Nice bounce at the apex of the hinge.

O - After the open we try down first, but the next bar is quickly bought up.

H - Given that this bar just slightly penetrates the previous swing low by a couple of ticks and price quickly comes up, a long here is justified, but since I'm in my real account, its not a legit enough trade to actually take.

I - Now I mark this short in. I know this all looks hindsight, but once again, I mark it in in real time but don't take it because we are getting quite congested in this range now. The reason I mark it in though is because the high matches to the tick the previous swing high before the open. We have the OH at 26.75, then the swing high at 25.50 where price turned again, and now we cannot breach this level a 3rd time. This to me increases the likely chance of this trade working out, of prices going down from here. If price after all comes down to here, it would have dropped over 4 points. Yes I am shorting in what is now an uptrend, but if I was in SIM, I would absolutely take this trade.

J - We have not a single RET on the way down but we do now penetrate the OL. Here at this down arrow is technically the first RET to go short, but its not taken, and the reasons are legit, not fear based. So first is the fact that these bars all go through the OL. By the time this trade would fill, it would be the 4th bar of what is essentially now a trading range. If I was going to short, I would now need price to drop further below this range and retrace back up to test this range from the bottom. So this short is marked because it is technically a RET entry, but too many reasons not to take it.

K - Here is a long I mark. I considered this one a little more strongly, but still not good enough to take. What I like about it is that the bar where the short would trigger essentially just pokes below the congestion/range and price is quickly bought up. Sellers had 5 minutes to push price lower but couldn't. Of course they still could, but given that this OL level is shaping up to be a key level now and we couldn't break below this consolidation, when we do leave, going up seems to be like the LOLR now, and hence why this long, although it appears to be not well set up is actually a higher probability for me.

L - Here is technically a RET now after leaving the bottom, but I don't even mark it in because we clearly aren't trending. I think trading a wide enough range is doable, and this one is 15 points wide and my entries would have worked, but not going to throw real money at it just yet.

SUMMARY

So as you have figued out by now, I wasn't in my SIM account but rather my real money account. I do value everyone's opinion and I'm happy they shared it and hence put it in my journal for later review.

All I can say it that if I was in SIM and I took these trades that I outline and did well today, I know that this still wouldn't change what I would do in my real live money account. I just know deep down that in SIM I would be more free... not reckless, but free, and when it came time to doing this in my live account, I wouldn't trade the same even though I just showed myself I could do it. I therefore need to take small steps in my live account, focus on the very best trades, and even if I get out for just a few points, if I see that over the course of a dozen trades I'm doing well, I can slowly progress to holding.

Everyone says that when you are coming up with a trading plan, you gotta do it yourself, you gotta do it your way. So I feel like this stubborness with not going into SIM is doing it my way. Perhaps if I'm still stuck a few weeks from now I will re-evaluate, but for next week, I'd like to think that I can take some real trades, focus on making sure I go through at least a series of 10 over several days, and then see where I'm at. My hunch is that 10 properly placed trades will do much better than 10 random trades which was my trading in the past. I will believe the result of this from my live trading account much more than if these results were realized in the SIM account. This is essentially the bottom line. My results from SIM I just won't trust as much. It might get me one step closer, but the real big hurdle still won't have been crossed, and that hurdle is putting money on the line.

 

[k p]

Was checking in throughout the day, and kept seeing how that OL kept getting rejected... although its more of a range now given that price did penetrate the OL but there was no follow through. On a higher time frame chart, it looks like the classic wedge "pattern" that I see often in the 1 minute charts.... a horizontal level that cannot be breached, but successively lower highs, or higher lows, in this case lower highs.

A - Here we have penetration again, and although I mark in a short because it is technically a RET, it does go through that support level.

B - By the time we get to here, this looks absolutely solid though. The RET happens below the S then R, and price comes up to test from below. It would fill and work quite well.

C - Coming down, I notice this congestion area form. One of the things I'm paying particular attention to is how price behaves at a bottom. I hardly want to call a bottom, but something about how this looks just stands out, and I think it was even ND who a couple of months back outlined these congestion areas for me on a chart which got me really looking at them.

So after the short, price consolidates in a range between B and C, dropping down to this new mini range. There is a bar that breaks slightly lower, but its bought up, and price now shoots much higher.

D - It now consolidates in another mini range, essentially the same range as to the left. I am all too aware of trying to take trades opposite to a trend, but its these little mini ranges that are just so different from what it typically looks like when price moves down and continues.

E - The long marked here is somewhat early given that the range isn't yet apparent, but two more sideways bars start forming this little range.

F - The high of this bar can't break through, but we also start to have tiny little higher lows on these bars, once again, a tiny little wedge. I could have placed the long entry above the next bar, but given that the RET at E gets me in at a better price, this is where I would place it. Price then shoots up once it breaks out of this little mini range.

I am a bit worried about this being micro managing too much, but oh well... its what I see, and most importantly, if it leads to a statistical edge, even better.

SUMMARY

I am somewhat disappointed about today and not having taken any trades. In all honestly, I am also worried about the comments I might get in reference to not being in SIM and all that jazz. Don't get me wrong, I appreciate the help and its for this reason that I am this far along, but I am suffering from too much back and forth, indecision about everything, which also therefore plays into taking trades.

So for next week, I will not update daily. I will save my charts and post on Friday. I plan to take trades, and even if I have a losing day, I know one day won't matter. If I post a bad day, this might affect me, especially the comments, even though there might be helpful ones. One day won't make a difference though, so it just makes sense to post the results of one week. This should allow for a series of trades. I know that even expert traders have down weeks sometimes, so even one week won't really matter, but I think the act of being responsible only to myself and not my journal should allow me to have a week of just doing it my way before I evaluate where I'm really at. At that point we can finally discuss if all my charts and all my annotations have any merit or not.

 

[k p]

Oh ya.... and look at where price stopped dropping today! I didn't even see this in real time as I was placing that long trade on the chart... but look at how nice is worked out today. Context at work!

 

[MarketAddict]

kp.. What is your main trading set up?

 

[k p]

kp.. What is your main trading set up?

Great question MA! Let me see if I can explain. The basis of everything really is the retracement. Its not any RET though.. its gotta be a RET after price turns or breaks out of something. ND showed her excellent BOPB setup, which was essentially a RET entry after price broke through a 5 min trendline. So I do am waiting to break out of something, be it a trendline or a range/consolidation area.

The other thing I'm using is reversal. Here I'm not waiting for the RET. I am simply buying above or below the bar where I am anticipating price to reverse. If price doesn't bounce off this level as I'm anticipating, often enough the trade would never even fill and then just melt right through the level, in which case I'm now waiting for the RET to get in on the continuation. When I flipped though my charts I have printed up, when I focus on the overnight levels and I eliminate any trades where price penetrates first or doesn't come close enough, either my trade would never trigger, so no harm done, but if it did, it gave me at least a few points profit or room to get out.

Does this answer the question?

 

[MarketAddict]

Yes it does.. But do you have a picture so I can see better? The reason why I am asking is because I know that breakout pull backs could be a pain.. They do work.. but sometimes they do look different... For this reason you probably won't get too many trades.. Which is cool if you are talking about a high percentage trade or a good r:r.. Are you trying to back test other set ups?

Do you have a picture of the reversal set up ?

 

[k p]

Yes it does.. But do you have a picture so I can see better? The reason why I am asking is because I know that breakout pull backs could be a pain.. They do work.. but sometimes they do look different... For this reason you probably won't get too many trades.. Which is cool if you are talking about a high percentage trade or a good r:r.. Are you trying to back test other set ups?

Do you have a picture of the reversal set up ?

I'm not at my home computer now, but the post from yesterday afternoon is a perfect illustration... here is the link:

http://www.elitetrader.com/et/index...via-price-action.281995/page-134#post-4059109

All day we saw price holding support at roughly the overnight low. At B, we have a solid break below and the RET back up. This is absolutely textbook in terms of what I'd be looking for. So in this case, the breakout is below the support level. I would also take other breakouts, like a breakout from a hinge. All of these have one central theme, the retracement.

My setups aren't really so firm... certainly nothing that I think could be coded. Its just a matter of following price, waiting for it to reach some extreme level, and waiting for a break above or below. What is firm is the retracement and what that has to look like.

 

[MarketAddict]

Do you have any filters...? For example are you looking for price to breakout strong ?

 

[k p]

Do you have any filters...? For example are you looking for price to breakout strong ?

Not strong exactly, but I do want to see the RET fully below or above the level. Also, and yesterday was a good example, I want the RET to be fairly quick... not 4 or 5 bars that end up forming a range with price dropping just below for a few ticks. Once we form a little congestion area, then this itself would need a RET.

The chart from yesterday once again provides a great example.

http://www.elitetrader.com/et/index...via-price-action.281995/page-134#post-4058966

At J, price did break through, but the RET is happening "through" the level I'm watching, not below it. And also, we see those bars overlap for a several minutes. A short below the lows of these bars would fill, but price would quickly come back up again, so this didn't fulfill my criteria to actually put the short on. If anything, this showed that no more sellers could be found, hence why I marked the subsequent long.

Sigh... such a good day yesterday to not put on any trades. I know many days will not be as smooth... but if I just stay out of trouble, the good days will more than make up for the days where its difficult and I have a few scratches.

 

[k p]

Just a quick review for today. I won't update specifics about what I did as I'm saving that for the end of the week, but today was a fairly good day in terms of opportunity.

Overnight we had a fairly tight range after our big rally yesterday.

O - Going into the open, we are essentially in the middle of our trendlines from overnight.

A - My first trade would be to go long here after rejecting going lower below the DL. Given that the range is only 12 points or so wide, waiting for an exit would be safer though.

B - A nice bounce from the OH, we could try for a short that works well.

C - Sure enough, we stop at the OL. Going long above this bar is tricky given how big of a bar it is as it puts us right in the middle of the range.

D - This sets up another nice bounce from the OH and therefore a DT. It fills on the next bar, the very lowest tick before price goes up. I did take this trade and it was clearly a loss once price went above the previous swing high. With so much of what I do, I wait too long. I didn't take the first REV trade, and each subsequent one has a lesser chance of working. Trading can only work if you take each trade as you should, which I am clearly not doing yet.

E - This one here hurts. I didn't have my PDH drawn on my chart, why I don't know, but here it is. I thought I could just eyeball it on the second monitor where I have my 5 min chart up that also shows the previous day. Now granted, given that I was just stopped out of a short, the last thing on my mind was a short. I could even mark a long here now, but this would never trigger. Price essentially come to within 1 tick of the previous day high. I was now going to wait for price to go somewhere else, but playing the REV off the PDH was the trade of the day!

F - Another bounce off the OL, but with this range being only 12 points wide, if you're gonna play it, you really need something faster than a 1 minute chart.

G - Price finally penetrates below, and the fact that it only reached midway of the overnight range is a good clue before it turned back down and broke below. (Also, this would be the 50% level of this down move, so price doesn't retrace more than 50%) Here is a RET for a short after testing the breakout level, the OL, so a perfect place to go short. It doesn't work though. Instead, we end up having a range. No problem... we just need to wait it out.

H - So once we finally leave the range, here is the first RET for a short... works well.

I - By about here we would have a break of the SL if we drew it in, and we can see a HL above the DB to go long, but perhaps we have a less steep SL that might not have been broken yet. And in all honesty, I was already done for the day, nor am I eager to trade opposite to the main trend which now is down.

Lets go to the bigger chart now.

J - I came back too late, but the next few hours was this wide range, which is pretty much a hinge on a higher time frame chart. Once we drop below, here is our RET for a short. In fact, every RET on the way down pretty much works.

K - As we are dropping and I'm just watching, I am paying attention to our previous day low, PDL. Sure enough, we can't go below 4219. This is 3 points above where the level is, but close enough.

Buying above this bar would be a bit risky given how big the bar is. But if you're ready for a potential REV, nothing wrong with taking it on a lower time frame chart.

L - To play it safe, above here is the first official RET to go long.

Now I'm not suggesting to go long above any lower high just because its a lower high. But if you're doing it above a level that you are watching, this drastically increases the chances. Here of course, price has already rallied over 10 points so I wouldn't consider this a great trade. Being prepared for the REV at K and getting in on a RET in a tick chart is the best strategy.

M - Oh ya, and here is a RET for a short since the uptrend is clearly broken. Now I wouldn't take this since its a RET in the middle of nowhere by now, but a case can perhaps be made that we dropped below a tiny trading range of the past 15 minutes and we rejected going higher above the little range.

SUMMARY

Anyway, I just wanted to update with an analysis of what should be done. I'm pretty much narrowing everything down to just two things. A REV entry based on rejection of a prominent level, and a RET entry to get into a trend once we have a BO from something, be it a range, a hinge, or a BO from the overnight levels. Today was a day for REV entries from both the overnight levels and previous day highs and lows.

N - As price is coming down, I hear ND saying "usually the daily low or high will be tested before price leaves". (she said something close to this... better worded I'm sure) Well, here is that test.