Trading NQ via Price Action

[k p]

So not much has changed from yesterday it seems. We have a rally up during the overnight, and not sit somewhat halfway between either the mean or lower line of the respective channels, or the lower line of the steeper channel, with the respective values being 3505 and 3430.

But what is on my mind more so today is just trying to make SLA work and working through my issues. I am taking note of Db's most recent post about not drawing in lines that are too tight, since they do invariably get broken. If I don't get in early enough, I just won't be able to hold a position if it goes against me by more than two points but hasn't broken the initial SL or DL.

So I think getting in right at the beginning of the move will help alleviate this. And this means getting in before you really even know there is much of a move happening. Holding a position that is coming back to your entry price is better than a holding a position that is going into negative territory. This means that if you get in on a short for example below the crest of the RET, this might mean you are more than a few points away from the SL, and if this is the case, then the trade technically is still working until the initial SL is broken. If the entry though is far below the SL, you might be looking at risking more than just mere ticks to see if the SL gets broken, unless of course you get in right at the beginning of the move. So this is what I will focus on today. It might lead to over trading, but lets just see where this gets me.

 

[k p]

Today didn't go according to plan, but good experience nevertheless.

A - The open had lots of overlapping bars. I initially had a short that never triggered below the level of A a couple of bars in, which was good, as B ended up forming a double bottom. Had I been stopped in, which is what would have happen if I was trailing my entry to one point below the low of the previous bar, I would have to scratch quickly. This might have also prevented me from seeing the double bottom, not that I saw it anyway till much later! No matter, up we go.

C - Price turned around at 85, just one point above the high of yesterday. I had been aware of this in real time, but you just never know if its a pause or a reversal. More important to SLA is the break of the DL, and each subsequent bar is lower. Here at C, I get into a short, but I do it within the bar. I get filled, unfortunately one tick above the low of the bar, and by the next bar, price is already against me 2.5 points so I'm out. You will notice that I get out at the high, and even though the bar after my exit does come up too, it doesn't come as high as my exit. So essentially I sold at the lowest point and bought at the highest point!

D - This poke of the SL would surely have gotten me out if I was still in from my first trade. I have kept my initial SL as is from the open as per the recent posts of Db.

E - Of course now I'm a bit put off on re-entering. By the time we get to E, I figure I have enough of watching this drop and get in again. Its not an SLA entry, its an entry based on emotions.

F - It moves against me right away. The fact that the move down is turning to be somewhat parabolic jumps out at me now and its no wonder the steeper dive had to halt and retrace. My exit here is just over 5 stops. Its an exit based on emotion, not wanting to lose any more money. You'll notice it is also practically at the top of the RET. Just a few more seconds and I would have noticed price turning around back down and I wouldn't have exited. The exit was controlled mind you, not based on fear, just thinking that I gave price enough room. We haven't broken the SL yet, but because of my terrible entry, the price risk of holding on was getting high.

G - If I still held, G would have caused me problems, but then perhaps I would have closed fora tiny profit or at least BE.

H - I am of course fully aware of the general trend being down, and so I mark this entry for a short but don't take it. I would be filled on the next bar and might have captured a few points, but you can't do the "could have" and "should have". I simply point this out as a valid entry.

So the bad news. I'm down $168, 8 points with commissions. More bad news, my entries, especially the second one, are terrible. I'm happy with my first scratch, just because it was based not on emotion, but a re-entry would have been great. For the second I was holding on because the down trend was quite clear and I figured it would turn around soon. It did, but this was all managed badly.

The good news, I was at least trading in the right direction. Had I kept taking entries, I think I would have done better, especially legitimate entries. My ultimate plan is to get into the move sooner so I don't have to keep taking entries and none of these RETs that stopped me out today would have been a problem if I got in sooner. It might take some time to get to this point though. A re-entry at C would have been best.

I think these problems will be easy to fix. I certainly am in for the long haul. I do know that 2 trades in the whole grand scheme of things means nothing, and as noted earlier, if I tried again, I could have captured some of this great down move. I'm not sure what the difference is between over trading and legitimately re-entering, but I guess I will have to figure this out for myself based on if it makes me more profitable or not.

 

[trip]

So by location, I mean extremes - this is where price risk is minimal, and information risk is at its highest. But is it really? When traders are at the mean, they are undecided which direction to go. When traders are at the extremes of a range, their most likely course of action, having tested that extreme, is to test the other side. Of course the market cares nothing of your lines on your chart, and could easily fall through whatever you marked as an extreme. But you know quickly, and often with tighter risk that you were wrong. The mean is filled with scratches trying to find a direction - the extreme is right or wrong, and quickly discovered.

I take it you either trade a retrace after a reversal (a.k.a. bounce) at the extreme or a retrace after a breakout of the extreme?

Sorry K P to barge in on your thread.

 

[k p]

I take it you either trade a retrace after a reversal (a.k.a. bounce) at the extreme or a retrace after a breakout of the extreme?

Sorry K P to barge in on your thread.

At the moment I trade off emotion! LOL.. (dont' do that). That second trade was just entered because the move was down and I was missing out. I didn't wait for a retrace, i just entered an order a point away from where it was. The first trade was quite good. Just dumb luck that I couldn't hold in. Then price dropped right away. In both trades, I got out at the worst moment.

I don't have skills to call when a reversal happens, but if it breaks the SL or DL line, then yes, look for the retracement. Just like in the SLA threads. If followed, it works great, even if it means you have some losses of a couple of points in terms of a scratch. The trick is to not worry about those loses because when the opportunity comes to enter again, you gotta take it. The sooner you enter, the better off you are and don't have to question all these things on the way down.

 

[k p]

Today we find ourselves just slightly above the mean of the steeper channel, or slightly above the lower line of the less steep one. We can either try to go higher to reach the tops of these channels, or try lower again. Yesterday we tried lower and came all the way back up.

Overnight, we are in a tight trading range of 3504 to 3513. Traders can't find trades above or below these values. Will try and really focus on supply and demand as Db has been trying to really drill it into us in these past couple of days.

 

[k p]

Shoot.. in regards to Db's post this morning asking if we know what we will do at 0930, that is an excellent question. Since I posted this morning, price dipped to 3502 but reversed. So we are still in the range with a mean of roughly 3508. A break above 3512 will cause me to look for a long, and break below 3502 will cause me to look for a short.

At the same time, the first couple of minutes really set the stage in terms of showing if the buyers or sellers are in control, so a rejection of either up or down will be seen in the first few minutes and then a trade out of this tight range might present.

 

[k p]

Here is my chart.

The astute observer will notice no trades, only two hinges outlined, and no letters noted. I have nothing to discuss in regards to direct price action on this chart.

I was watching the opening very closely, the range we were in, the rejections. Our drop below the range didn't last, but then it went nowhere once we were in again. I can see decisive areas now for trades, but I just wasn't all that focused.

I actually was answering in the Ghost thread about what each bar is telling me and enjoyed that. I wanted today to be reading price action more, not just following lines. I also wanted to put on trades that first jumped out at me without hesitation.

It's been a busy week and I just didn't come prepared today, and I'm happy I stayed out. I don't have the feeling of missing out today. I wanted to make up my 8 points I lost yesterday, and that isn't really a good way to start anyway, with that thought process.

Tonight I have time to study, and to get a good sleep. So I will come better prepared for tomorrow. It also really was an eye opener to read Db write that part of prep is knowing what you will do and where.

 

[k p]

The events of the past few days have been a real eye opener. I thoroughly enjoyed the exercise from yesterday with Db, and thanks to the crappy action in the markets, it allowed me to be in the right place at the right time to participate.

So as good as SLA is, understanding why price is doing what it does really gives control back to the trader and the necessary confidence.

Knowing what you're going to do at the open, being prepared for every scenario, takes all the fear out of placing the trades as well. This is what the proper prep would should look like.

Given all this, its gonna take a while to sink in, or perhaps a lighbulb just went off and I can run with it.

On that note, overnight, we had a trading range overnight between 3492.50 and 3500.50, with a mean of 3496. Curiously, 3496 (or 95) is also where price yesterday continuously reversed up. We have since left this range, and are sitting at 3512, but if we drop back down, this range or mean is something to look out for.

We have a high of 3524 yesterday, but I also will keep in mind the trading range prior to yesterday that provided clues.

On the channel front, we are above the mean, but I think mine needs a nudge to line up better with what Db has been posting. To me it would be at 3490 today, but I sense that it should be a few points lower. Having spent so much time below the mean, even bellow the lower line, a visit to the top channel line would be nice, but lets see what happens.

Specifically, as we are now, we are in little consolidation between about 3512 and 3516, but this is part of a 20 point move up from the overnight range. Above, there isn't much to stop us, below, we have multiple areas where lots of trades happened so a fall shouldn't be drastic.

 

[dbphoenix]

So as good as SLA is, understanding why price is doing what it does really gives control back to the trader and the necessary confidence.

That's the AMT part of SLA-AMT

Knowing what you're going to do at the open, being prepared for every scenario, takes all the fear out of placing the trades as well. This is what the proper prep would should look like.

Which is what Appendix E is all about.

I see that at least a couple of people noted the lines in the sand this morning. Channels are almost a macro if one is going to trade behavior.

 

[k p]

I see that at least a couple of people noted the lines in the sand this morning. Channels are almost a macro if one is going to trade behavior.

Yes... I am starting to see that, its the more immediate action of the past few hours or past couple of days. Previous day high and lows, overnight highs and lows, the apex of a hinge, the bounds on a trading range, the mean of a trading range, and then of course 50% of moves. Seems like a lot to watch for at first, but driving is like this too which I notice when trying to teach my girlfriend. I can watch out for so many things at once on the road while just coasting (cars around me, color of the traffic light, pedestrians standing on the edge of the curb eager to run, etc.). But I do it so fluidly it doesn't cause me any strain, but to an untrained person, its overwhelming. Watching all of this will one day become second nature.