Trading NQ via Price Action

Just for fun, or torture.... not sure which! .... I decided to use a 15 second chart to see how well SLA would have worked today.

It seems I have quite a few trades, and mostly scratches at BE. I would eventually be in a good trade I think, but even I got tired marking it all in after only the first 30 minutes. No way could I have done this in real time for the first 90 minutes.

Not saying I don't like using a 15 second chart, but I think trading off of it would burn me out, and only make the broker money.

This is the thing. When I look at the chart today, what I see is a hinge at the open that resolves itself to lead to about a 10 point rally. Then we drop back down 15 points, followed by a rather slower rally up 20 points, breaking the previous high of 48. This leads to another larger consolidation area, and it gets too late in the day anyway.

So 10 up, 15 down, and 20 up. All I want is to capture a fairly consistent 5 points, maybe 10. And if the market feels like offering a 50 point cascade, I will happily take it. But there should be no reason why 5 or 10 points isn't possible every day, no matter if its a trending day or a ranging day. You never know what you will get, so you just have to follow price and take what the market offers. I am even happy scalping for 2 or 3 points, and doing this several times a day, anything really that I prove works so I can trade 5 or 10 contracts without emotion.
 
Having not been able to be as focused the past few days because of other commitments, its a bit surprising right now to see the steep rise in price over the past week without too much of a pull back. Our ultimate top of 3740 is actually within reach right now given that we are just 50 points below this.

Because of the holidays, yesterday was a very short session, so I'm not exactly sure what to use for analysis of the overnight action, if I should also include this short session since the volume was very low. I will use all the action after the last full day.

This gives us a range of 3677 to 3696, with a midpoint of 3686.

I saw Db post some chart on the Ghost thread that include possible channels since we haven't gone too much into this in the past month. I have a limitation with my charting in that I can't use data from too far back as I can't build a continuous contract with more than 2 quarters, and hence I have to just use his charts and can't draw my own monthly or weekly ones. Based on his charts, we are just entering back into the long term channel on the weekly chart after taking a dip below for the past couple of months.

Going up, we have 3706 as a level to watch, as well as 3722, and of course the 3740, so its bit congested up here. On the way down, we could have a bit of a drop as we have had a pretty quick climb here, but 3660 and 3644 I see as possible areas from recent days, and also 3624 if we drop quite a bit.

Trying hard not to have a bias, but at the same time, we have to be aware that quick moves up cannot be sustained. Wouldn't it be something if we hit 3740 and drop like a rock! Maybe not today, but perhaps soon!
 
Drats, today didn't turn out so good.

We open by first trying down, and then up, then back down again. Nothing looked really too good to take for the first 15 minutes and it became obvious that we were forming a hinge. This hinge would have an apex of 3693, which is also roughly the mean of the range just prior to the open.

A - Here, although not plotted in real time exactly, is perhaps a first possible long. Its technically a RET on our way up following the DL, but although there is an earlier RET just like this one, this one marked for the long would have at least been an exit from the hinge. There are a couple of points of room before the previous high, but also of note is our previous low is a higher low from the ultiate low at the open (hence why the hinge forms of course, higher lows and lower highs)

B - We break above the overnight high, but in real time, the bar before this certainly look like a REJ bar because it opens and closes close to the low. Nevertheless, here is another RET above which to go long. I wasn't fast enough in seeing this one because of the REJ, but I was for sure hunting for trades now.

C - Here is now a third RET. I just learned not too long ago that two bars with the same high we can treat as a RET, so one point above these two would qualify, but luckily its not triggered.

We break our DL and can draw in a SL.

D - This would be a place to put a short, which I did, but it too wasn't triggered, and price went back up to break the SL.

E - We form a double top here, which is quite evident by the next bar that drops 3 points, quite a bit given today's small range.

F - We can draw in a SL, we even have a RET and come back down. I enter in a sell stop at 93.75 and it fills. Sadly, it goes against me right away and I'm out on the next bar. I have my sell stop set to -10 ticks, although I have been saying I"m gonna use 2 points. I just wanted to give it that extra bit of room I guess. I did try and close out this trade even sooner because it was clearly not working right away, but it stoped out before I could even do it manually.

Looking at it now, we are just above the apex of that hinge, and practically at 50% of the move up, so perahps I should have taken this into account, but I was just looking for the RET on the way down.

Once again, what would have been best would have been to just reverse. I am seeing this with most of my trades that are actually live. Instead of just exiting, it seems I am buying or selling at the worst posible place to the tick, so going in the opposite direction of my entry once its not working seems to be a good move, albeit, this is based on very little data.

G - Here I am thinking of going long, can't let the small loss from before stop me. But as I'm about to enter my trade, price does drop and breaks the DL. It does come back up 2 minutes later, but the trade was already taken off and re-evaluating is probably best.

H - Curiously, we make it to 3706 as outlined in prep, but there are just so many levels on the way up, since we are close to a top, and these are from quite a while ago, that I'm not sure if we can call this significant. Following the DL though, we can see it breaks.

Now although I'm not using volume as a means to trade, mostly since I don't think I know how to use it well enough, and also because price does still move on low volume so its a terrible excuse not to take a trade, today the range is small, and I was seeing some condolidation here. So its best we wait to go to a different area before I start looking for trades.

I really don't want to stop today with a loss, but more importantly, to stop with only one trade, but so far, nothing looks that good, and I don't want to develop bad habits and trade just to undo something from earlier. We really need to go above 3707 or drop below 3703 with a clear RET before I jump back in.

Thinking about my trade earlier, I'm not sure what to conclude. Is it too late in the move? I know my earlier trades usually happen too late, after the move is obvious. Here the double top is a good sign, so getting in within the one minute bar that drops looks really good in hindsight now. Is it still a legit trade that just didn't work out, but if I keep trading like this the long term results would be good? Or should have I seen the 50% level and waited?

I don't care about the loss, I just want to trade well, and consistently well. When taking trades, I have been entering where the moves are getting obvious. This is unfortunate because I know the best trades happen before the move is obvious, in places of mass confusion, where stops can be tight, and the trades that work go instantly into profit so later congestion areas don't have to be too much of a concern.

Summary : (-$59)
 
I spent much of the weekend reading Mark Douglas, The Disciplined Trader. I have already read his more recent book, Trading In The Zone, but that was a while back and I heard this one is different enough so I wanted to jump at. After taking some live trades these past few weeks, I can see that my thinking isn't exactly well geared towards trading.

I found it interesting where he states that a new trader will hold a loss, hoping for the turn around, and yet quickly get out of a winning trade, fearful that his profits will be taken away. In order works, two very different tactics, both applied completely all wrong.

I am more than halfway through, but because he goes into great length about how we learn and think, and illustrates so well all of this, it isn't until the final third I think where he actually gets into how to fix it. So I'm quite eager to get to the end!

I can for sure see that my thinking with regards to trading has to be completely different than my thinking pattern that got me through life thus far. So I have to remember to be patient because I am asking my brain to do something that it has never done before and to look at things in a completely different way.

Plus, I think that fear has been taught to me my whole life, which has worked well to keep me out of trouble, but it is absolutely detrimental in trading.
 
PREP FOR MAY 29

I wasn't able to be around for the open yesterday, but did make it about 45 mins in, and it wasn't an easy day. I was actually worried that price would make it to 3740, and either bust through or quickly reverse down as every trader on the planet must know this is the top, and this level should provide an excellent trading opportunity. Perhaps we were, and still are, in a fairly tight range because of the jitters already about trying to figure out if we are going higher or lower as we approach this critical level.

So overnight, we are stuck between 3713 and 3721, midpoint of 3717, such a tight range.

On the way up, its just getting to 3740, but also 3730, yesterday's high. On the way down, 3712, 3706, 3644, and well there would be lots of levels.

Having finished the Mark Douglas book, I am happy to read him suggest to set aside a certain amount of capital to use as tuition. I know I have been in a good frame of mind in that the small loses haven't bothered me at all, I just want to make sure that I am not making stupid trades. But I know that those initial losing trades have prevented me from taking more trades that same day. So going forward, I really will just try to take every SLA setup as it comes, with perhaps the only filter being if we are in a tight range.
 
Just before the open, about 20 mins before, there was this huge spike up, and looking at the tick chart, I see there were over 800 contracts traded in that one tick!

I really do wonder what is going on here, so if anyone reading has anything to say, I'd love to hear! It takes usually a whole minute to trade 800 contract during the lunch hour of a trading day during trading hours, so this is fairly huge volume to happen before the market open, and huge volume for just one transaction.

Here is the attached screen shot. (notice the spike in the tick chart at 8:11... sorry this value isn't displayed, but its around 850 for volume)

Edit: What I am curious about is the mechanics of it. I guess if you put in an order for 800 contracts, you would clear out all the orders waiting on the books at one price level, then go up a tick and clear all those, then go up another tick and clear all those, and keep going up until you get your volume of 800 filled). Am I correct in my thinking?
 
Well today is not unlike yesterday. Such a small range, and hinges all over the place. It looks trade-able in this hindsight chart, but hard to take anything in real time.

A - This DT is quite prominent. I almost saw it in real time, but with the top being at 27.75 and the previous low being at 21, there isn't lots of space here if it ends up being a range. I need to keep telling myself though not to worry about what might happen, just look at what is happening right now. If its a range, deal with it when it happens, but it might just keep dropping so taking the short at the DT is a good move.

So now the question is where? The bar beside B drops fairly quickly, and there is no RET in this down move until we get to C. These two bars with equal lows do provide a legit RET I have learned recently, but price doesn't go any lower, so a short wouldn't be triggered, and this is after all 6 points away from the double top now. Perhaps there is a RET in the 15 sec, or perhaps the rules for taking a double top or bottom should be to just take it a point away from where the top or bottom is. Something to explore.

C - After bouncing off C (this happens to be the overnight high but who cares now since we penetrated it no problem earlier), we go back up and down, and I am therefore able to draw in a nice hinge.

D - We break out below the hinge, something I am really watching, and this trade does provide at least a few points if taken.

E - There is no clear RET on the down move, so no way to get in, and then we have a SL break. This line wasn't drawn in real time though.

F - If we are using SLA, here is a good entry for a long. I just wasn't seeing it in real time though.

G - We get to the apex of the hinge... so we are testing it. On the next bar, price does drop below, setting up a possible short, but then we make a higher high so a short trade is removed. Price does come back down, which would have triggered. The down arrow shown would have been the entry, it should have even been trailed up, but since the next bar goes higher, I took the trade off. It would have been filled at the worst possible place before price headed back up.

H - We form another hinge, another apex, and another drop out the bottom.

I - If we took a short just based on the exit of the hinge, we should be out by now for hopefully BE or even a point or two profit. This test of the apex doesn't even get to the apex.

J - Coming back down, and then back up, we form yet another hinge. If you compress this chart enough, this whole morning is a hinge! The exit from this hinge is rather without force, although price doesn't really drop below the apex. It also doesn't go anywhere. If I was trading exits from a hinge, then a trade should have been made because there was no way to tell this would go nowhere, but at least the loss would have been minor or BE.

CONCLUSION

Price had a range of barely 10 points today, although I'm sure there are legitimate trades in here and profit potential.

What is obvious to me now is that I don't have a trading plan. I don't take solid SLA trades as I should, I also don't take the double tops or bottoms as I should (mostly because I don't have a solid plan of where or how to them them), or exits out of hinges. I am staying out of trading ranges, but I feel like scalping for a few points when its an established range.

Luckily I am smart enough to see this as being a problem now. I need to formulate something solid and trade it at least 10 times. I need to either make it a rule to take trades based on a 15 second chart or not. I need to make it a rule to take an exit out of a hinge or not. I realize that in the moment, I don't know what I am looking for, I don't have a solid rule, so then I can't act.

This is excellent progress though. Perhaps I do hesitate because I know that I haven't developed something solid. So still a bit of work to do, but no doubt that I am on the right path.

CONTINUATION

As I'm typing this up and watching, price has been leaving the range, so lets do a bit of analysis.

K and L - These lows from a fairly good double bottom, but I call it more of a range.

M and N - We have an equal double top here.

O - We note here that we cannot make it below the mean of this tight range, this should be a sign.

P - Our first exit from this range doesn't have enough support behind it.

Q - Although we go back into the range, we don't go even lower than here forming a higher low.

R - We come back up, hesitate at the previous highs at P, and eventually break through the highs of the day at A.

S - Sadly, we don't even make it to the previous day high, this green line here, but at least this price action tells a nice story.

T - Wait just a bit longer, we see that after hitting the top, the down move seems strong. I draw in the DL you see which gets broken, and we have a clear RET here at T and a solid short setup.

U - We come back up, a nice RET to get more people on board the short train, and drop again. Sigh.. no trades taken.
 
We got so close to 3740 yesterday, stopping just above 3737. Its funny how for the past week or two, it seems so difficult to trade, yet every day ended up being higher than the day before, and when you look at the hourly chart, its just a nice and steady climb.

Overnight, we started coming down a bit, so we have a range of 36 down to 28. I could perhaps tighten this up and call it a range of 29 to 35, only 6 points wide, giving me a mean of 32.

Gosh, its just so hard to ignore the move up which is quite steep ever since the 16th about 2 weeks ago. Attaching the hourly chart from before we hit the top of 3740. I still have the March channel plotted in. The DL for this last move up of the past few weeks is also drawn in. As you can see, we are essentially at the DL. Even if we go sideways, our line would break.

I'm not sure if we can suppose that since its Friday, something might happen today, or that we are even closer to 3740, something might happen today, and by something I mean a big move up or down. I'm not nearly experienced enough to make these calls, and am trying so hard to work without a bias, but given that we are at such a key point, lots of traders have lots on the line here and everyone is watching this level.
 
If we consider the DL as more of a channel and draw in the top line with a mean, we could also be at the bottom of this channel and head back up to the mean or the top line. Hmmm....

Edit: The colors on my channel are wrong of course, blue should be bottom and pink the top... too late to fix now before the open!
 
Today is rather disappointing, not the market since I have no control over that, but my inability to act.

Going to do a quicker recap today than going into minute detail so I can look at the global picture.

A - Was thinking of going long here... could have been scratched for BE.

B - Was almost going to go short here, based on 15 sec chart and the DL break, but didn't get the order in fast enough.

C - Took this long here, we have a series of higher lows, and although I am at the mean, perhaps it makes sense that we could test the high again at A.

Within seconds this trade wasn't working too well. I gave it a bit of time, but exited fairly quickly for a loss of 3 ticks. Perhaps I got scared, but I'd like to think it is more of a case of the trade not taking off like I thought it would so that is my rationale for a quick exit. If I held on, I might have perhaps gotten out for a better price, or a worse price. I do see often that a little patience can get you out at BE, but you don't know at the time if price will continue to get away from you, so its best to not wish and hope.

After this its just so much overlap. I do draw in a hinge, but with such overlapping bars, I don't think much of it.

D - We hit a bottom, and although break the previous low by 2 ticks, Niko does call it a double bottom. I don't see this in real time. Attaching a 15 sec chart of this area. Following up from yesterday, I need to make a firm rule about what I am looking for in a double bottom or double top, and where I will get in. Waiting for a RET seems to take too long. Getting in close to the level that would form the DT or DB allows the stop to be just on the other side of the level in case price doesn't reverse. This would mean that I have to get into the frame of mind of being fluid and quick with my trades, and this is I think the better approach for a higher risk trade perhaps, but tighter stop, and a smaller loss if scratched. Of course back testing is necessary.

From here on in, its just up and down, SLs and DLs. I've got one more short pictured. Next bar would have price going against me by a whole point, might have scratched again, but if I held on, it might be worth a few points. Since we are in such a tight range, going for a few points is just fine. Take what the market will offer.

BIG PICTURE

I can't help but notice once again how the past 2 weeks have been a steady climb up in the hourly, yet lots of mixed messages on the one minute chart. We are stuck in ranges and trade around means, yet somehow price just keeps going higher.

Today we have a series of higher lows all the way up from 3727. We did in fact make it to 3740, and just trying to figure out now if traders want the price there or not.

I am not prepared to trade the hourly chart, or even 5 minute, but what doesn't escape me is the general trend is being missed by focusing too much on the micro. Exactly last Friday we were at 3640.. and here we are, 5 trading days later at 3740, 100 points! If I call that 20 points per day, this to me is an excellent accomplishment, and instead, all I have are losses for a few points here and there.

I'm not being hard on myself at all, just seeing that progress needs to be made. I use the excuse that the days are choppy or the ranges are small, but I think opportunity is still there to get 5 points, and this is something I would be very happy with.

Once again, making some firm rules is what is necessary, and then following those rules strictly for at least a week. Even if I go down $1,000, this would mean losing 50 points, and I would still call this an excellent tuition fee because at least I'm trying!

I am scared to hold through deep RETs and things like this to capture the general trend, but there is no reason why I couldn't hold for just 5 points and take my profit, even 3 if I hit point points but then price comes back to my entry and I hit the close button. This will build confidence and good reflexes and diminish the second guessing.

Mentally I am doing this often, even if not marked on the chart, and although I might remember the winners more than the losers to make me think I've got something good, I still think I am bound to be closer to break even after a week than actually down 50 points, as long as I keep taking the trades. Rather though, I think I would be up, but I really don't know until I try.
 
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