Trading NQ via Price Action

[k p]

Gotta do this quick today.. too much to do today.

A - At the opening, we can't break 79... and not much looks good for a while.

B - Put in a sell order here, since the two bars above at the same low is essentially a RET to go short. Trade doesn't trigger which is good since it turns around back up.

C - At 79 again, great place for that REV trade I keep talking about, but perhaps I haven't done enough testing yet.

D - We come back down, breaking the lows at B, there is a little RET above this arrow, so I put in a sell stop which gets filled. At the time, my chart was just slightly too high so I didn't see my overnight low blue line at 71, it was literally one tick below the bottom of the chart. I perhaps would have waited to clear these lows first had I seen it seeing as the action was quite sluggish from the open.

The trade goes instantly against me but I am patient, expecting to test the lows at B at least.

E - Its really not looking good here, and my 4 point stop loss does take me out of the trade. I was thinking of moving it even higher, but lets face it, that would have been just hoping. It is unfortunate that price turned around again, so essentially I sold at a bottom and bought at a top. Looking at it now, I obviously could have exited for a much better price, but when the trade goes against you instantly, waiting for a better price I guess just doesn't always happen.

F - So here at these lows, which I mark twice, which are even one tick higher than the bar I got in on at D, should be quite telling that we are having trouble going lower for the moment. If I was still holding on to my trade, this would have been good reason to get out here, and the exit could have been for only a point loss or so.

G - We can't break the previous high at E, my exit bar, so its obvious by now that not much is happening today at all as we are still stuck in the overnight range.

So after this, not much looks good, and I don't want to be trading just to make up the loss. There is still a general trend down, but selling below the crests is problematic with the large recoils, and a better strategy would be almost to just sell at a SL that you could draw in. Selling at C, the triple top at 79, or just below this bar certainly is quite the juicy trade and one that allows you to be hanging into a short quite stress free since the entry is high up.

H - I'm getting kind of mad around here. It just keeps coming down, but I'm too scared to re-enter, and certainly I don't want to enter below the lows of any of these bars. I almost want to short at the top of a SL I can draw in. But I feel its too much of wanting to make up for my loss, so I better stay out.

SUMMARY

Well I'm down -$(84). One step forward... two steps back! LOL

Just not feeling to continue so this will be a short trading day.

As I was proofreading my post, I see we came back up again, but really hard to take advantage of all this, except for scalping purposes. And yes, I want to get in on scalping, simply for the reason that when you get a day that has chop and overlap, expecting this to continue is a valid assessment, and so when you know hat kind of environment you're in, taking advantage of that environment isn't a bad strategy.

Db said it as well to Niko about a week ago perhaps, that the first 15 minutes of so of the open should be quite telling of what kind of day you will have. My trade was 17 minutes into the day, which didn't trend in my intended direction, and at this point I was already feeling uneasy anyway about the narrow price range and overlapping bars. So having a different strategy given the conditions is I think smart.

 

[k p]

PREP FOR JUNE 19

Quite the interesting day we had yesterday. I wasn't even aware of the big news that was going to be released at 1pm, but I clearly would have seen it in the price. I find it interesting looking at the chart now how there was some confusion. It seems as if there was first a drop, then a climb, then right back to the beginning. It wasn't until 7 minutes later that the rise finally started for good. I have no idea how this matches up with how the news was being delivered, whether the first few words were bad and then it took 7 minutes to say the important stuff, but its interesting to see the behavior in the chart.

At any rate, overnight we hit even slightly higher, 3803, and never going below 3794, but I'm more inclined to call this a range of down to 3797. Here is the interesting thing now. I have been watching long enough to see how traders get all excited, bidding up price so high, only to see it drop the next day when everyone comes back to their senses and realizes that people ended up paying just too much. So I think it makes sense that there will be another big move today, favoring down, but I won't be blind if I see it going up.

That's it. Just have to watch to see if its going up or down, and figure out a way to get in.

 

[k p]

Ok.. the chart looks a little busy, but just follow me here. Most of these things were drawn after the fact for analysis of what could have been done better.

A - Simply marking the opening here, noting that we drop below the opening for a few minutes.

B - By the time price gets here, I am drawing in a DL. As Db pointed out, following the rules calls for a break out of this overnight range, so above 3803, or below 3797 (this low is my level to make the range tighter), and of course getting in on the RET. So I can start with my DL and see how far it takes me, to see if it continues above 3803.

C - We hit a high about a point below the overnight high, and start coming down, breaking our DL and here is technically a RET for a short as marked. Since I'm waiting to clear the range first, I'm just marking it in for testing purposes. (Yes, I'm doing forward testing more so than back testing... which I guess will end up taking me 5 times as long... but just being honest here

This short would have gone against me exactly 2 points before price came down again. (I can hold for more than a 2 point loss now though)

D - I can start thinking about a SL now since we broke below that bar that would have been the entry for a short. Notice this SL is fanned, but that's as a result of later price action.

This is also a good place to note the hinge that is drawn in. I was thinking about it in real time, but really wanted to be disciplined and wait for a break of the overnight range. This right here would technically be a break below the hinge, and it is a fairly significant drop.

I say significant because up to this point, price was slow and sluggish, nobody was making a decisive move in either direction.

E - Since we broke below the range with force, I am looking for a RET, and I see a decent one in the 15 sec so a put a stop in to go short one point lower and I get filled at 95. I realize I'm going short just at the low of the overnight low, but given the decisive move down, its a fair risk.

F - Here I mark in the SLA entry that is clear on the one minute chart. A few minutes later we break our SL, so I'm happy to be short from a little higher up.

G - It might be hard to see on this chart, but this bar above G I think of as a higher low, so my short isn't looking so good anymore once price goes even above the high of this bar.

I resisted closing, wanting to hang on a bit more, but it had almost been 10 minutes that I gave price time to drop some more and it didn't. Notice my exit is pretty much at a high, a high I use now to fan my SL after price drops below the previous lows. I'm down only 2 ticks, so -$(14).

H - Here would be another short opportunity since we fanned the SL. We also have a series of lower lows, so it looks decent, and we are slightly below the congestion of the past 15 minutes. I think it would fill, and then price shot right back up, to break the SL. (hence good the short wasn't taken)

I - We have a RET now after we broke the SL and draw in a DL. The problem with this entry is that for one, we are 7 points already above the low, and we would be going long right back into the overnight range, so its not a long I even consider taking. It failed right away anyway.

J - Here we have technically an opportunity for a short since we have a SL and a RET. But now we can for sure say that price is in a range of 91 to 97, so we better stay clear of this as well. In fact, this low at 91 is starting to look like a good area to take REV trades.

K - We have a double bottom here at 90. On the tick chart, this would be quite clear if you know to look for it here given the prior low and bounce at this exact same level.

L - We climb back up to 96 and turn around yet again. This is great for taking REVs, but for trending, we now need to get below 90, or above 3803, since 3797 to 3803 is still that range from before.

M - No trouble breaking through here. If I was trading REVs, and I was short from 96, I think 90 would be an automatic sell, and then I guess it should be an automatic buy, but hopefully I would be watching the tick chart to see no hesitation in going lower, and even if it did, a tight stop at one point below what should be the range would get me out of the trade. If I make 5 points up, then 5 points down, and do this at least a couple of times in a range, losing 2 points or so when the range is broken is I think still a statistically positive strategy.

N - So since we broke below the range, its time to start looking for shorts. I notice one here, and one point below this RET gets me in at 85.25. Would you know.. I sold a bottom yet again!!!

Its funny how just within seconds, I am starting to think that hmmm.. this looks like a higher low now. We spend a few minutes bumping up against 87, each time making higher lows on the waves and I'm thinking this doesn't look good. This is exactly the type of action that would make me draw in one of my wedges sloping up that would favor a break above 87, but I am short.. not long!

O - Patience is there, and although I am looking at a 4 point loss at the moment, I am just focusing on price and knowing that it will come down again. It does, right here, and forms a higher low. I could have gotten out here but figured that since it already went lower, it might further still. Lets not forget after all that the reason I went short is because we dropped below the range at 90. In hindsight, the drop was far too quick, call it parabolic or a cascade, and these tend to retrace back up often.

P - At any rate, price makes a lower high this time, this looks good, and I'm still patient.

Q - We match the previous low, but its ok as long as we keep making lower highs.

R - And I'm out! Once again, worst possible place, but I didn't know it at the time, I'm already about 4 points down, and all higher lows don't look good, so I'm not going to keep hoping forever.

And I'm done... 2 hours is good enough.

SUMMARY

Well, I'm down $88 for the day. My first short worked so well right off the bat and I thought I was going down easy street, but alas, it turned, and although that loss was small thanks partly to my quicker entry, the second short wasn't the best.

Was it legitimate? I guess it was an SLA entry, we were below the range, but perhaps the drop was too quick, so I should have been aware of retracing back up strongly.

So now the big picture is that we did in fact still drop for the day. Shorting the exit of the hinge right at the top makes for a 15 point move down. Of course you could never know to buy back a short right at 85, but there was still a down move, and price was often forming somewhat of a down slopping channel.

I took my entries though, which I'm happy about, I stayed out of more trouble by not taking every trade I marked which failed, which is also good, and frankly, the losses don't bother me at all. As Db says, trading well is of utmost importance and this is what I'm striving for and if I worry about the money, it gets in the way. I'm happy with my ability to hold onto my trades today even if they didn't turn out too good. If I go down maybe $1000 I will re-evaluate, but I'm still far from that, and using real money is a great lesson in itself.

 

[k p]

So before I do my prep for today, yesterday while I was still looking throughout the day, I noticed this hinge forming in the bottom of the chart and drew it in as is shown here. I just didn't have the time to watch how it would turn out, but sure enough, it worked pretty well. The strategy was to wait for price to break above or below the overnight range yesterday, which is good in the long run, but what I do notice is just playing off the two hinges, the first for a short as it exits below 3800, and the second as it exits to the upside in the afternoon, would have been for a really good day. Oh well...

 

[k p]

PREP FOR JUNE 20

So the drop yesterday just didn't hold, and before the end, we retraced back up almost 50%. Overnight, we have been continuing the climb. I see a firm bottom in place at 3784, a triple bottom, and at first it looked like 93 was going to be the top of the overnight range, but price has already busted through, so we are practically back into the overnight range from yesterday.

If traders want to make another go for breaking above 3803, we are close enough, but perhaps these same guys who weren't buying yesterday and helped price come down might also not want to buy today and let price come down some more before they start! (this might be a bit of a joke, but often I see the same type of day repeat at least twice before price does something completely different)

I don't want to dwell too much on yesterday since its in the past, but shorting right at the top, either the hinge breakout, or even based on a failure to even test the overnight highs was another good rationale. If I had been in a short from higher up, perhaps I would have held on just a bit longer and not exited my first one as it certainly looks like the first climb back up to 3799 looks like a test of the apex of the hinge, and dropping after that was easier as price just kept making lower highs. If was for sure slowing going though, difficult to see that price was in fact going to go lower, so this is all hindsight of course.

At any rate, attaching the 10 minute chart once again to plot where we are at.

 

[k p]

Oh ya, so as for what to do today, well if they go up at the open, waiting to see what happens at 3803 might be best, although given that we are at 93 right now, if I had the inclination that the highs from yesterday would be tested, why not ride it up 10 points?

If it looks weak, shorting right at the beginning would have its advantages, so you're not caught up in chop a little lower down, but waiting for at least 5 minutes for the opening range to form has generally been good practice. In essence, I'm not as clear what I will do today.

Hmmm.. this could be because I haven't developed a bias for today, which might be good, but I should of course have a direct plan ready for either move. The overnight lows of the range are at 84, and given that we are at about 93, that is 10 points away, which means that if we hit the lows and a short presents itself, a test back up is very possible which might stop me out, but not threaten the short if all we are doing is testing the opening level again.

Gosh... maybe flipping a coin to go long or short right at the open would have a better result than my trading so far! LOL This would get me into a short or long right away, and if price goes against me 4 points, I would just reverse. Haha... clearly this might be terrible on the days where we trade around the mean at the open, but on many days, this would work well too cause!

 

[k p]

A - This spike up just before the open gave me some context for the opening.

B - 2 minutes into the open, we form a lower high and I can start drawing in my SL. As a result, I put in a short one point below the low of the previous bar, and I got triggered at 91.25. (I show the place where I was already thinking to short with my purple down arrow.)

As you can see, the trade works against me instantly, but I'm being patient. (Looks like I'm spending money these past few days to learn all about patience!)

C - We form yet another lower high here, and things are looking good.

D - We even form a lower low here... more good news.

E - Unfortunately, price comes up, breaking the SL and form a slightly higher high. I am going to wait for a wave back down, not wanting to be scared off right away.

F - We come down again, but drats, we form a higher low. I will draw in a DL now and see what happens.

G - Another higher high here. The thing though is that I see we are still just bouncing off the opening high, so my context is that traders still aren't buying above where we opened. But alas, one more wave down and back up was enough to hit the exit on the next bar.

Its true that if I waited a bit longer, I could have exited for about 2 points better, but seeing this drop would have just made me more than likely hang in there longer, thinking its coming back down yet again, and we ultimately have a strong push up.

Its really too bad. I think I jumped the gun too quick to get into my short, but its all CWS, and it looked good at the time. I wasn't too happy only 2 minutes into the trade, it started looking very much like a range, but I thought chances were good we would drop out the bottom, and I had to manage what I had, since I was already in a short, and not dwell on having gotten in too soon.

Having to fan my SL should have been the first clue, and the higher low at F, the one that allowed me to draw a DL should have been an exit which could have saved me perhaps 2 points. So as it is now, I'm down -$(69).

H - We ultimately go higher, and I draw in a new DL.

I - It breaks here, no surprise we bounce off just under 3800, but I'm not sure of where to get in. (The REV trades I think call to just hit a market order to go short when you see the dip down in the tick chart) It continues sideways anyway for a while, and as it goes lower by mere ticks, it just puts us back into that messy range, so not even thinking of shorting. (This is of course unfortunate cause it ends up being the best move today. I don't know how many times I have already thought to just short when we get up to these highs given that its worked so many times in the past when we get to 3800 or above, but alas, I don't do anything about it.)

J - So I didn't do much about the drop, but here at the bottom I am starting to see a hinge form so I draw it in. First exit is pretty quick and then it drops back down to the apex just above 87. I almost shot a market order to go long, but figured I should just mark it in and track it. Lets see where it goes.

The reason why I say market order by the way is because I wanted to get in on the wave down, just as it was turning back up. I'm noticing with all my other entries, I wait to get stopped into the trade, which is supposed to be safer, but far too often it doesn't work for me too well, so I figure if I think its going to go in one direction, just get in right now, versus giving up a point waiting for it to go in my direction. I'm not quite sure how well this strategy works out in the long run, but just something I'm thinking about.

Here at least, right in the hinge, I have the comfort of getting out at almost BE, versus buying above it after it exits and retraces back down. My price risk is a bit higher to go long above the hinge, but at least that strategy doesn't get me into the trade if it doesn't in fact go higher. Hinges do often turn into ranges, so by buying in the middle of the range mind you (or what initially looks like the apex of the hinge), I also have a better chance of getting out BE versus getting in at an extreme if I got in and the direction changes on me right away. (I am of course thinking all this because so many of my trades are either selling a bottom low, or buying a top high, its like a have the power to get in at the worst possible time!)

K - Right here price is following up a DL up quite nicely (not drawn, but essentially the bottom line of the hinge). It isn't a strong move up, but good for at least 2 points to get out anywhere around here if I so desire.

L - Well, DL would break here.. getting out for even a point profit is quite possible. (As it so happens, the dip down was only a test and when I took my screen capture of the chart price is shooting up from the hinge and a test of the apex!)

SUMMARY

Well, another losing day, but its not so bad really. Gotta figure out what it means to hold on, only hoping, and what it means to give price room. After that higher low was formed at F, my exit should have happened as I waited far too long by this point, and my exit could have been for only about a 2 point loss. Time wise, the trade had over 10 minutes to work and it didn't, so that is something else on my mind, and after breaking the fanned DL, that should also have been a sign. Its a great lesson though.

Secondly, that hinge on the bottom, just like yesterday, is a great trade that is working so well now. As I mentioned in my prep, today sure is looking a bit like yesterday with a crummy move down, and then a surprising move up.

 

[k p]

So here we are again, having reached 3807 this time, so just a touch higher, but coming down yet again. For 12 days now we have been bumping up against 3800ish, and upon each bounce back down, we somehow make it up again. So here is a wild prediction. Even though we are at 3792, and hence over 10 points away from the top, if the past is any indication, we will more than likely drop some more again, rather than climb back up. I'm not saying we can't shoot for 3800ish again, but even if we do, it seems quite likely that once we hit the top level, even maybe make it slightly higher, before the day is done, we should also see at least 3780ish.

Now I'm of course not going to make wild bets like this and just go short, but the behavior is all in the charts. The reason of course why I am mentioning this is that while I'm concerned with the minor price movements and hence every tick, the longer term pattern seems to be more predictable and its the bigger picture that should really be guiding me as opposed to these minor little price swings.

We have a fairly wide range for overnight, and its not even a trading range, rather just over a 20 point range that price has moved within. There are so many levels now that we have been here for 12 days that its difficult to spot out the obvious levels (means where traders have made the most trades, and levels that price cannot cross). Hence, I will just have to use SLA more so for today.

I noticed Db posted the straight SLA trades for the 20th. I unfortunately didn't get a chance to inspect in great detail, but they were all by the rules, only rule being broken is that after 2 scratches, he kept showing trades as opposed to waiting for price to go somewhere else. What jumps out at me though is that it looks like if each one was taken and exited at a line break perhaps, the points look like they are still in the positive.

I don't want to develop the bad habit of over trading, but just because one or two trades goes bad for me doesn't mean I should just stop for the day. If I keep the losses small (I already see that I can get out for a better price than when I am usually scared and want to close right away), and I keep following price, then continuing to put trades on is essential, and provides that chance to finally get into a move that really goes somewhere and covers all those little scratches.

I didn't get a chance over the weekend to do an analysis of all my trades, but I think what this will show is that I am trading in the right direction at least for at least 2/3rds of my trades, my exits could be for a better price, and I think I short far more often than I go long. At any rate, I will try and do it during the week. I don't think I have enough data yet to make a solid statement about how I trade, but it should be interesting.

 

[k p]

What an interesting day. The red "O" just shows the opening. I think I will start marking it in now as I find myself always trying to reference this point throughout the day.

A - Fairly instant drop at the open, and we break our initial DL from overnight.

B - First official SLA short here, which I take! The less steep DL from overnight would also have been broken by this point, but I erased it because things started to look too cluttered.

Price goes against me a bit, but I just didn't care to be honest. I'm using my SL as a guide, and I see that price can still go up a bit higher before my trade is invalidated, so I just gotta wait and see. I did of course wish I wasn't short from much higher up. The drop overnight was pretty quick, and the retrace up was less than 50%, so I think I had the LOLR in my mind to be down. I do plan to investigate how probable it is to get into a trade right away at the open and what criteria I should use that gives me a positive amount of predictability, but for now, I just have wishing and hoping! LOL

C - Exit happens 3 minutes later. I'm watching the 15 sec chart, and price is following a nice SL down, but I notice that it had just broken, I notice we are close to the overnight low, and of course I want to protect some profits. As it turns out, it was quite the good exit, with no chance for even a better price.

D - My SL breaks up here, which would have been about a point loss if I waited to exit till here. The climb up is pretty steep, shame I wasn't prepared to go long.

E - I'm itching for a short here. We break the quick stride up, we have a poke above the opening high but don't continue up, and the DL is broken. More importantly, we have this little ledge of the past 3 bars that didn't hold, so once we drop below, it looks solid. Didn't take it of course, still wanting to protect my $26!

It doesn't go far, but there are many chances to exit for a profit, and hardly any exits that would be a loss for the next few minutes.

This is also where it gets interesting. We broke the stride to go down, we can't really go any higher, so its really looking like we are going to be in a tight range for the day.

That short at E would have been at exactly the 15 minute mark, and as Db says, the first 15 minutes should give you an indication about what kind of day its going to be. I do wish I had a plan for trading ranges because the opportunities for the next hour or so are juicy if you are going to be in trading range mode.

F - Can't even break the previous high (this blue dashed line is the mid point of the overnight high and low)

G - Although we slightly break the low at C, its a quick reversal up, and this happens just ticks above the overnight low, so some fairly good confidence in a REV trade to go long.

H - This is now practically a triple top with the previous two attempts to break 3797.

I - By the time we get to here, its obvious we are trading around the mean of roughly 91. I do love the pretty symmetry. This can also be thought of as a hinge, so breaking up or down might be a really good trade, but we may just once again just get to the other end of the range which is just 5 points away on either side.

SUMMARY

So although we are in less than a 10 point range, there is still lots of opportunity to make money, and the price action is certainly looking nice and orderly. SLA doesn't help all that much today, but as you know if you read my journal, these trading ranges offer a great risk:reward ratio if you've got it in your plan and know how to trade them.

As it stands, my initial prediction of hitting the low 80's didn't quite happen as we really haven't gone low enough, but the day is still young, and often in these past couple of months the really good moves happen during the day, not the first 2 hours where most traders are pretty much agreeing on price.

I did unfortunately stop putting trades on much too soon. To be honest, I just wanted to have a positive day. The last two I've had losses of perhaps a combined $150, and so its pretty stupid that being up $26 today would somehow make that better. To my benefit, I don't think I know enough about ranges yet to be trading them, and the SLA trades would really be quite choppy today and hence my other reason for staying out. In fact, the one thing I don't like about SLA trades is that your entry is usually a few points away from the SL or DL. Exiting on the first break will lead to a few points loss, but I know enough now to be patient as price will more than likely come back closer to the entry point again. In a trending environment, this isn't a problem, and the SLA trade is designed to stop you into a trade once its moving back in your direction, so there are lots of benefits, especially if you keep taking trades as you should. But I seem to be stuck a bit in reluctance to keep going, so a first bad trade seems to knock me off course, hence why I think that if SLA would have me be short down below a bar, I think of getting in sooner so I have some wiggle room.

As I'm finishing typing this, when price was here at "J" I was favoring a break lower, and sure enough, that might have been a good scalp of 3 points at least! Lets see if it breaks below the overnight low.

 

[k p]

Well here we go again!

It seems like overnight, we stayed in pretty much the same range as we did all day yesterday. We have a high of 3796 and a low of 3784. At the moment, we are pushing hard against 96 trying to go higher still. There is of course quite a bit of resistance above 3800, and our ultimate high is 3807, so we aren't that far away.

Now 3797 was of course the 50% level of the move up yesterday overnight, so this 96/97 level has some significance.

If we go higher, there really aren't all that many trades up above 3800, so it could be a quick dash up to get to 3807, but then we would need to find lots of people willing to trade up here or even higher, or else we would have a quick drop back down.

Will just have to wait and see what happens at the open. Unless my first trade is an instant hit, I really need to focus on taking each valid trade that setups. Limiting my profits is almost as bad as not limiting my loses, so its something I really need to work on. This of course comes back to the lack of a trading plan and having trust in it, but given how busy I've been these past 2 weeks (which is just coming to an end now), I haven't been able to sit down and formulate solid something just yet.