Trading NQ via Price Action

[k p]

A - Strongly considered a short here. One voice is telling me that we aren't exactly at an extreme, while the other voice is telling me that 4080 might not be tested again and getting in on the ride down to 54 is a huge win. Well, the trade is gone before I can make up my mind.

What I have also come to learn is this. Chasing, which I have done, I usually do after multiple thoughts of wanting to, many seconds apart. So by the time I have gotten into a trade, it is sooooo far gone. But I think that if I was nimble and able to react instantly, chasing might just be getting into the move. Even if I get in 2 points away from where the ideal entry would have been, a good move is always at least 10 points, so the profit is still there. Its when it takes me 10 points to figure out that I should get into the move that causes me to get in at a less than ideal time.

B - Anyway, so I watch this drop past this recent swing low here, and no problem for the down move.

See, this is where my brain is of no use. I first miss the good entry at A. Then I see this swing low at B I want to clear first. Once this is clear, then I think darn, we are even further away from the initial entry and with each point further away when price is moving quick, the chances for the end of the move are that much great. So even as price continues down, I think of reasons to not get in, until, finally, 10 points later, I want to be in so bad that I enter.... at the end of the move!

C - So I finally get in on the short here, just below the RET, and also well below that other swing low I've brought forward, but sadly, because of a slight thrust up, I start sliding my targets and I'm out for 1 tick profit.

D - I see price going through each level, and because I didn't know exactly which I would rely on more, I'm not quite sure what to do. We end up going 2 points below the red line, which is really that more prominent swing low on the daily chart I've been talking about. Even on the 15 sec chart I could see there was not a continuation so no way to really get into a trade.

But as price comes back up, all these level make me not know where to get into the long.

E - I finally get into a long here, having just slightly cleared the previous swing high above C, but once again, I'm scared of price turning on me so I'm out for just 1 point profit. I'm also feeling bad for getting nothing on the way down, and of course I know that the long trade really started much further down below.

SUMMARY

Today really was quite a good day. We have 20 point moves, and price reacting to levels. The problem is me. Genetically, I think you have to be born a trader. Maybe the skills are learned early in life, but either way, my natural instinct is so far from what is necessary that this really is a constant uphill battle.

Today should have been a $400 dollar day. 10 points on the way down should have been easy and 10 points back up was without question possible.

Well... looks like I end at -$1.

Actually, that's a lie. I took one more scalp as you can see on the chart. Price went against me instantly about $30 so I continue with the sliding of targets and I'm out for one tick profit, hence $1 profit, so I end my day at $0.

I do think that we will make it down to test 54 again, or perhaps the new low at 52.50, but this could take all day, and I think my nerves are used up.

A TANGENT

Just before I go, there is one thought that popped into my head. I have a sense of what other traders are doing based on their journals, and I understand the technique that Db teaches, but this still doesn't get close to showing me how someone trades, or rather, how a good trader should trade, logistically.

Here is what I mean. Its one thing for a person to tell you that in order to get a woman's number, you just have to talk to her, find out what she likes to do, and maybe suggest that the two of you get together again to talk further or partake in some activity. You might even learn specific lines you could use. But the execution of all this would still be a huge mystery, and lets face it, it isn't so much what you say that matters, but entirely on how you say it, both with words and body language.

Likewise, I see that I'm not quite sure how I should be acting when I'm trading. I'm not exactly sure how far in advance of a trade I should put it on. I'm not sure how to react when I see price thrust up or down. I know in my job how I need to act throughout the day, and I know how to speak when dealing with a customer versus talking with co-workers over a lunch break. But when it comes to trading, I wish I could see how an excellent trader carries himself. Having someone sitting beside you, a mentor, would be most invaluable. Because my problems are clearly psychological, it would be nice to have someone to talk me through it. But this being a single player sport... I guess I gotta learn to rely on just myself!

 

[k p]

Took one more trade. As price was coming down, I should have taken a short, just because testing the previous low was so likely but I waited. I have the low from D extended forward by the cyan support line.

Price hit 52.50, and I put in a stop to go long at 53.75. If price came back up to get a fill, it would tell me that price is coming up. There usually is a bounce at these levels, if only for a few points. So I get my fill, and I'm not even looking for a 10 point move, I'm just looking for a win. I slide the profit target to something that will make me feel like its a winner, and I'm out for it looks like 7 ticks.

So I guess I end up day at +$31. Its a shame because as I take this screen shot you can see price already went up 3 more points. But jesus, I think I need major rehab and crawling with baby steps is at least moving forward.

Let me just upload this little blotter I guess its call with finally a green color.

 

[k p]

Well my entry was good... but I see that trade from 53 is now worth 20 points.

 

[toucan]

A TANGENT

Just before I go, there is one thought that popped into my head. I have a sense of what other traders are doing based on their journals, and I understand the technique that Db teaches, but this still doesn't get close to showing me how someone trades, or rather, how a good trader should trade, logistically.

Here is what I mean. Its one thing for a person to tell you that in order to get a woman's number, you just have to talk to her, find out what she likes to do, and maybe suggest that the two of you get together again to talk further or partake in some activity. You might even learn specific lines you could use. But the execution of all this would still be a huge mystery, and lets face it, it isn't so much what you say that matters, but entirely on how you say it, both with words and body language.

Likewise, I see that I'm not quite sure how I should be acting when I'm trading. I'm not exactly sure how far in advance of a trade I should put it on. I'm not sure how to react when I see price thrust up or down. I know in my job how I need to act throughout the day, and I know how to speak when dealing with a customer versus talking with co-workers over a lunch break. But when it comes to trading, I wish I could see how an excellent trader carries himself. Having someone sitting beside you, a mentor, would be most invaluable. Because my problems are clearly psychological, it would be nice to have someone to talk me through it. But this being a single player sport... I guess I gotta learn to rely on just myself!


KP... I traded with a friend of mine for 3 years and we shared everything that we did. He was never profitable and here is what we found....

1. Haven't found a trader yet who could take a system/process from another trader and make it work. I have seen traders start with other systems and then substantially change it to "make it their own" and turn out profitable, but it takes a very long time.

2. Although we traded side by side, my friend could never overcome 2 things: exiting profitable trades too quick and holding losers too long. He finally gave up and started trading much longer term.


cheers
toucan

 

[k p]

A TANGENT
2. Although we traded side by side, my friend could never overcome 2 things: exiting profitable trades too quick and holding losers too long. He finally gave up and started trading much longer term.

cheers
toucan

Ouch... I have shown to suffer from number 2!

Yesterday is a prime example of both holding onto losers and giving away winners. Today, just now, the last trade where I went long at the bottom I knew I was getting out far too soon perhaps, but I just wanted a winner. And now the trade is worth $400.

Its funny you mention this just now because I too have been repeating to myself one of that age old trading wisdom of "cutting your loses short and letting your profits run". Today was really such a good day where things worked like clockwork. I honestly think many good traders could have made easily 50 plus points on only one contract.

Anyway, I too have been looking at longer term but the stops would be far too wide for someone as panicky as me. Plus what I really want to do is learn how to make an income from this.

In terms of the first point, I completely agree as well and why I haven't been able to make SLA work even though it seems to clear and is backtested to be profitable. Everyone sees something different, and what stands out for me are these horizontal levels or support or resistance. The entries are clearer, the exits are better defined I think, and once I learn to just get on board and exit quickly, which is possible if you're taking trades at the extremes, then this I think will be the basis of my plan.

Thanks for sharing this piece of info.. it really helps solidify what I was already thinking!

 

[k p]

Well.. I did it again!

Took a REV trade off the OH, but got in a bit early as an entry triggered 2.5 points below the actual level of 4080. I knew that my stop has to be on the other side, which I had at 4081, and so with my entry at 77.50, I was facing not the tightest of loses.

A - You can see price inch higher, and then come back down to my entry 3 times! This level of my entry sure was acting like quite the little micro support level. Even while watching the right tick, it became pretty apparent that price stopped right here, lots of buy orders I guess at this most recent swing low. This told me that for price to come down even further, all of these buy orders were have to be used up and we would have to run out of buyers if my short is going to work.

B - We in fact do hit 4080, but only for a couple of transactions and then come down again.. good sign.. but...

C - This is the 3rd instance of price bouncing off my entry. I had my profit target one one tick below my entry now just so that my commission costs would be covered.

It took from 12:09 to 12:25, over 15 minutes of sitting through this torment before I was finally out.

My entry was clearly a bit early, and my exit for $1 is I think justified given how long this took and how much support my entry level seemed to have. Its true that I could have gotten a few points out of this trade, and who knows, by the end of the day this might even be a 10 or 20 point move down, but the less than perfect entry makes me happy to be out. I could have stayed with it and just changed my stop to BE now, but of course the fear is that getting the fill on my exit at one tick profit might be all there was so take the $1 while you can before price shoots back up!

I do consider this a win though because it was a trade put on at a level that had a reasonable chance of producing a good trade and the placement of the stop loss was well understood. I would have held on for more profit if price did in fact do what I expected it to do.... drop!.... but since it didn't, the exit for a tiny profit is what was the game plan half way into the trade.

So my day ends at +$32.

 

[k p]

O - So as always, my open is a bit tough to get right. The activity generally picks up about 30 seconds before 08:30 based on my time, but is this just lots of trades happening before the open or is my time off? When the data is reloaded, things shift, and sometimes this changes my view. Anyway, so the opening is either here, or a bit higher, which of course then changes the level of my OH.

A - At any rate, its obvious now that price quickly goes up, and if I was taking trades based on my bit of research, once we move about 2 or 3 points above a level, the REV trade is no good, and going with the trend is called for. I'm not sure what I was thinking at the time because it seems quite clear here, but for some reason, I didn't think to put in a long, mostly because I was just scared of being the guy to buy at the top.

If the long is to be considered, the sooner its done the better because the PDH is just a few points away, and if the REV happens here, then I would need to get out of the long pretty quickly.

B - Breaking above the PDH isn't too difficult, but we can see quite a bit of overlap here, so still not sure about where to get in. Given the overlap, the uptrend is pausing, so it might be best to wait for a good place to go long as opposed to being caught up in this chop.

C - Considered a long here. Not only does this bar before here not overlap as much with the previous bars, but if this PDH level is important, then this bar below C comes down to test and REJ this 91.50 price level now. So going long one point above this bar would be sensible, and a stop just below the bar, which also then puts us below the PDH would be a good place for it.

I like how when I'm thinking about a trade now, I am also looking at where to get out, and by focusing on just the extreme levels or rejection levels, the exit is pretty clear since its just on the other side of the level, and the closer I set into the trade to the level, the less of a loss that has to be taken on the trade. Some members have been emailing me over the past few weeks and each brings somethign different to the table. With having exits clear in my head, (I don't like the idea of profit targets though), I know exactly what I'm going to risk, and if I say my stop would be 3 points away, as long as I'm ok with risking $60, then this should be a trade I am comfortable to put on, and then of course I have to be very firm with my stop. So the point here is that once I know all the outcomes, the fear should diminish.

Anyway, so the long here would have been great. In fact, I even had to go to the bathroom, so I told myself if I go long at 94 and put a stop at 91, I could at least just be in another room for a few minutes and not freak out about what is going to happen tick by tick. Once filled, price would go against me by only 1 point, and then of course 5 minutes later I would already be in the money. Oh well...

D - So based on the DL I have drawn, and based on what looks like a HL here by one tick (this bars opens and closes on the low), it appears as if this trend is running out of steam. Selling below this bar might be smart, but since price never comes down, it would never trigger. When we do break above the highs at D, we now have the level of 4101 to deal with (stuff that might happen though should never prevent me from putting on a trade... as Db would say... deal with it when it happens, we can only act based on what we see happening right now)

E - So once again, we broke above, we have a minor RET here, and going long here if price comes back up could be legitimate. I think at one point I even had a trade on for a minute, but since price didn't come up fast enough, I took the trade off. I was also bothered by the fact that price has already gone up almost 20 points, so getting into a long would be so late into the move.

F - This might be another place to go long given the test and REJ at G. This trade would for sure trigger but not go far.

G - Given the REJ here, can I believe that this level of 4101 is prominent enough?? I know that when you get your levels right, the juiciest trades happen here, be it a breakout of REV, you just have to hunt for it on the tick chart and get in as close to the level as possible.

H - This bar breaks the fanned DL, but it also rejects going down, and is a higher low above G, so even though we are going sideways, no need to panic if in a long.

I - Here we have a slightly lower high, but only by a tick really.

J - So we start coming down, passing through the swing lows at G and H, and going below the 4101 level. I had wanted to go short a little higher, but for some reason, my price ladder kept saying I would go long instead of short when I was dragging the STL icon and dropping it on the sell column below the price. So I fumbled around a bit, and got in not exactly where I wanted to. Price went against me a bit, but I was clear about my stop being a point above this level, and so when price did come down again, I got out.

I am of course fully aware how in the past few days, I've been taking tick profits even though I've gotten into the moves fairly early on, and so I knew it was going to hurt to do it yet again, but I was feeling a bit uneasy about this trade given the huge rise up and the slight fumbling around.

I still have no idea why this was happening, and its a good thing I have the confirmation activated, but this confirmation is slowing things down too much so I need to figure this out. I for sure could have gotten a bit more out of this trade, but oh well. Lets face it, a long from the beginning was the trade to put on and hunting for short back down after such a good move might not be a huge move.

So I'm at +$11.

K - Price comes down here and although I have been looking for more shorts, I don't take any. This is turning out to be a range, and this level is exactly 50% of the up move from 4086 to 4105. So with price stopping at 50% of the up move, this still shows strength.

L - We do drop below, but so much of this is now too random for me. If we aren't at a major swing point or level then getting into moves is just too tricky for me.

SUMMARY

Shame I didn't do more today. I almost think that I might need to take my hands off the mouse once I finally put a trade on. As long as my stop is 3 points away, this is good enough I think to act as a legitimate stop that isn't just a disaster stop. This way, I could walk away for a few minutes and come back to see where the trade is. If I get stopped out for the loss, it would have happened anyway, but by not freaking about every tick, I might find that price has actually moved far enough away in my direction that I can collect a profit for more than just ticks.

Well, so it looks like my day ends at +$11.

 

[k p]

Ok.. here is what I'm looking at for today. I have my PDH and PDL levels marked in green, complete with the mean. I have the overnight levels and mean in blue, and the red lines represent major swing points that are only obvious on an hourly or daily chart. You'll notice that at "A", price turns around, and this happens to be just two ticks above that 4101 level. If I was around at the time, I would have taken the REV trade once seeing the drop down on the tick chart.

Applying SLA in the middle of nowhere was difficult for me, but taking these trades at the levels I'm watching seems to have a much higher success rate. If price penetrated and retraced a bit, I would take a trade going with the trend if it went about 2 points or so above the level.

Anyway, so that is gone, and it looks like I will have to wait for either that level to be tested again, or to make our way down to the OL at 85.

Yesterday I saw that hinges also launched great moves the whole day. The best one was the one that formed shortly after I left just before lunch eastern time. It gyrated around the 4101 level, and when it dropped out, there was no looking back. This type of action worries me the most, when price gyrates around the level I'm watching because it doesn't make a conclusive move above or below the level, so my approach might chop me up. But what I do know is that if a trading range or hinge forms, then taking a trade once it leaves this usually leads to a very good move.

I think that for today, I will have have to focus on not letting a trade stop me out at BE. I think going forward, I should either take the 3 points loss, perhaps even less if I see the trade not working, but in no way should I take less than a 3 point profit. Far too many of my trades in the past weak I have ended for a tick or two profit that took off eventually and I was in right at the beginning.

Ok, so this is the plan. What I end up doing, well... that is a whole different matter! I'm noticing we are just bouncing off the overnight mean at 93, so perhaps we will make a run for 4101 again.

 

[k p]

A - Took my first short here. It wasn't exactly well thought out, just following price down and thinking I can already be in a short if we penetrate the OL or I can get out BE and even go long in case we have a bounce at the OL. I exit pretty quickly though because...... my entry was made in haste.

I have noticed that often getting into a move right away is fine... most of my loses have been because I get into a move 10 points into the move!!! So just the simply tweak of getting in sooner would make a world of difference, but of course getting into a move off an extreme level is best.

So I made $11 on this one.

B - Take my second short here. We drop below the OH, and here at 83 puts me two points below. This means that a 3 point stop loss will be at 86, which is 1 point above the OL, so these are numbers I can work with. What's lost in the chart is that it goes against me right away, but not for more than a point.

I surprisingly feel not too bad. Knowing that I will either get a profit or a 3 point loss makes me feel calm. Its almost as if those tick profits actually hurt me because I know its stupid, so taking a loss is almost better than a 1 tick profit. The 1 tick profit is an emotional loss, and these really add up.

C - I am going to go for a 5 point profit.. don't want to be greedy, and of course an exit should be made based on what the market tells you, not a profit target, but it would be good enough for at least one day. As you can see though, price only makes it this far and turns around. It comes back up and I say screw this, I'm at least gonna get something out of this trade and close it.

So I'm at +$32 now.

Its funny because when I can see that a trade stops working, when the right tick is clearly making HH's and HL's, I don't think fast enough to just go in that direction, but a long is certainly called for. The action of that right tick, how it moves, seems to really show excitement, and even if price starts to drop after a long is entered, you can see that a RET down doesn't have the same excitement as went price is going up, so this is a good thing to note.

D - Here is an SLA long that I almost took. I liked how it was now above the the OL, but since this level was penetrated already it might not mean much anymore. Had I gotten in at 86.25 where the entry is, price moved against me over 2 points right after the entry would trigger.

E - This is the swing low I would be watching for an exit, and we never do get this low. So for 3 more minutes I actually have the ability to enter at 86 again, but I just don't take it. Once we break above the entry, by then its too late. I might have also considered this is a mini trading range, between 84 and 86, so buying above this could also be good, clearly it would have been, but oh well. Shame that exit of my short down there at 81 isn't in fact a SAR to go long instead!

F - So we stop here. I wish I knew exactly where the opening happened, but perhaps it isn't all that important since price is continuous. It is roughly around here, and I do think the opening level is somewhat of an important level to watch as well. Here we can't go past it, so this is good for another 10 points down, but I'm not that eager to get in.

G - Here we almost make it to the low at C, but not quite. The market can certainly set its own levels during the RTH session, and it looks like this is what is happening today since price hasn't gone above the opening level, or now it can't go below the low after the open. The REV back up happens exactly one point above C, so at 80 vs. 79, but if I had this marked as an important level, I would consider it close enough. Oh well, these swing points I haven't seen as happening often enough. At least this range is about 12 or 13 points wide which is wide enough to trade.

H - So by about here, this is now shaping up to be one big hinge. The highs are certainly not holding up as well as the lows... but lets see which was it breaks.

I - So here we are breaking out of the hinge. An entry right here would be getting in right away, but that swing low at C might provide support. I had a short on just below this but it didn't trigger, and price just ends up going back up.

J - Now of course if I forget about the hinge, which makes me favor the short, but instead just see the bounce at C and G, then hunting for this REV trade at J would set up a nice long given that price only goes 2 ticks below C.

I really don't know how to play this so better stay out.

K - Looks like this hinge is holding up pretty well.

L - Given that the highs on the hinge keeps getting lower, I favor a short and could have taken one here. Yes that level at 79 is providing support, but since nobody wants to keep paying more as the upper line of the hinge tracks down, I suspect the bottom has to fall out. (unless of course it break ups! hahaha)

M - Wow.. we found buyers at the exact level of J. That was a good scalp which could have had a really tight stop in case price broke through.

N - Yet another lower high.

P - This looks like a juicy REJ bar. When the next bar doesn't go lower, it usually sets up a really nice long.

Q - Damn... there it is, and price also finally makes a higher high.

R - Broke lower by 1 tick now but still reversed up. Looks like it even broke the down trend from Q to R.

Ok... this hurts. I have this strategy fairly well worked out in my head, but I'm just not taking them. I guess I expect that once I finally put the trade on, it won't work anymore (that is the fear... that once I start.. it stops working). This level at 79 is only important based on the previous few occurances of price coming down here so it isn't a major level like some of the other ones in prep, but its clearly working!

By now of course the hinge has turned into a trading range, and I'm clearly not taking any trades anyway so might as well pack up for the day.

SUMMARY

So I end up at +$32. That last REV trade at R is worth over 5 points now. (make that 10 points)

 

[k p]

Son of a bitch.. what a day to not be able to come back in the latter part. So it looks like there was a nice 60 point drop. No way to know what I would have done of course but here is what I see.

S - Price makes it to within 3 points of the previous ultimate high... not quite close enough to maybe consider a REV trade before it starts to really drop.

T - Continuing down, we see a bounce here which is very much at the low of a previous congestion area.

U - This previous swing low of the day provides excellent support, as these swing lows often do, if only for a few points.

The point for me is that taking a REV trade at these swing lows allows for a trade to be placed at a precise level with a very small loss since my exit is well defined. If price penetrates more than a point or 1.5 points, its an instant exit. But both here at U and at T, I can see that at least 5 or 6 points is possible in each bounce by going long. When price does come back down again, going through the level, especially at U, its easy, so then taking the "with trend" trade is called for, which in this case also works as well for at least another 10 points down.

V - Here an instant SAR would work beautifully for a good 10 points back up. This level is just so important now and even for me provides a trade that must be taken.

Well... there you have it. When you focus on important levels, when you focus on areas of previous rejections, this might almost be easy.

This gets really interesting from a daily chart point of view now. We continue to have support at 54, but we cannot seem to break out too far above before coming back down. Hmmm....