Trading NQ via Price Action

Just finished reading section 7 of Wyckoff (The first PDF about analyzing the average 50 stocks during 1931). I can see why Db suggested this in my attempt to understand what I am looking for while just watching price.

The addition of volume analysis by Wyckoff was quite intriguing and seems like an excellent filter to use to help distinguish the validity of a bar that moves against your position. For my purposes of course, I will leave volume out of the equation, but I will continue to have it displayed on my charts as I do believe glancing at it every now and then might have positive effects down the road when my brain starts to piece it all together.

It really is amazing how these daily bars from 80 years ago look so similar to the 1 and 5 minute bars that we are using for trading the NQ. Seems like excellent proof that price is moved by behavior and humans just haven't changed all that much in terms of fear and greed in the past 80 years.

What I got out of this PDF was a continued example of how to think of what price is doing. Phrases such as the bars rounding off at the top to show that the initial thrust of an up move is fading. Or the fact that a bar might have a wide range that but closes close to its low is very telling. The idea that price needs to form a congestion area before taking off in the opposite direction of a move is also well highlighted. And of course, Wyckoff looks for price areas that might show support or resistance, paying attention to a previous high or low that needs to be cleared to show a continuation of that move. I think Db is Wyckoff reincarnated!!!

Enough conclusions for now though as I don't really know enough to be making these assumptions. More reading awaits.
 
NoDoji said:
You nailed it; you're looking for certainty, and the fact that price has moved a "long way" in a certain direction convinces us that it's "due" to reverse. And so we think that little higher low or lower high is THE REVERSAL.

BUT...as long as there's a key level a tradable distance away, I've learned to just keep on trading the retracements in a trend.

The three charts I posted at the start of the thread below illustrates the trend continuation setups that can look and feel like reversals, but as long as a key level is still above or below, it's worth considering them as continuation setups until that level is reached.

http://www.elitetrader.com/vb/showthread.php?t=281746

I consider a key level to be a longer term trend line, a "previous S becomes R" or "R becomes S" horizontal line, a previous day's close/high/low, a longer term trend line or moving average...pretty much any level that lots of eyes are watching.

Even those levels get breached, but until price reaches them, I consider them profit target magnets for with-trend continuation trades.
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NoDoji, Thanks for sharing and it is a good thread & example.

To be honest, it is quite easy to trade in the trend, technically you only need to follow the trend and buy /sell anytime (follow the trend), and make sure you put your stop in correct level, swing your profit. I know you prefer the pull-back and confirmed by the signal bar (L1, L2, H1, H2, micro-channel break or whatever your "Master" called it, you know what I mean :) ), but for me I just go straight in and make sure I have a good stop. It works and money come in.

The hard part is the whipsaw or trading range day, it is easy to say avoid those days, but you won't know it is TR day until in hintsight. Sometime the market is in TR for for hours before it develops a strong trend, so if you completely avoid those "suspicious" TR, you will miss the big juicy part when the market become trend. The way to trade in TR is opposite with the trend day.

What is your thought ?

Disclaimer: I have my own QA trading method so I never trade TA in serious way (and my QA trade is profitable as far as the market stay volatile), but I did know TA :)
 
dbphoenix said:
But you're creating the overload.

1. Track the balances between supply and demand with straight lines.

2. When price takes off in one direction or the other, wait for a retracement.

3. Enter on that retracement, a few ticks above the trough of a \/ retracement or a few ticks below the crest of a /\ retracement, and stay in until your line is broken.

4.When the line is broken, exit and wait for a retracement in the opposite direction.

5. Continue until you enter chop (two consecutive trades that don't go anywhere and are accompanied by a higher low and a lower high, i.e., not trending).

And that's it. If a trader brings a lot of baggage with him, this gets real complicated real fast. But that's the trader's choice, not a characteristic of the approach.
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Given that perhaps some of the chat members have not been able to see the exercise Db provided at the beginning of the year and last year, I am going to do exactly what was posted above during next week chat sessions, I will post the results of that drill in my journal at the end of the session with the respective P&L. As Ninja provides it. Will not pay attention to 50%s or S/R or AMT, only the SLA Drill. That will also help us with the joint exercise. :)
 
niko said:
Given that perhaps some of the chat members have not been able to see the exercise Db provided at the beginning of the year and last year, I am going to do exactly what was posted above during next week chat sessions, I will post the results of that drill in my journal at the end of the session with the respective P&L. As Ninja provides it. Will not pay attention to 50%s or S/R or AMT, only the SLA Drill. That will also help us with the joint exercise. :)
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If you're referring to the three-week-long demonstration that began Jan 1, it's at the beginning of the Ghost thread, posts 1 and 2 and following. There are also several series of hindsight charts at the beginning of the Son thread. None was done for the Bride thread, the "bare-bones" thread, though perhaps should have been.

Those who want to follow the "real-time" tracking during the Son thread that we did on the morning of 10/11, that begins here. The charts that accompany the posts begin here. All this could be combined into a pdf, but it would be a lot easier to just start over. But for those who just can't get enough of these posts :), there they are. And those who want to see me smacking Niko around will enjoy them in a different way.
 
I wound up reading again that 10/11 arc referred to above. It was a lot more interesting than I remember, sort of an illustrated chat log. There were some excellent questions, and the questions were very likely much different in "real time" than they would have been had we had been pouring over yet another hindsight chart. For one thing, I had no idea at 0928 what price was going to do, and the fact that it behaved in such a spectacular way was a challenge to everyone.

Not that I'd want to do it again . . .

Now waddaya say we give k p back his journal?
 
dbphoenix said:
Not that I'd want to do it again . . .

Now waddaya say we give k p back his journal?
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I consider this a good use of my journal! If we were trading via an astrology method, I would say all the stars are aligning quite nicely for Monday morning! I am seriously quite excited and grateful to have gotten on board at just the right time to see this all happen and be a part of it.

Niko, its great that you are taking this challenge on, I know I will benefit from it greatly. And Db, how awesome to read you say that the previous link where you had done it before showed how different the questions are in real time versus if the chart was pulled up in hindsight. Like learning to ride a bike or learning how to swim, all the theory in the world somehow gets lost when you are placed on the bike or thrown in the water.

Niko, I do wonder what your rules will be. How far away will your entry stops be from a break of the SL or DL after the retracement? What will constitute a break of the line? Will you use the 1 min chart or the 30 second one that you got me looking at now since it just shows the action clearer/earlier?
 
Ok.. so here we go... my assessment of Feb 24, 2014, the day when Niko was going to do a straight mechanical approach of the SLA.

First off, confusing start. Db was already in chat early, and he was calling out some lines that were broken. My confusion was that I couldn't tell how he was drawing them in. I was looking at 5 min charts, 1 min charts, action from within the past 2 hours, action from what happened over night. This set up beautifully I think how the rest of the day went because although we are trying to formulate a mechanical approach, the parameters aren't set out in stone yet. Refer to the first pic posted, "5 minute just before open". My first question would be how far back do we go to establish where we are in the trend? If we are going to starting right from open, do we just go back the past 30 bars on a 1 minute chart? Or can we take into account more action that happened over night?

So lets now move to the 1 minute right at open. I will be presenting a series of charts, the next best thing to real time, so you can see how this all evolves and how difficult it is to call it in Real Time. As you can see, all I have is this supply line drawn it, and it will be a while until its broken... so what to do? Watch.

Next picture, only 4 minutes later, SL is broken as the action from the open is strongly up.

Open plus 5 shows an initial demand line connected with the first two bars. Can we even draw a DL with just bars and not swing lows? Furthermore, can those areas with circles in the picture be a retracment? Clearly price was higher in the previous bar as it didn't close on the top, then opened lower than the top, came down a bit more before it went up. If you were looking at at tick chart, the retracement would clearly be there.

Open plus 16 now tried to show a bit more of the action and the thinking is written on the chart.

Now I can continue but it would be pointless because to me at least, the lack of stringent rules has already left me needing to fix this first bit.

So lets just get right to what I am thinking. In the open, I asked how we are defining where we are in the trend. If are using a 1 minute chart, is our first line going to be drawn looking at the action from only the past 30 minutes or the past 8 hours from over night? This will affect I think if we might be starting with a DL or a SL in play.

Second, how tight are we drawing these lines? Can we use two consecutive bars as a demand line? At the open this morning, price shot up. It wasn't until 12 minutes after open that we had another swing low to connect to our low at open to be able to draw a DL if we are in fact going to be looking for swing lows and not lows of just opening bars that happen to be consecutive.

Third, what constitutes a retracement? Refer to the retracement image. In here we have circle a and b. In circle a, we can see bar 1 makes a high, but closes lower. Bar 2 opens at the close of bar 1, goes even lower, but ends up higher and closes higher.

In circle b, the high of bar 3 is less than the high of bar 2, and hence this qualifies as a traditional retracement. But it probably isn't any more of a retracement than the previous example if viewed on a tick chart. So will we be counting only circle b as retracement and not circle a?

Ok... so now that I have confused everybody, I would like to say how important it is to make your own rules and follow them. Although this SLA method I'm sure work, there seem to be subtleties contained within that need to be ironed out for it to be a purely mechanical approach. Maybe because we had the parabolic moves today at the beginning this appears more complicated then it should be. But I feel like I need some more rules to know how to act as these bars are forming because I am realizing that in real time, there are too many questions.
 
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