Trading NQ via Price Action

[k p]

A - This is a failure to reach the opening high, and technically a break of the earlier DL with the RET so a great place to take a short. Exit taken just based on watching price. Total +21.25

B - Higher low from the previous swing low, should have taken a long above this bar for at least a scalp. (this turns out in fact to be a strong move up)

C - Just under 50% of the move down.

D - We are struggling here, but we do have more than a 50% RET of the down move, and a beautiful series of higher lows all the way from the bottom.

E - I am just enjoying watching price now, and its simply amazing to see price come all the way back up to the top. Its a perfect illustration of the importance of just following price. First it went down, then it came back up, and money could have been made on both moves.

Although I didn't officially take that earlier long above the bar at B, I thought that it was a good place to take it. Being careful to not want to be right for the sake of ego, I simply mention this as an illustration of using all the knowledge learned thus far to make an educated guess about what price is telling me, and the failure to make a lower low said maybe we will go up instead.

Tired today so calling it quits early, but what a great day.

 

[k p]

The trend from overnight was somewhat up, but the preceding action of the past hour gave me no indication as to who was in charge. We had a fairly tight range of 64 to 73 for the past several hours.

A - At the open we have price dropping but no RETs.

B - After hitting a low and coming back up, price gives us no RET for a long. This is a shame as this move ended up being 30 points to the top. But what can you do, no RET, no trade, and patience is necessary so that only the best opportunities are taken.

C - We hit a high here and watching the right tick shows how price really slows down.

D - DL broken here.

E - We try to go higher, and form a double top with C. Now I'm really looking for a short, but once again, no RET, and then we have a break of our SL.

F - Price forms a slightly lower high from C and E

G - Once again, lower high. So naturally I'm looking for a short, all the while keeping in mind that we haven't been able to break out the bottom of 86 either. This wasn't the case for the first few instances of hitting highs, but it becomes more apparent now. So even a posible short would worry me at this point as we are forming a range.

We spend the next 15 minutes range bound, and altough we poke above the highs of C and E, watching the right tick it seems that buyers just don't have it in them for a real BO from this range.

H - First legit trade I actually see, a short below this crest of the RET, not triggered. Sure I would be taking it in the range, but you never know when it will break out.

I - For the purposes of completeness, a long could be place here as we technically have a DL line now after our SL from earlier was broken and below I we have our RET. But sicne we are in a well established range, I'm not taking it.

J - Possible long entry, but slightly worried that we are just at the top of the range and haven't broken through yet with conviction.

K - As we are heading back down now, if we have a RET for a short, I'm thinking in my head that Db would say "Do traders really want to end up back in that trading range that took so long to get out of?" So not sure what to do here. Lets see what price does.

L - This is where our short would go. Over the next few minutes, we don't appear to be heading back into that earlier range, but we also aren't going higher, so yet another range it seems.

No trades actually taken today, what a shame. But rules are rules, and since there was no RET on that up move just after open, it couldn't be taken. There was no great RET of the up move either, so unlike yesterday where the short down and the long back up had plenty of opportunities. Oh well....

Coincidentally, hitting the high of 3600 seems to be the top of the hourly channel that can be drawn in from the 21st. So following AMT, price moving down seems to be the LOLR.

 

[k p]

Here is my crudely drawn hourly channel if anyone is reading. I am following all the other journals and I see a few different takes on these hourly channels so I'm still not as well versed in AMT as I think I am with SLA. The trouble seems to be when we draw in a new channel versus still follow an old one once price breaks out of it.

Anyway, here is what I was referring to when I said price stopped at 3600 which is the top of the hourly channel as I had mine drawn in (blue lines). The red lines refer to an earlier and longer term channel.

 

[niko]

Here is my crudely drawn hourly channel if anyone is reading. I am following all the other journals and I see a few different takes on these hourly channels so I'm still not as well versed in AMT as I think I am with SLA. The trouble seems to be when we draw in a new channel versus still follow an old one once price breaks out of it.

Anyway, here is what I was referring to when I said price stopped at 3600 which is the top of the hourly channel as I had mine drawn in (blue lines). The red lines refer to an earlier and longer term channel.

Nice job, I missed this one, but don´t go to micro or it will drive you crazy.

 

[k p]

Nice job, I missed this one, but don´t go to micro or it will drive you crazy.

I completely agree. I try and just stick with a longer term trend for these channels. But I also see how Db posted some charts not too long ago where possible new channels have been rotated down so I'm trying out different things here as well.

 

[dbphoenix]

Nice job, I missed this one, but don´t go to micro or it will drive you crazy.

While the upper trend line (supply line) is a good idea -- and I wonder how many people shorted 3600 today -- the channel itself is not unless and until it confirms itself, and, if it hasn't, the mean should not be attempted. In order to have a mean, you have to have some sort of recognizable range. Yes, one can do it mathematically, but the only point in calculating it at all is to provide an edge, and if traders aren't trading off it, there's no edge to be found, or at least one of any practical value.

 

[k p]

Tough day today. One hour before the open we had a good uptrend, illustrated by the first DL which does break.

A - So we draw in a SL and place a stop to go short here. For now, before the open, I am just warming up so I'm not actually counting these as trades. It would be stopped out for a very minimal loss.

B - Draw in DL and place a stop to go long, also has to be scratched for minimal loss.

C - So here we are, just before open, and both long and short positions didn't work, although I am thinking we still had a strong move up to this point. Price drops quite quickly, but just as quickly the low is rejected.

D - Price rallies in a big move, far too quick, so looking for the drop back down.

E - We ultimately hit a high of 3600, and I'm once again watching here to see if 3600 is as significant as it was on Friday. We do appear to bounce off, but nowhere to get in yet. (I have since read Db's new PDF and he does clearly state that RETs do happen within the one minute bars when you are watching the right tick. So since I have always wanted to look for these to get in sooner, I see that it is legitimate to do so.)

F - Hitting the price at F represents a move down of more than 50% of the initial up move, which once again was very quick and offered no support for price.

G - Price does although make a move up, forming a LH from E. Perfect place to look for shorts now, as I type this. But in RT, I am seeing that strong rejection at C and the move up from overnight, and talk myself into not thinking about a short just yet.

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A quick detour if I may. I spent the weekend reading "Nature of Risk" by Mamis after the recent discussions. What an amazing read! I enjoy well written literature, an important quality that is completely separate from content, and I am enthused to find that it reads quite similarly to how Db writes. I'm not sure if this is a coincidence, or if Db developed his thinking patterns after studying all of these materials, but its wonderful that everything from Wyckoff that I've read to Mamis now and to Db flows so well and its as if it is one continuous thought from one person.

Within the first few dozen pages, I see a clear example of TDTDB, and although Mamis doesn't call it this, the idea is identical in both thought and language. It is absolutely reassuring to be reading materials that flow so well together and don't contradict one another.

On that note, the reason I bring it up here is because the illustration of information risk vs. price risk is dealt with in great detail, and something that I am currently working through. I see it all over this chart today, and I've been seeing it for weeks now. Hopefully by the time I finish the book my head will be thoroughly rid of this major blockage.

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H - So we make it all the way down to H, and I'm curious to see what happens here because of the rejection at C. We have a SL break, and a placement for a long at "I" would be ideal. Of course I'm thinking that the lower high at G worries me. Clearly though, exceeding the high of G just to prove this isn't a problem is now a huge price risk in exchange for the gained information of getting past that lower high.

J - Making our way to J and reversing starts to establish a 15 point trading range.

K - Hitting the low at K represents a 50% RET of the up move from H to J, and a buy stop at "L" would be perfect. I am in fact calling all these things in real time, just not acting on them. From here we can follow the DL, past the price of 3601 which could be seen as the top of our trading range and hence a BO from it, until we get a break at roughly 3606.

M - Staring to get back into the groove, we can place a firm short at M, but our SL is broken so an exit around N I'm thinking should be taken. This is unfortunately just before we move down again, but hey, you gotta cut your losses quickly.

O - Here we reach roughly 50% of the move from the bottom at H to the top of 3610, but from here on its just a tight trading range.

I say it was a difficult day because the action at the open signaled indecision to me, and right at the open, the strong quick move down, then the quick move up and retrace of more than 50% at F showed so much indecision. Looking at this chart now, I'm sure a few points could have been made following the rules, but I had far too many things going on in my head to talk myself out of taking any actual trades.

 

[k p]

So this is a little late, but I wanted to follow up something Db said to me in a post that was in a different journal which had to do with channels and means.

I had shown this chart and how beautifully price bounced off 3600 on the 29th. I saw this as a channel forming and hence had the blue lines drawn.

Db's reply, if I am understanding it correctly, is that although the top line of the channel , A, can be thought of as a SL and hence provided a clue for the price bounding off the SL, it isn't a channel because the mean here is actually a range. I have shown this with the two red lines of B and C.

In contrast, other traders have drawn in a possible channel as the green lines, D and E, and although Db doesn't like to get into these micro channels, he admitted that price here behaves in the traditional fashion of actually respecting the mean shown by the dashed line F. We see here price bouncing off the mean several times.

This is how I am interpreting the info he provided, so hopefully I'm processing it correctly. It is the mean that is more important, the upper and lower lines of the channel just provide the extent to which price deviates from the mean. So when a channel is drawn correctly, you see price behaving in relation to the mean first and foremost.

Time to delete my "channel" and just use line A as a SL, but I'm keeping the green channel outlined by D and E, with the mean at F being the critical line.

 

[k p]

I spent today being quite enthralled with these channels, and in the process, unfortunately not being in tune with price too much. And what's worse, price didn't appear to react too much with the extremes or means as I had them drawn in.

In the past few weeks, I had seen that getting in before the open was beneficial. The last thing you want to do is chase price up or down, so its good to be in already, but of course in the back of my head I keep being worried about what happens if price instantly shoots in the opposite direction at the open.

A - So this morning we have a DL. In fact, so often it seems like the Asian or European markets love pushing price up before the NY open. Getting up 3 hours earlier and getting aboard the slow moving train seems like a smart thing to do.

The trouble I'm having lately is thinking that if I don't get in on a move at the beginning, is it right to get in after a RET hoping for a continuation? That hope word is a big red flag obviously, but after a move has gained 5 or 10 points, the price risk seems higher to me because I think maybe this is all price has left. Yet at the same time, I'm seeing 30 or 40 point moves often so missing the first 10 shouldn't be so bad, and its better than just watching price go without you.

I obviously have issues I need to solve!

So although I think its smart to be in a long before the open, I play it safe and wait. Yesterday after all, we had a down move of 4 points before we went in the opposite direction, and this happened so quick that there just wasn't time to think.

B - So after watching price go up 15 points, we hit a high, have what can be a RET for a short, but its not triggered.

C - Now we can draw in a new DL and place a stop to go long.

D - Break of the DL so we better get out here, although full well knowing that this could just be a pause like at B.

E - Right after here we get a small RET where we could go long again, but I'm just wallowing in the regret or not being in from the open. (As wrong as all these thoughts are, or should I say unnecessary, I write them in so that when I look back one day I can hopefully see how far I've come once I get past all these issues)

F - Following the plan, a short should be placed here, which has to quickly be scratched at G.

H - Although price makes it here, I was not even considering any more trades. After a 35 point move up, the chance of a long consolidation seems high. Of course you never know, but perhaps it is smart to wait for price to clear 32-38. The high of 42 here is above that level, but there was no RET above 38 to allow for entry, and price just came back down again.

I'm in a bit of a rut. I'm using SLA, but not following it mechanically because sometimes there are very good reasons to either stay in a trade even though you have a slight break of the line, and there are also times when you should not be trading it seems, like these consolidation areas that would only make you scratch repeatedly. Of course the answer is that I need to do my own testing, but I fear as I would just over complicate everything.

I worry about getting into trades half way into a move, yet getting in before the open has its own set of risks for me because price starts to move so quick and I would hate to be on the wrong side, scrambling to get out.

Basically, I'm talking myself out of everything! LOL... All I can do is laugh, its better than crying! And yet, I know that for the past 2 weeks that I had been using SLA and keeping track of my points, I was very much in the positive, so why I don't just keep doing what I was doing I don't know. Yes, I am looking to go live and get my feet wet, hence why this hesitation, but logically I can see that no one trade or two will break me, and a week's worth of trades will produce a positive outcome.

Ok... that's it for now.

 

[k p]

Looking at the hourly, we see that price escaped the smaller term green channel we had been looking at these past few days, but it certainly is respecting the longer term down sloping blue one that was started at the beginning of March. I was watching last night when price bounced off of it, and now we can even see that during the night price is riding right up against it.

On the one minute, we have have a SL, and although the steeper and tighter one can easily be broken, the more shallow line follows from the bounce off the trend line and certainly makes it appear as if price isn't going to be able to get out of this channel and just head down. Therefore, I would thinking a trip down to 3600 is quite possible again which would be the mean of this channel.

Since price broke out of the green channel, lets see if it has any effect on price if it does go down and passes through the upper trend line of the mean of this smaller channel.