Very interesting, have not payed attention to this. Will do from now on. Thanks.
Trading NQ via Price Action
- Thread starter k p
- Start date
Very interesting, have not payed attention to this. Will do from now on. Thanks.
That's because if price does in fact break through decisively, you have the fear of others -- of missing out -- working for you. If it just meanders, it's more of a meh.
Another example of focusing on the behavior rather than the pattern.
I too love the idea of introducing "quality". This is the essence of behavior as well. Sometimes price moves because traders want it, other times price moves just because there is a lack of offers higher or lower so price is just feeling its way around.
Not sure if this makes any sense, I could just be talking out of my ass, so I stand to be corrected, but watching that right tick sure helps you develop a feel.
Before I leave this, given the discussion about where to enter and why, I want to point out that you're missing the pre-opening range entirely. That ranges from 05 to 15. And the mean of that range is guess what? And the mean of the hinge that develops after the open is guess what? And the suggested entry is 10, which represents a launch off what? And the probability of success of this sort of entry is what?
One can't just look back and engage in CWS. If something like this looks interesting, it presents a subject for backtesting. Or if one has determined empirically that it just isn't worth taking, that's fine too. But one should first determine the conditions surrounding such a launch that determine whether or not it's going to be a successful trade. That's one of the behaviors that separates the winning trader from the losing trader.
One can't just look back and engage in CWS. If something like this looks interesting, it presents a subject for backtesting. Or if one has determined empirically that it just isn't worth taking, that's fine too. But one should first determine the conditions surrounding such a launch that determine whether or not it's going to be a successful trade. That's one of the behaviors that separates the winning trader from the losing trader.
Thank-you Db. I hadn't seen this before. 10 is of course the mean of the range. The apex of the hinge is also right around this value, so after price goes down and comes back up, it launched off the apex of this hinge. The probability I don't know, but I know you have said that price leaves hinges generally in the opposite direction first of what ends up being the ultimate move.
Back-testing I have unfortunately not engaged in too much thus far, not in the specific way of looking for an actual set of circumstances and the outcome at least.
Looking at the chart even more now, I can see the hesitation to break past the level of 10, it takes several minutes, so the apex of that hinge and mean of the opening range is very evident now.
I was a little bummed out today for missing the very important elements of the pre-market yesterday. In the past, I was in the habit of drawing in my overnight highs and lows and found them to be key areas where price reacted.
Today I made sure to look at the pre-market more closely. The overnight highs and lows I noted, and also noticed that we were in a general uptrend for the past couple of hours.
A - We hit a high of 10. Took me a while to figure out that this is exactly what tripped me up yesterday... the mean of the opening range...the apex of the hinge... and here 10 comes into play again.
B - We try to go lower but don't get far. I'm not sure now if there is a reason to stop and reverse here, but we do. So now that we are going to go back up, we will very quickly hit 10 again.
We do clear 10, but I certainly remember that price did stall a bit here, or rather, price retraced back to 10 after breaking out.
C - Making our way to C, Db notes that this is the last swing high from yesterday. Sure enough, it matches up perfectly. Back down we go.
D - Our reversal here matches up with the overnight low... i'll be dammed! Luckily I was aware of all of this. Did I do anything about this reversal? Sadly no.
E - We start seeing the importance of the 07/08 level. This represents the mean of what could be a trading range, or a 50% RET of the down move. Visually we can see how there are lots of trades here, and the mean of something is where lots of trades happen.
F - We fail to make it up to the highs of C again, but here we have a very clear rejection.
G - Another rejection. We can definitely make a case of this looking like a big hinge from the open. And look at that, we drop out the bottom quite quickly from the apex, which we can really see is roughly 07, the mean of the possible range.
H - We curiously drop below the low at D by a couple of points. If we take a quick short thinking its going lower, we have to get out right away. If we play it like a REV now, this too fails.
I - This is where the REV from H would fail. It is 7 points higher mind you, so BE is more than likely, even a couple of points profit might be possible if you are quick to get in and out, but of course I am just basing this on a hindsight chart.
J - This is looking interesting now. We bounce off almost exactly the same level as H. This certainly looks the case on the next bar, and the bar after K is even higher than the bars at I. Call it a double bottom, in person of watching price, its a test of the previous low and rejection.
K - Right after this bar we have a RET. What more info do I need to put on a trade! Price just takes off...
L - In real time, the move up didn't seem to look as sure, but getting to the previous top of 20 is almost a 30 point move. There is a bit of hesitation here to get past 20 but really, it is no different than hesitations the entire move up.
So no trades today as you can see, wasn't in that frame of mind which is sad really as the range from top to bottom is quite large. Have to really think about these past couple of days.
Today I made sure to look at the pre-market more closely. The overnight highs and lows I noted, and also noticed that we were in a general uptrend for the past couple of hours.
A - We hit a high of 10. Took me a while to figure out that this is exactly what tripped me up yesterday... the mean of the opening range...the apex of the hinge... and here 10 comes into play again.
B - We try to go lower but don't get far. I'm not sure now if there is a reason to stop and reverse here, but we do. So now that we are going to go back up, we will very quickly hit 10 again.
We do clear 10, but I certainly remember that price did stall a bit here, or rather, price retraced back to 10 after breaking out.
C - Making our way to C, Db notes that this is the last swing high from yesterday. Sure enough, it matches up perfectly. Back down we go.
D - Our reversal here matches up with the overnight low... i'll be dammed! Luckily I was aware of all of this. Did I do anything about this reversal? Sadly no.
E - We start seeing the importance of the 07/08 level. This represents the mean of what could be a trading range, or a 50% RET of the down move. Visually we can see how there are lots of trades here, and the mean of something is where lots of trades happen.
F - We fail to make it up to the highs of C again, but here we have a very clear rejection.
G - Another rejection. We can definitely make a case of this looking like a big hinge from the open. And look at that, we drop out the bottom quite quickly from the apex, which we can really see is roughly 07, the mean of the possible range.
H - We curiously drop below the low at D by a couple of points. If we take a quick short thinking its going lower, we have to get out right away. If we play it like a REV now, this too fails.
I - This is where the REV from H would fail. It is 7 points higher mind you, so BE is more than likely, even a couple of points profit might be possible if you are quick to get in and out, but of course I am just basing this on a hindsight chart.
J - This is looking interesting now. We bounce off almost exactly the same level as H. This certainly looks the case on the next bar, and the bar after K is even higher than the bars at I. Call it a double bottom, in person of watching price, its a test of the previous low and rejection.
K - Right after this bar we have a RET. What more info do I need to put on a trade! Price just takes off...
L - In real time, the move up didn't seem to look as sure, but getting to the previous top of 20 is almost a 30 point move. There is a bit of hesitation here to get past 20 but really, it is no different than hesitations the entire move up.
So no trades today as you can see, wasn't in that frame of mind which is sad really as the range from top to bottom is quite large. Have to really think about these past couple of days.
On the hourly this morning, we can see how we continue our steady rise. We are well within the March channel, and hence the upside potential looks to be the mean of the channel at 3581, and the bottom at 3522 roughly. On the way down though we would also have the 3536 level which might attract enough buyers to retard a drop as yesterday it provided quite the barrier for price and was work to cross, so it might be defended today. The upside potential today is quite good, and now, only about 45 mins to open, we already have a good rally in progress.
edit: changed "support" to "attract enough buyers to retard a drop", as per seeing Db's correction in another journal about support
edit: changed "support" to "attract enough buyers to retard a drop", as per seeing Db's correction in another journal about support
Today was a tough day. The direction an hour before open was up, but it turned into a range.
A - Was definitely looking for a long, but the first bar tested down, and then up again, and didn't go far. So we bounce around between A and B for the first 20 minutes.
C - We breakout to the bottom, no RET for a short yet, but we end up having a prominent rejection here at 36. This price level sticks out in my mind. This is where price kept topping yesterday, and it was even outlined by Db as being the apex of the hinge in the hourly chart from a few days ago.
Taking all this context, it certainly makes sense here that 36 would be a value to watch, and it didn't disappoint. This being a hindsight chart though, its easy to see now. At the time, to take the reversal, you're saying that price will go back into the range it just tried so hard to get out of, not an easy proposition. It does just that of course.
D - Here price comes to a halt, not able to find buyers above 3550 (careful not to say resistance!)
E - Price is having trouble going higher, but with such a tight range, not much one can do about it.
F - Here after all we have a rejection at 40, right back into the range.
G - So coming back here again... do look for a REV at 40? (thinking out loud, waiting for price to tell me of course)
H - Wow.. we get to 36 again... hmmm.. what to do about it. The next bar is interesting. We have a possible bracket order here I came to learn. Either we go long, treating this as a REV, which looks really good given two tries to go below 36 that fail. Or we do make it to below 36 since price is after all heading down fast. The idea that price instantly reverses and comes back up seems strange, but you can't argue with it.
Here of course your short might be triggered if you're just a point away from the previous bar low, so its best to maybe actually wait for a low below 35.
The long triggers as well on the bar after. This chart makes it look like an excellent obvious trade, but you will notice the bar at "I" dips down quite a bit from where your entry would be which might make you scratch. This is the problem today. Looks good now but was just hard to see at the time. You have no way of knowing, so not much you can do about it, or rather, you just gotta take it and scratch if necessary. Low information, better price, or positive information, and worse price, trader's choice.
J - Here we have a similar issue as at H. Do we go long above and short below? The long would trigger and it looks good for a while until price drops.
K - The next hour really is just a mess. Sure we can draw in a SL, but the bars overlap far too much, and we are just heading back into the range from open.
So that's it for today.
I have been thinking a lot about context and Db's post to Niko about his backtesting and if he took note of where the trades happen. Look at today. A random reversal at C might not mean much, but 36 has been identified as a level to watch. Furthermore, the reversal at H is even better with the context of the reversal at C earlier.
The best backtesting would include re-creating all the conditions. You would have the daily chart with your channels plotted in, so if you are testing reversal trades, you can tell if the reversal happens at an extreme, in terms of AMT, perhaps an overnight high or low, but a place where you identify something. It would be like prepping as we do each morning for a day in the past that you are going to be backtesting on. If I just randomly scroll through charts and look for rejections, the statistics of how they turn out could be way different if they are at a key levels versus just in mid air.
Furthermore, what if the REV happens in a range.. how wide is the range? Here, when we are at H, 36, we have some room to go to 50. Or do we consider 40, the low of the range a possible area for trouble and hence not take the REV right away? All of these things deserve some thought, so good backtesting I think takes all of this context into account.
On that note, a week or two ago I did a study of openings. I was seeing that an established direction before the official open provided a great entry. Then at the opening, your only worry is staying in or getting out, not if to get in, and then where and how. So I randomly looked at dozens of openings that showed a nice setup in the hour or two pre-market.
What I found was unfortunately inconclusive. The power of volume at the open can easily change the direction of the pre-market. Other times the price stalls and goes into a range. And other times still it completely changes direction in a way where you wonder what the overnight guys were thinking when they bought price up only to see it start dropping at the open. These ranging days unfortunately come up often as well. Can't have a good trend day every day I guess.
A - Was definitely looking for a long, but the first bar tested down, and then up again, and didn't go far. So we bounce around between A and B for the first 20 minutes.
C - We breakout to the bottom, no RET for a short yet, but we end up having a prominent rejection here at 36. This price level sticks out in my mind. This is where price kept topping yesterday, and it was even outlined by Db as being the apex of the hinge in the hourly chart from a few days ago.
Taking all this context, it certainly makes sense here that 36 would be a value to watch, and it didn't disappoint. This being a hindsight chart though, its easy to see now. At the time, to take the reversal, you're saying that price will go back into the range it just tried so hard to get out of, not an easy proposition. It does just that of course.
D - Here price comes to a halt, not able to find buyers above 3550 (careful not to say resistance!)
E - Price is having trouble going higher, but with such a tight range, not much one can do about it.
F - Here after all we have a rejection at 40, right back into the range.
G - So coming back here again... do look for a REV at 40? (thinking out loud, waiting for price to tell me of course)
H - Wow.. we get to 36 again... hmmm.. what to do about it. The next bar is interesting. We have a possible bracket order here I came to learn. Either we go long, treating this as a REV, which looks really good given two tries to go below 36 that fail. Or we do make it to below 36 since price is after all heading down fast. The idea that price instantly reverses and comes back up seems strange, but you can't argue with it.
Here of course your short might be triggered if you're just a point away from the previous bar low, so its best to maybe actually wait for a low below 35.
The long triggers as well on the bar after. This chart makes it look like an excellent obvious trade, but you will notice the bar at "I" dips down quite a bit from where your entry would be which might make you scratch. This is the problem today. Looks good now but was just hard to see at the time. You have no way of knowing, so not much you can do about it, or rather, you just gotta take it and scratch if necessary. Low information, better price, or positive information, and worse price, trader's choice.
J - Here we have a similar issue as at H. Do we go long above and short below? The long would trigger and it looks good for a while until price drops.
K - The next hour really is just a mess. Sure we can draw in a SL, but the bars overlap far too much, and we are just heading back into the range from open.
So that's it for today.
I have been thinking a lot about context and Db's post to Niko about his backtesting and if he took note of where the trades happen. Look at today. A random reversal at C might not mean much, but 36 has been identified as a level to watch. Furthermore, the reversal at H is even better with the context of the reversal at C earlier.
The best backtesting would include re-creating all the conditions. You would have the daily chart with your channels plotted in, so if you are testing reversal trades, you can tell if the reversal happens at an extreme, in terms of AMT, perhaps an overnight high or low, but a place where you identify something. It would be like prepping as we do each morning for a day in the past that you are going to be backtesting on. If I just randomly scroll through charts and look for rejections, the statistics of how they turn out could be way different if they are at a key levels versus just in mid air.
Furthermore, what if the REV happens in a range.. how wide is the range? Here, when we are at H, 36, we have some room to go to 50. Or do we consider 40, the low of the range a possible area for trouble and hence not take the REV right away? All of these things deserve some thought, so good backtesting I think takes all of this context into account.
On that note, a week or two ago I did a study of openings. I was seeing that an established direction before the official open provided a great entry. Then at the opening, your only worry is staying in or getting out, not if to get in, and then where and how. So I randomly looked at dozens of openings that showed a nice setup in the hour or two pre-market.
What I found was unfortunately inconclusive. The power of volume at the open can easily change the direction of the pre-market. Other times the price stalls and goes into a range. And other times still it completely changes direction in a way where you wonder what the overnight guys were thinking when they bought price up only to see it start dropping at the open. These ranging days unfortunately come up often as well. Can't have a good trend day every day I guess.
... Can't have a good trend day every day I guess.
thx for the reminder
thx for the reminder
Well yesterday ended up being quite the day. We hit the mean, and even went past it. Db has an explanation in the ghost thread about this business of the mean.
This morning, the top of our channel is at 3635, the mean at roughly 3577 and the bottom at 3519. Overnight, price couldn't make it past 3600, an important level in the past, and we also had a solid rejection of 3574. We sit currently at 3587 which looks damn close to be the mean of this overnight range.
This morning, the top of our channel is at 3635, the mean at roughly 3577 and the bottom at 3519. Overnight, price couldn't make it past 3600, an important level in the past, and we also had a solid rejection of 3574. We sit currently at 3587 which looks damn close to be the mean of this overnight range.